A startup company is said to have fallen short of its goals to open a Detroit office and create more than 300 jobs, prompting state development officials to attempt a claw back of grant money the company was awarded.
The company, Clearcover, is a Chicago-based auto insurer founded in 2016 that says it uses smartphone apps, "generative AI" and other technology to lower the cost of car insurance.
In summer 2020, state and local development officials approved $4.65 million in various performance-based cash grants for the company, with the expectation Clearcover would eventually lease office space in downtown Detroit and bring 303 jobs, averaging about $60,000 in annual pay.
Those commitments were heralded at the time as a big win for Detroit, especially because Clearcover was entirely new to Michigan and the jobs wouldn't simply be reshuffled from another part of the state.
Now, four years later, the company has failed to perform, according to development officials.
A Detroit Economic Growth Corp. spokesperson said Clearcover changed its plan to lease downtown office space and instead opted for a primarily remote-work employment model for new hires.
So the DEGC did not disburse any of the $750,000 performance-based grant that Clearcover was approved for, the spokesperson said. To unlock the grant, the company needed to hit various performance milestones, including leasing a downtown office and hiring at least 100 employees — 40 of them Detroit residents — by Dec. 31, 2023.
However, Clearcover did receive a $500,000 portion of a separate $3.5 million state-level grant. And the quasi-public Michigan Strategic Fund in Lansing is now suing the company to get that money back.
The $3.5 million Michigan Business Development Program grant had six performance milestones. Clearcover did meet the first milestone — creating 26 jobs — to unlock the initial $500,000 payment.
But after Clearcover failed to maintain those initial jobs numbers, it was asked to pay back grant money, according to an MEDC spokesman.
Clearcover didn't respond to repeated messages seeking comment for this article.
State and local development authorities offer grants and tax breaks to attract new businesses and encourage existing ones to expand or take on expensive projects like a new headquarters.
Back in 2020, Clearcover told MEDC officials that it also considered potential locations in Indiana and Wisconsin for the 300-plus jobs, and that the $4.65 million potential incentive package was necessary to help offset the higher costs associated with opening an office in Michigan.
An insurance industry-focused newsletter, Coverager, reported last yea r that Clearcover undertook layoffs that reduced its workforce by nearly 30% as the company's CEO "focused on ensuring the sustainability of its business in the face of a difficult and historically volatile market."
In February, the Michigan Strategic Fund sued Clearcover in Ingham County Circuit Court over repayment of the $500,000 grant award.
A judge in May entered a $540,000 judgment against the company, but the judgment was later set aside and the case reopened. The judge recently set a nonjury trial date for the case in March 2025.
Further details about the case were not immediately available.
As for the $750,000 local grant that wasn't paid out, a DEGC spokesperson said that grant also was designed to ensure "that public resources are only allocated when companies fulfill their commitments."
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"In cases where a company’s plans change and its promises do not materialize, no incentives are disbursed," the spokesperson said. "This approach safeguards taxpayer investments and maintains the integrity of our economic development initiatives."
The Michigan Strategic Fund had also approved Clearcover for an additional $400,000 performance-based grant through the Jobs Ready Michigan Program, aimed at helping with employee recruitment and training. None of that money appears to have been disbursed.
Contact JC Reindl: 313-222-6631 or jcreindl@freepress.com . Follow him on X @ jcreindl
This article originally appeared on Detroit Free Press: Officials to claw back grant for startup Clearcover that fell short of Detroit jobs goal
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