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Thursday, January 24, 2008

Florida Asks Appeals Court To Reinstate Allstate Ban

By JEROME R. STOCKFISCH, The Tampa Tribune
Published: January 24, 2008

TALLAHASSEE - Accusing Allstate Corp. of engaging in an "ongoing crime," state regulators asked a state appeals court Wednesday to reinstate an order prohibiting the insurer from conducting new business in Florida.

The Office of Insurance Regulation is pressing Allstate over state subpoenas calling for documents relating to the way the company sets its homeowners insurance rates.

Insurance Commissioner Kevin McCarty said in a statement released Wednesday that Allstate "has continued to do everything it can to keep from providing the documents requested" and that now McCarty is "doing everything within my power to ensure that the documents are produced."

Regulators are trying to establish why, after the state took on more financial exposure in the event of a catastrophic hurricane in an effort to drive down homeowners' rates, many insurers failed to lower their rates or even sought rate increases.

Frustrated by Allstate's response to subpoenas issued Oct. 16, McCarty issued an order on Jan. 17 barring 10 Allstate companies from doing future business in the state. The companies wrote everything from lucrative auto policies to workers' compensation, motorcycle and marine lines.

The order was lifted the next day by the 1st District Court of Appeal in Tallahassee, where state regulators on Wednesday filed their argument to reinstate the suspension.

"This doesn't change the fact that our agencies and agents across the state are open for business," said Allstate spokesman Adam Shores. "We are going to continue to provide the documents requested by the Office of Insurance Regulation as outlined in their subpoenas."

In its petition that resulted in the court lifting McCarty's order, Allstate argued that the regulation office was abusing its power to issue emergency orders that are supposed to be limited to specific immediate dangers to the public health, safety or welfare.

In Wednesday's response, regulators argued that Allstate's failure to produce documents did indeed indicate that "the Appellants are engaged in an ongoing violation of the Florida Insurance Code and thus an ongoing crime that in and of itself threatens safety and welfare of Florida citizens that is sufficient grounds" to issue the order pulling Allstate's licenses to do business. The regulators cited Chapter 624.15 of Florida statutes, which states that willful violations of the insurance code is a second-degree misdemeanor and could result in denial, suspension or revocation of business licenses.

"Appellants state that the 'Allstate companies have attempted and are continuing in good faith to respond to the subpoenas and produce as best they can and as quickly as is practicable the huge volumes of documents requested by the Office of Insurance Regulation.' Nothing could be further from the truth," states the petition filed Wednesday.

Regulators say Allstate produced 16 boxes of documents that include prior rate filings already held by their office, documents with missing pages and documents "falsely marked as 'Trade Secret'" that included prior rate filings already in their office's possession and available online.

The office said Allstate claimed it spent 2,000 personnel hours producing the documents. "The Office finds it remarkable that it has taken Allstate the equivalent of 285 days to produce 16 boxes of documents to the Office," the petition states.

Allstate spokesman Shores said the insurer is providing documents on a weekly basis. He said on Wednesday that the company turned over the controversial McKinsey documents, which are internal recommendations on how the company should settle claims, chiefly in the auto business. Regulators confirmed late Wednesday that it had received what were thought to be those documents, which have also been sought by regulators in other states.

The Tallahassee court did not indicate when it would rule.

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Gene'O said...

How big were those boxes, anyway?

That's more than two weeks per box 'o' docs.

I think the bit about them taking on more exposure (I assume this means selling more policies?)to lower rates and then not lowering rates is telling. I'm not an economist, but I have to think that if we really dug deep into that situation we would see the same approach to business that is sinking two of our largest credit corporations.

That approach basically involves taking clients' money under false pretenses, underestimating risk and cooking the books to cover up the fact that they don't have enough money to meet all their obligations, and hoping that when it's time for the company to live up to their end of the deal, they can either twist the law to avoid their responsibilities, or count on the government to bail them out.

Ana Maria said...

Yes, when the insurance industry didn't pony up the money to cover the wind damage that Katrina caused, our government bailed out the industry: grants for repairs for which the insurance companies wrongly denied payment and money for cost of living expenses that the insurance companies denied when they denied claims for wind-related damages to home and business, and inflated flood claims that the insurance industry claims adjusters wrongly sent to the Federal Flood Insurance Program. Remember, the private insurance companies are the ones who determine whether damages would be paid through their own wind policies or through falsely claiming that flooding caused the damage and sending those fraudulent claims to the federal government.

Insurance CEOs and boards of directors ripped off home and business owner customers and stuck the American taxpayer with a massive bill anyway we slice it. I'm happy that the MS AG is now going after the fraudulent claims to the NFIP.