Insurance Complexities: The Myth of State Farm’s Financial Insolvency and Conflicts of Interests.

I occasionally run across “fans” of Nassim Taleb, a philosopher/visionary who is changing the way people view world events. His black swan concept, which is the name sake for his latest book, is understood and often repeated as the totality of his theory when in reality it is just a small part of his body of work. Russell and I share an interest in Taleb’s work, an interest that derives from actually reading his two books rather than simply embracing the pop culture lite version repeated in the popular media.

This subject of insurance is akin to understanding Taleb and his theories; one can get a slight flavor for the concepts of subjects like wind claims dumping from the media but the nuance and complexities of the subject escape the vast majority of the popular reporting just as Taleb’s theories are revealed completely only by reading his books. Taleb’s Black Swan is an important concept but his central thesis is far more involved. Taleb’s website, named for his first book gives a better clue the larger theory he espouses.

Such is the case with the recently issued GAO report and the concepts surrounding the Continue reading “Insurance Complexities: The Myth of State Farm’s Financial Insolvency and Conflicts of Interests.”

Florida Insurance Hearings: Not Every Company is Losing Money

We noted in our continuing coverage of the Florida Senate Hearings concerning their property insurance mess that Allstate used unapproved short term weather models to make actuary decisions on the purchase of reinsurance. Those poor business decisions have caused losses for Allstate’s Florida operating company, losses they now wish to dump on Florida consumers.

Allstate has since been joined by Nationwide and Farm Bureau in admitting the use of unapproved short term models to drive reinsurance purchase decisions. Farm Bureau also admitted losses deriving from that fact.

In a refreshing change, we have a story from the Miami Herald that Florida based American Strategic Insurance testified Tuesday they used approved long term models and have profited from the better decisions that resulted from that fact.

American Strategic, a St. Petersburg company that managed to cut rates an average 11.5 percent due to the money it saved by buying a portion of its reinsurance from the Florida Hurricane Catastrophe Fund.

The company also lowered rates another 9.5 percent later in the year, mostly because it paid a lower cost for additional reinsurance bought in the private market and had fewer claims and better cost controls.

”Generally speaking, apples to apples, reinsurance costs were coming down for everyone in 2007,” said CEO John Auer, who expects to see another drop this year.

Unlike many insurers, American Strategic said it is writing new homeowners policies, even some on the coast. The company has 260,000 policies, making it the third-largest insurer behind state-run Citizens and State Farm.

Sen. J.D. Alexander, R-Winter Haven, questioned American Strategic’s heavy use of reinsurance to cover potential losses. He asked if it would be in financial trouble if its reinsurers, especially the state catastrophe fund, couldn’t make good on their
policies.

Auer said the company, started 10 years ago, has already lived through highs and lows in the reinsurance market, noting that reinsurers are pleased with American Strategic’s management. And A.M. Best raised American Strategic’s rating to A-minus from B++ last December.

As I opined on the Allstate Yahoo Finance Message Board, the testimony of Allstate, Hartford, Farm Bureau and Nationwide Insurance reminded me of the confessions of an accomplished three card monte dealer. They expect their customers to foot their mistakes; both the mistaken decision to purchase more reinsurance and the decision to buy expensive reinsurance at all for that matter, rather than the cheaper variety offered by the State of Florida. Is insurance the only line of business that doesn’t have to pay for their business mistakes? In the small business world where I come from there is no government backstop save bankruptcy so the concept of profit entitlement is foreign to me.

In any other line of business the shareholders, not the public would be eating these business mistakes. So while we congratulate American Strategic and their owners for their ability to profit while their competitors languish we also hope free market principles apply equally to those who make bad business decisions.

Simply put there is a point where the insurance industry needs to take ownership of their mistakes. The mess in Florida illustrates exactly why so few present day insurers would survive in a truly competitive marketplace without that anti-trust exemption they currently enjoy. Our position is that the free marketplace should reign supreme where ever possible and the culture of big insurance profit entitlement should end.

