Investors who poured more than $60 million into Lighthouse Insurance Co. just before it went belly-up are now suing the firm and its executives, alleging a complex web of fraud involving a family trust, affiliated companies, and a Florida bank. The lawsuit, filed by New York-based hedge-fund managers, sheds new light on the questionable business practices of one of the 12 insurers in Louisiana that failed after Hurricane Ida.
The allegations against Lighthouse, detailed in a lawsuit filed by Fortinbras and Silver Rock, claim that the executives misled investors by not disclosing regulatory scrutiny and misrepresenting the amount of claims expected to be paid out to victims of Hurricane Ida. The deal with investors closed in December, despite the firm being at “imminent risk of liquidation due to financial distress.” The state eventually put the firm in receivership in April and liquidated it.
Former Lighthouse CEO Patrick White, along with his father Lawrence White and their family trust, are named as defendants in the lawsuit. The investors also sued One Florida Bank, alleging that the executives used the capital infusion to repay debts to the bank as the insurer was going under.
The lawsuit alleges that the White family deleted key documents and made improper transfers to an affiliated reinsurer using investors’ money. Former CEO Patrick White declined to comment on the allegations but previously stated that the industry as a whole had early estimates wrong regarding the losses from Hurricane Ida.
The failures of Lighthouse and other insurers in Louisiana have raised questions about the state’s oversight of rapidly growing companies in hurricane-prone areas. The state Department of Insurance has since increased its review of companies’ reinsurance and concentration of policies in risky areas, while legislation to bolster reporting requirements for less-regulated affiliates is in progress.
The investors suing Lighthouse claim that the executives misled them to raise capital to avoid a collapse that could endanger the White family’s assets. The lawsuit highlights the challenges faced by policyholders in getting their claims paid and the impact of the failures on Louisiana’s insurance market.