Four insurance executives of a now defunct Florida property insurer have been found not guilty of defrauding the state’s reinsurance facility of over $20 million in a case stemming from hurricane losses dating back to 2004.
Judge Robert Lewis of the U.S. District Court for the Northern District of Florida ruled that former Vanguard Fire and & Casualty Co. President William Sanders, Chief Executive Officer Thomas Stinson, Controller Richard Magsam, and Vice President of Claims John Henry Axley were cleared of all charges.
The four former executives had been accused of improperly obtaining $20 million from the Florida Hurricane Catastrophe Fund when the Maitland, Fla.-based Vanguard faced a deficit after incurring heavy losses from Hurricane Frances and Hurricane Jeanne in 2004.
According to the original indictment, Vanguard’s losses from Frances met a necessary $37 million threshold to qualify for reimbursements from the Cat Fund. However, the insurer’s losses Jeanne did not meet the mark to qualify the insurer for Cat Fund reimbursements.
Attorneys for the executives argued that since Jeanne followed a similar path to Frances by just a few weeks, the insurer had trouble determining which claims were attributable to which storm. As a result, the executives told the Cat Fund they would consider all claims as stemming from Frances up to the point where the two storms’ path diverged at which point they would attribute the remainder of the claims to Jeanne.
Email messages between the insurer and Cat Fund officials showed the executives fully informed the officials of its methodology for calculating the hurricane losses.
Vanguard was liquidated by the state’s Department of Financial Services in 2007 after state officials determined the insurer’s cash reserves and other assets were inadequate to pay claims stemming from its hurricane losses.