Finally the events in Florida now have me wondering if our state regulators here in Mississippi have been hoodwinked by similar tactics. Our wind pool premiums are in the stratosphere, largely due to the astronomical cost of reinsurance. Given what we have learned through the application of Sunshine to the insurance industry by the Sunshine State, I challenge Mr. Chaney to hold rate hearings for any increases in property insurance, not just those he arbitrarily deems too high. We have quickly arrived at the point where he should put the interests of the citizens of this state ahead of the profit interests of these out of state insurance companies.

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The Allstate Battle in Florida: An Update

The Florida District Court of Appeals last week kept a temporary stay in place against the suspension of Allstate from Florida by the Florida Office of Insurance Regulation. The ruling is a double edged sword in that the expedited appeals process puts pressure on Allstate to produce records on its business practices; records it has been unwilling to produce in the past. According to Kevin McCarty, Commissioner of the Florida Office of Insurance Regulation Allstate has become more diligent in producing the subpoenaed records:

All the documents requested in our October subpoenas were due at the Jan. 15 hearing, but I am encouraged that as a result of my suspension order Allstate within a week produced about 25,000 pages of documents.

“I remain ever committed to Florida consumers to get to the bottom of this issue and to ensure that Allstate is held accountable to the law.”

The timetable for the expedited court appeal points to a resolution in early March, 2008. A copy of the court order that contains the milestones can be found here.

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Breaking News: Hood Fires Back

Jim Hood has made the news today with his Friday court filings in response to State Farm trying to prevent a new grand jury from looking into alleged wrong doings on their part in how Katria claims were adjusted here on the coast. I write this post with a heavy heart as we have just learned of Jody Compretta’s untimely passing in a parade accident last night in New Orleans. Our thoughts and prayers are with JP and his family.

The AP story:

A lawsuit filed by State Farm Fire and Casualty Co. that accuses Attorney General Jim Hood of using the threat of criminal charges to force settlements in civil lawsuits is based on “lies, speculation, and innuendo,” Hood said in court papers.

State Farm sued Hood in September, claiming he violated his part of a January 2007 settlement in which the attorney general’s office agreed to end its criminal investigation over the company’s handling of Hurricane Katrina claims. A judge ordered Hood to temporarily shut down the probe.

The accusations in court documents have intensified over the past week as both sides prepare for a hearing on Wednesday.

“Before allowing State Farm to use this court as a three ring circus to parade its inflammatory evidentiary rhetoric of innuendo, guilt by association, and smears, there should be some factual basis alleged to support a conclusion of retaliation and/or harassment,” Hood said in papers filed Friday in U.S. District Court in Jackson.

Jonathan Freed, a State Farm spokesman told The Associated Press on Friday, that the insurer is ready to “proceed with our case and we’re looking forward to airing these issues in court.”

Hood asked the court to dissolve the restraining order and allow him to resume his investigation. Hood’s 19-page filing came just days after State Farm used some of the strongest language yet in accusing the second-term attorney general of wrongdoing.

The company claimed Hood and wealthy plaintiffs attorney Richard “Dickie” Scruggs, who is facing corruption and contempt charges in other cases, participated in an “extortion conspiracy” by trying to force the company to settle civil litigation with private attorneys.

The court battle heated up when State Farm began urging a judge to allow the company to question Scruggs under oath. Hood has called Scruggs his “confidential informant” and has said Scruggs provided allegedly incriminating information about State Farm.”

General Hood is clearly concerned that his co-conspirator will either tell the truth or invoke the Fifth Amendment on specific questions related to their extortion conspiracy,” State Farm said in a motion filed Wednesday.

U.S. District Judge Michael P. Mills on Friday ordered Scruggs to submit to the questioning by 5 p.m. Monday. Scruggs will likely invoke his Fifth Amendment protection against self-incrimination when questioned because of the pending charges against him.

Scruggs, one of the most influential plaintiffs lawyers in the country, is facing federal charges that he conspired with several associates to bribe a judge in an unrelated dispute over $26.5 million in fees from a mass settlement of Katrina claims. He’s facing contempt charges in Alabama for allegedly violating a federal judge’s order by giving leaked Katrina assessment documents to Hood rather than returning them to the company from which they were taken.

Scruggs has denied wrongdoing in either case. Scruggs is not a party to the lawsuit State Farm filed against Hood, but the company claims he worked in collusion with Hood.

