A few years before the more-recent spate of Florida insurance carrier insolvencies, a workers’ compensation insurer known as Guarantee Insurance Co. was
declared insolvent in 2017—a rarity in the usually profitable workers’ comp line of business.
Regulators blamed owner Steve Mariano for diverting more than $15 million and using the funds for “no discernible business purpose,” something Mariano has disputed. News reports and lawsuits at the time raised questions ab
out the entrepreneur’s purchase of a multi-million-dollar mansion, a condominium and a yacht in south Florida.
A few months later, the Fort Lauderdale insurance technology and back-office and underwriting services firm, Patriot National, whose largest customer was Guarantee and whose CEO and majority owner was Mariano, filed for ban
kruptcy. The collapse came just three years after Patriot National went public on Wall Street, raising more than $140 million from investors.
It was a stunning and sudden downfall that made headlines for years and is still ringing through courthouses in Florida and New York. Since the Chapter 11 bankruptcy
filing, Mariano has blamed his auditors, Wall Street investment funds, and large national law firms for the demise of Patriot National.
On Tuesday, July 14, a long-delayed jury trial in Mariano’s malpractice lawsuit against the law firm of Simpson Thacher & Bartlett, which advised and facilitated on the IPO in 2014 and subsequent fundraising and litigat
ion, is set to begin in Broward County Circuit Court in Fort Lauderdale. The trial promises to make for some new revelations and perhaps provide some guidepost
s for insurance companies and insurtech firms considering going public.
Mariano’s lawsuit was initially filed in 2018, but has met with years of delays, motions to dismiss, changes of attorneys, calls for sanctions, and more. The 172-pag
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e complaint argues that instead of looking out for Patriot National’s best interest in raising new capital in 2015, Simpson Thacher paired Mariano with “predatory hedge
fund investors” who engaged in market manipulation “that placed Patriot National into a death spiral and threw both Patriot National and Mariano into major litigatio
n with the hedge funds and other opportunistic claimants seeking to capitalize on the crash of Patriot National’s stock price.”
The New York-based Simpson law firm is well known for handling other major Wall Street
deals through the years, including the famous Kravis Kohlberg Roberts $25 billion acquisition of RJR Nabisco in 1988. But for Patriot National, the white-shoe law
firm failed to draft non-disclosure agreements and securities purchase agreements that would have protected Patriot National from the hedge funds’ alleged actions, the lawsuit complaint charges.
“After getting fleeced by the hedge funds in a transaction that doomed Patriot National and thrus
t both Patriot National and Mariano into litigation, Simpson Thacher made matters worse by directing the litigation work to one of its alumni who would not be likely to criticize Simp
son Thacher’s handling of the transaction and who proceeded to cause further damage to Patriot National and Mariano by negligently preparing Mariano’s affirmative defenses without pleading readily available facts supporting Mariano’s available defenses to the hedge funds’ claims,” the complaint reads.
