Heartburn in Tennessee

January 17th, 2008 by

The Tennessee Restaurant Association (TRA), as you might expect, is a lobbying group for restaurants. One of the benefits of membership is access to special insurance programs. Around 500 members participated in a workers comp program run since its 1993 inception by the TRA’s charismatic director, Ronnie Hart. Unfortunately, as we read in the Tennessean, Mr. Hart had no experience in insurance – he was a lobbyist by trade. So he learned “on the job” for the first few years and then hired a company called Hospitality Management Plus to administer the program. The “plus” was apparently the routine doubling of management fees and unauthorized dipping into the reserves. The minus, alas, is that neither Hart nor Hospitality Management knew how to run an insurance operation. Both are now bankrupt.
The state’s Department of Commerce & Insurance took over the fund in 2005. They originally estimated the shortfall at $1.5 million. The revised number is $4.8 million, which has upset the stomachs – and wallets – of the 500 or so members on the hook for payment.
Randy Rayburn, owner of the renowned Sunset Grill and Midtown Cafe, is very angry. He is also a bit circumspect: “In hindsight, what does a lobbyist know about running an insurance company?”
Frank Grisanti, a restaurant owner and trustee of the fund, says he knew that Hart was making a profit running the trust, but he did not see it as a conflict at the time. “I guess it turns out that it was poor judgment…” Grisanti is facing a $60,000 assessment as his part of the trust’s liability. That’s a lot of surf and turf.
I’m sure the restaurant owners now appreciate the need for a little due diligence in the insurance area. Just as they would not hire a plumber to be a lead chef, they might think twice about asking a lobbyist to run an insurance company. It looks simple enough, but on-the-job training is not the way to go. Now the owners are stuck with the bill. They’ll need more than extra strength Tums for this severe case of “Hart-burn” in Tennessee.