Behind Closed Doors at People’s Trust Insurance Company

Merlin Law Group has often questioned the representatives and adjusters of People’s Trust Insurance Company (“PTIC”) during depositions about what has transpired in our client’s insurance claims for damages, but it would be very interesting to see the processing of my client’s claims before Merlin Law Group was hired and understand what goes on behind closed doors.

So far, People’s Trust has not invited me in to their offices for depositions, but we know their office includes PTIC’s legal department and that someone there makes the decision to sue certain policyholders who file claims with PTIC. You read that right, this company sues its policyholders after certain claims.

The Sun Sentinel reported about this tactic in their article, Why does People’s Trust Insurance keep suing its own policyholders,¹ and Merlin Law Group and others have filed counterclaims against PTIC when the carrier was in breach of the insurance policy contract and started the litigation.

Now, PTIC is making headlines for withholding documents for public release relating to an audit of financial records. This prompted the question, what is going on at PTIC?

As way of background, The Office of Insurance Regulation made a request to People’s Trust. The audit request came from the State because of claims made about PTIC’s former CEO’s improper use of company funds.

Here are more details:

The audit request was sparked by the Sun Sentinel’s April 20 report that George Schaeffer, the company’s current CEO, accused Gold of illegally spending company money at a casino and massage parlor prior to Gold’s death in January 2014.

Schaeffer made the allegations in a memo to Gold’s widow, Eileen Gold. He demanded she agree to rescind the terms of Schaeffer’s buyout of the Golds’ half of the company negotiated in 2014 after Mike Gold’s death. The two sides agreed that Schaeffer would pay $30 million, and he has so far paid $21 million.²

The Sun Sentinel has reported and FAPIA has posted a lot about this issue.

After the audit was finally provided on June 30, 2018, People’s Trust marked it as a trade secret. Being labeled a trade secret, we can’t access the audit report with a public records request. This raises the question, how is an audit report a trade secret?

What is a Trade Secret?

Pursuant to Section 688.002(4), “trade secret” means information, including a formula, pattern, compilation, program, device, method, technique, or process that:

(a) Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and

(b) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

Trade secrets may include CAD drawings or designs, computer or source code, the formula for chemical, financial or sales information, or client or customer lists. Florida courts have recognized a business’ confidential method used to set prices, rates, and profits as a trade secret. It is not always clear whether information qualifies as a trade secret and courts often struggle with whether information is in fact a “trade secret.”³

One interesting point to note is that Schaeffer was Gold’s equal partner when the company was started in 2008. When Michael Gold died in 2014, Schaeffer and Mr. Gold’s widow reached an agreement where Schaeffer would pay her Gold’s interest in the company. The amount some 30 million because the two believed the company to be worth 60 million, but now Schaeffer says he has just recently learned the extent of mismanagement at the company and that Gold was engaged in criminal activity including the borrowing of funds from the company. These allegations were set forth in December correspondence from Schaeffer to Mrs. Gold. In December, Schaeffer advised he thought the company was only worth 34 million, not 60 million.

As an equal partner one would think Schaeffer would have known more about the business valuation when he wrote up the deal four years ago. Something about the way the allegations against Gold were made and the partnership percentage makes it curious as to why this is only coming to light now when additional payments were due to Mrs. Gold.

What is strange is the way PTIC is blocking the information to the public. By claiming trade secret, the company is essentially saying that something in the audit of the money spent by Mr. Gold or paid to Mr. Gold by PTIC is proprietary information they don’t want to share with their competitors regarding their business model. Trade secret information is something you want to keep away from your competitors so they don’t implement the same processes at their insurance companies, but this information seems unrelated to proprietary and business model secrets to success. After all, the request and the audit were related to improper money issues at the company and not about how they set up their underwriting criteria or something of traditional proprietary nature.
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¹ “Why does People’s Trust Insurance keep suing its own policyholders?” Sun Sentinel, April 27, 2018. Last accessed 7/27/18. http://www.sun-sentinel.com/business/fl-bz-peoples-trust-insurance-sues-100-more-customers-20180419-story.html
² Ron Hurtibise, People’s Trust Insurance gets second extension to submit audit of former CEO’s spending” Sun Sentinel, June 19, 2018. (Last accessed 7/27/2018) http://www.sun-sentinel.com/business/fl-bz-peoples-trust-spending-audit-delayed-20180618-story.html#
³ Florida’s Uniform Trade Secrets Act: What Does It Mean for Your Business? Marshall Socarras Grant blog post, last accessed 7/27/2018. https://www.msglaw.com/legal-news/floridas-uniform-trade-secrets-act-what-does-it-mean-for-your-business/