Update: “Our office is confident that Jeffrey Bragg is the best candidate for the position and looks forward to further discussion on this by the Florida Cabinet,” said Jeri Bustamante, spokesman for Gov. Rick Scott.
Original post: One of two candidates for insurance commissioner set to be interviewed by the Florida Cabinet Tuesday was accused in a lawsuit of signing misleading documents in a flood insurance venture that harmed investors to the tune of tens of millions of dollars, records reviewed by The Palm Beach Post show.
Jeffrey S. Bragg, as executive vice president and chief operating officer of Insurance Management Solutions Group Inc., signed a “false and misleading registration statement” in connection with a stock offering, according to a suit filed in U.S. District Court in Tampa in 2000.
“As defendants later admitted, the prospectus failed to disclose that (the company’s) flood mapping and flood zone determination subsidiary, Geotrac, was not compatible with the company’s other line of business and, as a result, could not be operated profitably or be integrated into the company,” the suit said.
The case was settled in 2003, records show.
Expertise with flood insurance has been seen by some observers as a selling point for Bragg, the candidate Gov. Rick Scott’s office put forward to be interviewed. Scott’s office and Bragg had not commented by early Monday afternoon in response to questions.
Bill Hager, R-Delray Beach and former Iowa insurance commissioner, is the other candidate scheduled for a Tuesday interview before the full Cabinet.
Florida has the most flood policies in the nation and many officials want to encourage private-sector competition as an alternative to the National Flood Insurance Program.
“Holy cow, you’ve got to be kidding,” said attorney Chip Merlin, president of a firm that sues insurers with offices in cities including Tampa and West Palm Beach. “It certainly raises issues that have to be vetted. A delayed decision on this is better than making a bad decision.”
Merlin said he already had concerns about Hager, whom he characterized as often testifying on behalf of insurance companies against consumers in his private-sector business. Now it’s important to learn more about Bragg for an important watchdog role, he said.
“They ought to take another month to look at this,” Merlin said.
The stock offering that raised $37 million was later called the “worst performing IPO” of the year by one publication and investors suffered tens of millions of dollars in damages, according to a suit that names Bragg.
Officials with the Florida Association for Insurance Reform, a Fort Lauderdale-based group that includes representatives from Florida-based insurance companies, said they have concerns about Hager and like Bragg’s overall experience. FAIR president Jay Neal said as far as he could determine, the case naming Bragg was settled for about $2 million.
“If somebody stubbed his toe, that can be a learning experience,” Neal said. “We are completely unconcerned about this and consider it part of a huge body of experience this man would bring to the commissioner’s job.”
Hager has been “too close to the reinsurance industry” and, on balance, has been bad for policyholders, Neal said.
Investor litigation that named Bragg also named as a defendant Bankers Insurance Group of St. Petersburg, describing it as the parent company of IMSG.
Bankers has an unusual history with Kevin McCarty, a state Department of Insurance official who would go on to become insurance commissioner in 2003. Bankers paid $2.55 million in 2000 to settle a lawsuit stemming from its decision to investigate his private life, according to published reports. The investigation, which involved wiretapping, revealed that McCarty is gay, something that was not public knowledge at the time, reports said.
A lobbyist for Bankers, Fred Karlinsky, reportedly pushed a candidate to replace McCarty last year after the governor’s office called for the commissioner’s replacement. That candidate was Louisiana Deputy Commissioner of Consumer Advocacy Ron Henderson.
Other Cabinet members spoke out for a transparent process to consider successors. McCarty announced in January he would leave his state post May 2.
In his application, Bragg, 67, describes his stint at IMSG in St. Petersburg as lasting between 1997 and 2000. As executive vice president/COO, he listed these duties and accomplishments:
• Full profit and loss responsibility for new public company with 800 employees and revenue of $71 million.
• Grew outsourcing revenue from $31M in 1997 to $71M in 3 years.
• Developed and implemented new sales initiatives which resulted in 23 new unaffiliated insurance company accounts in less than two years.
• Led operational efforts to complete initial public offering. Participated in road show and raised $37M for partial sale of IMSG.
• Discovered, negotiated, and closed acquisition of national claims adjusting company.
Litigation, filed on behalf of investor Murrel Neal and others, said the company’s stock traded as high as $11.88 the day of the offering but plunged as low as $2 after the company revealed plans to sell Geotrac because it “never fit” the business model.
Bragg’s application also notes federal government roles, largely in GOP administrations. He served from 2003 to 2014 as executive director of the U.S. Department of Treasury’s Terrorism Risk Insurance Program, which created a system of shared government and private compensation for terror attacks.
He served from 1981 to 1986 as an administrator working with the National Flood Insurance Program. His application says he oversaw efforts at NFIP “to permit the private sector to sell and service flood insurance policies.”
Hager, Iowa’s insurance commissioner from 1986 to 1990, is president and founder of Insurance Metrics Corp. in Boca Raton. His services there include “providing expert witness testimony in complex insurance cases” and arbitrating reinsurance disputes, according to his application.
Hager sponsored a bill to help families get life insurance benefits that state CFO Jeff Atwater supported this year. He also filed a bill that did not get very far to repeal the state’s Personal Injury Protection car insurance requirement, which has been criticized as a costly, fraud-prone system that forces most consumers to pay twice for health insurance.
In the past, Hager has supported legislation to shrink the Florida Hurricane Catastrophe Fund that opponents including FAIR said would have raised consumer rates.
Officials have discussed the possibility of waiting until April to make a final decision on appointing a new commissioner but have not ruled out a faster choice. Under state law, the governor and CFO must agree along with a majority of the four-member Cabinet to pick the insurance commissioner.
“We’ve lost one of the best insurance commissioners in the country who is moving on,” Merlin said. “It’s much worse to rush in with a bad decision than to take the time to get this right.”