Firm strikes back against lawsuit

Executives at Clearwater-based insurance firm HCI Group aren't taking the standard approach — keeping silent behind lawyers — to the threat of a potentially damaging shareholders' lawsuit.

HCI, with $241 million in 2013 revenues, is instead fighting back. The publicly traded firm is the target of what's sometimes called a “strike suit.” That's a lawsuit where the plaintiff hopes the defendant will settle to avoid the costs of fighting the case in court. In this case, New York law firm Levi & Korsinsky says it's “investigating HCI in connection with possible claims of breaches of fiduciary duty by certain members of the board of directors.”

A press release issued by the law firm May 29 says nothing else about the possible breaches. The statement has a link to a website, where HCI shareholders can fill out of a form for more information.
HCI, in its own statement, says the suit is bunk.

“HCI Group endeavors to comply fully with applicable law and is aware of no basis for an investigation of the company by any law firm,” the firm says in its release, issued five days after the Levi & Korsinsky statement. “HCI believes Levi & Korsinsky has launched a 'fishing' expedition in hopes of finding plaintiffs to initiate a strike suit from which Levi & Korsinsky would profit at the expense of HCI shareholders.”

The insurance firm also points out Levi & Korsinsky is prolific when it comes to these cases. The law firm has issued around 75 press releases regarding other publicly traded companies in 2014, many with a “shareholder alert” headline. Firms Levi & Korsinsky have targeted include Waste Management, PetSmart and Shoe Carnival. The firm has also sent out dozens of “investor alert” statements about mergers and acquisitions, including the proposed AT&T purchase of DirecTV.

HCI (symbol: HCI, recent price: $39.82) was founded in 2006. The firm, which absorbed policies from the state-run Citizen's Property Insurance Corp., went public in 2008. It now has 160,000 policyholders and around 170 employees. That fast growth partially caused the firm to score a D on a recent report from Weiss Ratings, an insurance industry scorecard firm. Weiss cites HCI's fast growth and inexperience with hurricanes in the weak score. (See Business Observer, May 23.)