Connect the dots on today’s insurance news

Today was definitely a big insurance news day in the Gulf Coast states of Florida, Mississippi and Louisiana.

We saw two companies fighting to hold on to information about the way they do business – a big loss for Allstate in Florida and a win for State Farm in Mississippi that was a set back for policy holders taking the company to court to resolve their Katrina claim.

The news out of Louisiana, however, is an indication of the kind of information insurance companies had rather their customers not know – in this case just how much profit they made from a FEMA formula designed to only cover cost.

I’ll explain more about this type of taxpayer-funded “bonus” in my coming-soon “Subsidy for Dummies” post – Right now all you need to know is that usual practice is for the government to require overpayment to be returned. Don’t hold your breath waiting for this refund!

FL Court gives thumbs down to Allstate Appeal

Earlier today Florida’s First District Court of Appeals issued an order affirming the authority of the state’s insurance regulators to suspend Allstate’s companies from writing new policies in the state because the insurer failed to comply with subpoenas.

Insurance Commissioner Kevin McCarty’s office suspended the licenses of the Allstate Companies from writing any new business in Florida in a January 17 Immediate Final Order. Allstate appealed the decision and the Commission’s order was suspended until today’s ruling.

“I remain seriously concerned with Allstate’s continued failure to comply with our subpoenas; as evidenced by its 196-page privilege log of documents that they have failed to provide us,” said Commissioner McCarty. “They have not been willing to explain to us their relationships with rating agencies, modeling companies and trade groups and how these relationships might have influenced the huge rate increases they requested in September. Continue reading “FL Court gives thumbs down to Allstate Appeal”

Breaking: Judge Senter Disqualifies Katrina Litigation Group

Anita Lee has broken the story that the remainder of the old Scruggs Katrina Group is disqualified from representing their insurance plaintiffs. The order entered today was in the McIntosh case but applies to all their remaining clients. I have a feeling Chip Merlin’s phone will now be ringing off the hook. Here is a copy of the order and here is a copy of Judge Senter’s opinion.

The reasoning relates to the payments made to the Rigsby sisters by Dickie Scruggs:

I have determined that disqualification is required because Scruggs, acting in furtherance of the SKG joint venture, paid the Rigsby sisters a substantial sum of money (a consulting fee of $150,000 per year) despite Scruggs’s knowledge that the Rigsby sisters were material witnesses in connection with many hurricane damage claims that were likely to become the subject of litigation. While Scruggs made the arrangements for these payments, the other members of the SKG joint venture knew or should have known that the payments were being made, and I am of the opinion that their failure to take timely and reasonable remedial steps or to object to this arrangement amounts to a ratification of Scruggs’s actions. While the other ethical misconduct alleged by State Farm and Renfroe are substantial, the payments to the Rigsby sisters are, in and of themselves, sufficient to warrant disqualification. Continue reading “Breaking: Judge Senter Disqualifies Katrina Litigation Group”

The “F” word is back in the news!

Rebecca Mobwray tells the storyFEMA to restructure the way it pays private insurers – but there’s another story in the story – the Federal Flood Insurance Program provides a subsidy to private insurers!

I know, I know – I’ve got the “F” word and the “S” word in the same post but I haven’t finished “Subsidy for Dummies” and the insurance industry has opposed HR3121 because it would “socialize a currently private industry…Taylor’s best efforts notwithstanding, everyone sees his bill for the giant subsidy package that it really is. No one beyond those who stand to personally benefit has an appetite for that.”

…and, who benefits?

In addition to paying insurance companies fees on a sliding scale to cover the cost of sending adjusters to individual homes, FEMA also pays insurance companies a flat 3.3 percent of the cost of claims to cover overhead expenses that are not associated with specific claims, such as the cost of maintaining a field office.

While insurance companies were paid 3.3 percent of the value of claims in overhead, adjusting those claims only cost them 2.5 percent of the value of the claims, according to data the insurance companies collected for the flood program.

Now, doesn’t that make you want to say the “F” word, too?

Link to the Story: htcls : )

“The image is one thing and the human being is another”

If Elvis understood that, Sop, it shouldn’t be all that difficult for folks to apply his wisdom to USA v Scruggs – particularly if they read your comment to my Fat Mama’s post or the April issue of the ABA Journal.

The Katrina-related cases—tailor-made to cast Scruggs as a home-state hero—have also led indirectly to the bribery allegations against him.

Scruggs’ own home in Pascagoula had been destroyed in the hurricane, occasioning his relocation upstate to Oxford. He bankrolled lawsuits against companies like insurance giant State Farm, which had argued that damage from water pushed landward by winds was not flood-related, and thus not insured.

But as the litigation proceeded, two familiar complaints against Scruggs emerged with a vengeance: one involving tactics, the other fees.

It’s impossible to review the record of USA v Scruggs and miss all that “emerged with a vengeance” to suggest the image of the King of Torts was on trial, not the human being, Richard A. “Dickie” Scruggs – but the vengeance of the pursuit of all things Scruggs says far worse things about those in pursuit than could ever be said about Richard A. “Dickie” Scruggs.

Bloomberg Article The Insurance Hoax Finalist for Prestigious Journalism Award

Lord knows I don’t have time to write this post but I made the “mistake” of checking in on Sam Friedman’s blog at the National Underwriter and saw two pieces well worth noting. I’m going to concentrate on the Bloomberg story The Insurance Hoax that is a finalist for the Daniel Pearl Award for Investigative Reporting from the Deadline club in New York.

Mr Friedman’s opinion that the story is a hatchet job on the insurance industry has some validity in my opinion, from a straight industry point of view. He is very fair in his reporting on insurance issues and I respect his take. However, under the talking points do lie some very real problems with how insurers adjust their claims. As industry blogger David Rossmiller pointed out himself in a particularly insightful post on the legalities behind a “first party claim”:

An adversary relationship is assumed to exist between the insurer and insured from the time the claim is filed, and generally speaking, no fiduciary duty arises on the part of the insurer.  This doesn’t mean it’s OK for insurers to cheat you, merely that it is understood that an inherent conflict exists to an even greater degree than in third-party claims, where it could also be said that a conflict exists, because paying for the legal defense of an insured is expensive.  All this is inherent in the nature of insurance, and is why we have various rules ranging from bad faith laws to  interpreting ambiguities against the insurer in insurance law. Continue reading “Bloomberg Article The Insurance Hoax Finalist for Prestigious Journalism Award”