Monkey Business – State Farm Mutual, State Farm Fire, and Rule 30(b)(6)

hear-no-evil-pictureIn its notice or subpoena, a party may name as the deponent a public or private corporation, a partnership, an association, a governmental agency, or other entity and must describe with reasonable particularity the matters for examination.

The named organization must then designate one or more officers, directors, or managing agents, or designate other persons who consent to testify on its behalf; and it may set out the matters on which each person designated will testify.

A subpoena must advise a non-party organization of its duty to make this designation. The persons designated must testify about information known or reasonably available to the organization…. Rule 30(b)(6)FRCP

When the named organization is State Farm, some think the party and the non-party are one in the same.  One who shares that view is the Administrative Law Judge who reviewed the Company’s plan to withdraw from Florida and issued a related Order :

Transactions between State Farm Mutual and State Farm Florida for reinsurance and credit risk provisions totaling approximately $561.8 million, when viewed in the light of economic reality, Subsection 1.01(3), or Section 624.04, may be transactions which State Farm Mutual engages in with itself and which lack any independent economic significance. Transactions with no independent economic significance would be sham transactions which may distort the economic costs of the reinsurance and credit risk provisions purchased from State Farm Mutual. Such economic distortions may enable the group to derive a rate advantage from the legal form in which State Farm Mutual chooses to do business in Florida. (Finding of Fact 42)

The various legal forms in which State Farm Mutual exists could be called Corporate DID:

a psychiatric diagnosis that describes a condition in which a single person displays multiple distinct identities or personalities (known as alter egos or alters), each with its own pattern of perceiving and interacting with the environment. The diagnosis requires that at least two personalities routinely take control of the individual’s behavior with an associated memory loss that goes beyond normal forgetfulness…

Litigation following Hurricane Katrina became policyholders vs Eve and Sybil as State Farm  State Farm Mutual, the Company whole, disassociated into State Farm Fire & Casualty.  Continue reading “Monkey Business – State Farm Mutual, State Farm Fire, and Rule 30(b)(6)”

Chip Merlin on “State Farm’s Power Play and Propaganda Ploy”

State Farm’s decision to withdraw from Florida has invited comment and Florida attorney Chip Merlin allowed us to cross post his comments here.

State Farm is hard to figure out. They say one thing and often do another. When you finally get to the decision makers, there is usually some logic to why they do things despite disagreement from consumers or regulators. State Farm’s announcement that it was leaving the Florida property market really has me wondering–“what’s up?” From what I read and hear, I am not the only one.

The number of building policies affected is estimated to be between 800,000 and 950,000. Only Citizens Property Insurance Corporation insures more structures in Florida. Approximately 1.2 million total policies will be phased out by State Farm over two years. Under Florida law, State Farm has to file a plan to remove itself from Florida. Kevin McCarty, of the Office of Insurance Regulation, will then step into the picture to evaluate and investigate State Farm’s actions.

McCarty has taken a very calm ‘wait and see’ attitude. Very smart. He knows that State Farm does not just announce leaving a market without a strategic plan in place to help its overall position throughout the country and in Florida. Continue reading “Chip Merlin on “State Farm’s Power Play and Propaganda Ploy””

Florida homeowners slabbed by State Farm request for 47.1% average rate increase

On my way out of town Friday, I filled my tank for $62.50 – exactly half of the monthly payment on my first car. I imagine State Farm policyholders in Florida are having similar thoughts about State Farm’s proposed rate increase.

After lowering rates 9 percent this year, State Farm, the state’s second largest home insurer, did an about-face Wednesday when it asked state regulators for permission to raise homeowners’ rates 47.1 percent on average.

The private insurer, with nearly 1 million policies statewide, said it isn’t generating enough cash to cover the claims that could result if a major hurricane strikes next year. In Hillsborough and Pinellas counties, State Farm has nearly 100,000 policyholders.

“Our current rates are inadequate and must change,” said Michael Grimes, a spokesman for State Farm Florida. “We’re making this filing so we can continue to do business in Florida.”

…State Farm Florida Insurance Co. says it needs to increase premiums to have the cash to pay claims if major storms strike.

The planned increase flies in the face of the Legislature’s efforts to curb property insurance prices that doubled or tripled in some cases after hurricanes in 2004 and 2005.

After I returned to my wired world on Sunday and saw Chip Merlin’s post, I realized I’d left town with this story still in draft – sorry – but now you get Chip’s perspective, Snookered Again, plus the news story. Continue reading “Florida homeowners slabbed by State Farm request for 47.1% average rate increase”

Warren Buffett is the cat's meow in Florida

Not that Warren Buffett wouldn’t be the cat’s meow anywhere; but, in Florida we’re talking “cat” as in catastrophe bonds – and according to this story from Reuters (h/t CLS)

Florida officials agreed to pay Warren Buffett’s Berkshire Hathaway Inc …$224 million for a conditional pledge to buy $4 billion of state hurricane bonds during 2008, a state spokesman said on Thursday.

Vulnerable to big storms, Florida runs a reinsurance operation called the Hurricane Catastrophe Fund that can issue tax-free bonds to pay insurers’ claim losses beyond agreed caps.

The Berkshire agreement, approved on Wednesday by Florida’s governor, chief financial officer and attorney general, requires Berkshire to buy $4 billion of 30-year tax-free bonds with a 6.5 percent coupon, if the state fund incurs total storm-related claims this year of more than $25 billion.

A related article in the Orlando Sentinel added local color. Continue reading “Warren Buffett is the cat's meow in Florida”

Florida reinstates Allstate after gaining cooperation

Yahoo finance news reports Allstate agents in Florida can resume selling new car insurance and other policies in Florida after the insurer turned over documents showing how it sets homeowners rates – and that’s good news for all involved.

h/t to Supsalesmgr who brought the news to slabbed and posted this encouragement on ALL finance.

What is important is ALL has pretty much gotten out of the earthquake business and most of their hurricane mitigation plan is in place. That, along with plenty of reinsurance, positions ALL pretty well going into this hurricane season. Continue reading “Florida reinstates Allstate after gaining cooperation”

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”