By: John D. Hadden, Attorney at Penn Law

In the lead-up to Florida’s tort reform legislation, insurance companies funneled billions of dollars to shareholders and affiliate entities while simultaneously claiming financial losses in the state’s markets, according to a newly revealed study commissioned by the Florida Office of Insurance Regulation.

In a Miami Herald article titled “Secret study found Florida insurers sent billions to affiliates while crying poor” reporter Lawrence Mower writes that “executives distributed $680 million in dividends to shareholders while diverting billions more to affiliate companies.” The article also quotes Doug Quinn, Executive Director of the American Policyholder Association, who stated, “These companies are crying poverty in order to raise premiums or justify insolvency: ‘It’s litigation, it’s fraud‘….This is money shifting from their left pocket to the right, and crying poverty while their right pocket bulges.”

In some cases, insurers collapsed while their affiliates—the beneficiaries of these financial maneuvers—thrived.

The study, which was withheld from lawmakers as they debated, and ultimately enacted sweeping tort reform at the insurance industry’s urging, exposes how insurers exploited affiliate companies to shift profits and circumvent state-imposed profit caps. These affiliates charged insurers exorbitant fees for essential services, directly benefiting company executives. Meanwhile, the effects of tort reform continue to reverberate across Florida, making it more difficult for victims of negligence and wrongdoing to seek justice—all while insurance companies reap the rewards.