The January 2007 agreement that State Farm claims Hood violated by resuming a criminal investigation was part of a broader settlement that called for State Farm to reopen and possibly pay thousands of policyholder claims. However, a federal judge refused to sign off the terms of deal and State Farm later entered into another agreement with George Dale, who was then Mississippi’s Insurance Commissioner.

In August 2007, State Farm received a new subpoena for records from a grand jury. Less than a month later, the company sued Hood in an effort to stop the grand jury’s investigation.Hood claims he wasn’t reopening the same investigation, rather he was probing new claims.Hood has argued that he never provided “blanket immunity” from future investigations.

Pee on My Leg and Say It’s Raining Part 3: Marsha Thompson Joins Kevin Drawbaugh in the Drive by Reporting Craze

Since Lotus at Folo brought this report that aired on WLBT to my attention, I filed it away for further commentary, not only for its glaring factual inaccuracy (EA Renfroe is a claims adjusting firm not engineers), but also because of the sheer silliness of the logic used to frame the Rigsby sisters as document purloining perverts. I had to chuckle thinking of the State Farm commercial which no doubt aired at some point during the broadcast, informing us the good neighbor stands ready to sell us life and auto insurance; contracts that people such as Dr Leroy McFarland discovered post Katrina really were not worth the paper they were written on.

I filed Ms Thompson’s revealing report away as I was vetting the first Reuters story on the GAO report past some ordinary people off the coast to gauge their reactions to it and the context which it was framed. This is the paragraph that repeatedly came up in the feedback I received.

Study after study has come back with the same results, showing there is no evidence insurance companies improperly attributed wind damage from Hurricane Katrina to water,” said Justin Roth, senior federal affairs director at the National Association of Mutual Insurance Companies, an industry group.

“We fully expect this report to reach the same conclusion,” Roth said

Mr Roth’s artful wordsmithing must be appreciated in PR circles for its sheer intellectual dishonesty as is Mr Drawbaugh’s apparent willingness to serve as a mouthpiece instead of his stated vocation of reporter in the finest traditions of misinformation that would make Dr. Goebbels proud.

So how could Mr Roth be so confident in his statement, issued one day before the GAO report was released? Easy, the Three Wise Monkeys work for FEMA, and Mr Roth knew FEMA did not collect wind damage payment data in flood claims thus they had no way of knowing if NFIP was improperly charged for wind damage. This is what the GAO had to say on that exact subject:

FEMA officials stated that they did not have the authority to collect wind damage claims data from insurers. But without the ability to examine claims adjustment information for both the wind and flood damages, NFIP cannot always determine the extent to which each peril contributed to total property damages and the accuracy of the claims paid for losses caused by flooding.

FEMA cannot be certain whether NFIP has paid only for damage caused by flooding when insurers with a financial interest in apportioning damages between wind and flooding are responsible for making such apportionments.

However, when the public adjusters in Louisiana peeked under the hood of flood claim adjusting in New Orleans, they found a far different story than was conveyed by Roth and Drawbaugh:

“….a group of former insurance adjusters, identified only as the Georgia company Branch Consultants LLC, say they have reinspected 150 properties with flood and wind damage. In all cases, private insurance companies overcharged the federal flood program for storm damage while they underestimated wind damage.

“Every single one of them,” said Allan Kanner, a New Orleans attorney representing the insurance and construction experts as they pursue what they say is a violation of the False Claims Act on behalf of the federal government. “There’s a pattern here.”

In one striking example, the suit claims that a group of four-plex apartments in eastern New Orleans were compensated for flood damage with taxpayer money even though they experienced no flooding. Each building in same complex was paid only a pittance for severe wind damage on its regular property insurance policies.”

WLBT Jackson Joins in the Drive By Reporting Craze

In their anchor captioned report “Sex, Lies and Theft” WLBT tries their hand at character assassination. The story teller, Marsha Thompson, dutifully informs her viewers of Kerri Rigsby’s sex life and that the Rigby’s were “Stealing documents without State Farm’s knowledge or permission and then furnished copies to the Attorney general, US Attorney and Scruggs without permission.”

Following Ms. Thompson’s logic the Rigsby sisters, who publicly stated they believed they have witnessed crimes known in some legal circles as Racketeering, should have asked permission before calling the authorities. Following the Thompson logic means we should also obtain the permission of an armed robber before calling in a bank robbery. Thompson logic also evidently means the sex lives of witnesses to a crime are fair game too.

Is it any wonder around 26% of the public finds local TV news “believable” or that so few white collar crime witnesses are willing to come forward as whistleblowers. WLBT should hang their head in shame.

Fade out to the “Good neighbor” ad…..

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GAO National Flood Insurance Program Report: A View from Outside the Industry

Yesterday we pointed out several glaring omissions and factual inaccuracies in the Reuters drive by reporting on the General Accounting Office NFIP report. Today we see better coverage courtesy of Anita Lee at the Sun Herald. In addition to our analysis, Ms Lee points out some of the other conclusions reached by the GAO on the flaws inherent to the current program design:

The first flaw involves the three wise monkeys and the concept of see no evil, hear no evil and speak no evil. While that old proverb works well in our personal conduct it is an invitation to disaster when used to manage a federal program:

The flood-insurance program cannot accurately determine flood-claim payments on properties that were subject to both winds and flooding, because FEMA does not collect information on wind claims and does not require companies to explain how they distinguish between wind and flood losses.

The second flaw involves the security the program gives to it’s participants, even if property owner contracts for wind and flood insurance there is no way to know if all the damage will be covered due to Catch-22 like scams such as the anti concurrent clause built into wind policies and other coverage differences between flood and wind policies:

Property owners with separate homeowner, wind and flood insurance policies cannot know prior to a storm whether all their damage from a hurricane will be covered because of differences in the policy limits. The NFIP cedes the damage determination to the insurance company.

The system as currently designed fosters legal disputes because of Catch-22 scams such as the Anti Concurrent clause.

Legal disputes between wind and flood coverage have increased because of insurance companies’ anti-concurrent causation clauses that attempt to exclude coverage of wind damage if flooding contributed to the loss.

Most interesting is that FEMA seems to oppose the common sense recommendations, especially those that would require the bureaucratic FEMA monkeys to remove their blinders and examine how flood claims are adjusted and the damage is apportioned in multi peril events such as hurricanes by private insurers.

Given the insurance money that supports Senate politicians like “Renfroe” Richard Shelby and “Pac-Man” Christopher Dodd we certainly understand their insistence to sticking with the current “heads I win, tails you lose” setup for coastal residents whereby wind policies are essentially meaningless pieces of paper and taxpayers ultimately bear the burden for multi peril events like Hurricanes. However, from the appearance of Gene Taylor’s remarks quoted in the Sun Herald, the Catch-22 days of ordinary citizens unable to rely on their wind policies while insurance companies laugh all the way to the bank appear numbered. Thanks to the internet the truth will win this debate. Today’s Sun Herald story:

GAO points up conflict of interest

Insurers deciding in wind vs. water

By MARIA RECIO
SUN HERALD WASHINGTON BUREAU

The Government Accountability Office issued a report Wednesday on the National Flood Insurance Program that concluded insurers have “an inherent conflict of interest” in determining flood damage the federal program must pay, with the wind damage covered by private companies.

“I applaud the GAO for confirming that insurance companies have an inherent conflict of interest when they are allowed to determine whether to assign damages to their own wind-insurance policies or to the federal flood-insurance policy claims,” said Rep. Gene Taylor, D-Bay St. Louis, who lost his home in Hurricane Katrina.

The GAO concluded the program needs greater transparency and oversight of wind- and flood-damage decisions. The agency is the congressional watchdog arm and frequently investigates at the request of members.

“The report reinforces my proposal,” said Taylor, “to give homeowners the option to buy wind and flood coverage in the same policy.” The House passed Taylor’s provision in September but the bill is stalled in the Senate.

“I urge the Senate to pass this legislation in order to stabilize the insurance market in coastal states,” Taylor said. “I strongly support GAO’s recommendations that insurance companies be required to turn over their wind-claims files so that FEMA can verify that the companies applied the same standards to the flood insurance claims as to their own wind claims.”

According to the GAO, FEMA opposes the recommendation, which prompted Taylor to say, “I am disappointed, but not surprised, that FEMA opposes that recommendation. FEMA needs to recognize that its oversight responsibility is to protect federal taxpayers, not insurance companies.”

The GAO also concluded:

• The flood-insurance program cannot accurately determine flood-claim payments on properties that were subject to both winds and flooding, because FEMA does not collect information on wind claims and does not require companies to explain how they distinguish between wind and flood losses.

• Property owners with separate homeowner, wind and flood insurance policies cannot know prior to a storm whether all their damage from a hurricane will be covered because of differences in the policy limits. The NFIP cedes the damage determination to the insurance company.

• Legal disputes between wind and flood coverage have increased because of insurance companies’ anti-concurrent causation clauses that attempt to exclude coverage of wind damage if flooding contributed to the loss

Pee on My Leg and Say It’s Raining Part 2: Reuters Story Contains Glaring Omissions and Falsehoods

After I read yesterday’s Reuters story on the fight to reform the flood program I thought it strange it contained this paragraph which I knew to be inaccurate:

The Senate bill would extend the NFIP for five years and improve flood maps used in the program. But a vote by the full Senate on the bill has been blocked by lawmakers from Louisiana who are concerned that it would boost insurance rates there.

Fast forward to today and this Reuters story which contains almost the exact same wording for the reason for the hold on the senate version of NFIP re authorization:

The NFIP’s post-Katrina debt would be forgiven under a bill approved in October by the Senate Banking Committee. The Senate bill would extend the NFIP for five years. But a vote by the full Senate on it has been blocked by Louisiana lawmakers who are concerned it would boost insurance rates in their state.

The second story, concerning the release of the GAO report on the National Flood Insurance Program, boiled the report down the following:

The GAO, the investigative arm of Congress, said questions remain about the Federal Emergency Management Agency’s handling of flood-damage claims processed by private insurers under the National Flood Insurance Program (NFIP).

The GAO urged Congress to empower the agency to examine both wind and water claims data related to hurricane damages. It also said state regulators need to strengthen licensing and training requirements for insurance adjusters.

Alabama Republican Rep. Spencer Bachus said the GAO report contains “sensible recommendations” and deserves further discussion in the House of Representatives Financial Services Committee, where he is the ranking Republican member.

However, while Rep. Bachus is the ranking Republican member of the committee Mr. Drawbaugh evidently did not see fit to report on the reactions of the Democrats running the House Financial Services Committee to the GAO report they ordered. Curious.

I also found it equally strange that Mr Drawbaugh as did not report on the “inherent conflict of interest” in the current system of private wind insurers adjusting flood claims or the problems associated with damage related to multi peril catastrophes like hurricanes contained in the GAO report:

Insurance coverage gaps and claims uncertainties can arise when coverage for hurricane damage is divided among multiple insurance policies. Coverage for hurricanes generally requires more than one policy because private homeowners policies generally exclude flood damage. But the extent of coverage under each policy depends on the cause of the damages, as determined through the claims adjustment process and the policy terms that cover a particular type of damage. This process is further complicated when the damaged property is subjected to a combination of high winds and flooding and evidence at the damage scene is limited. Other claims concerns can arise on such properties when the same insurer serves as both NFIP’s write-your-own (WYO) insurer and the property-casualty (wind) insurer. In such cases, the same company is responsible for determining damages and losses to itself and to NFIP, creating an inherent conflict of interest.

Though we are not so called “professional” news reporters at the Insurance Issues Forum, I was able to land a copy of Senator Vitter’s letter to Senators Dodd and Shelby by contacting Gene Taylor’s office and simply asking for it. Since Mr. Drawbaugh did not see fit to speak with either of Louisiana Senators or HR3121 sponsor Rep Gene Taylor I guess it is understandable, though somewhat unprofessional that he reported a false reason for the hold on the Senate re authorization of the National Flood Insurance Program. Concerns over “boosting insurance rates” was not the reason Senator Vitter had a problem with the Senate version of the bill, rather:

I believe any legislation reforming the flood insurance program must make an increase in the maximum coverage levels available to policyholders. As you know, your bill does not do this. The current coverage levels have not been increased since 1994. With inflation and increased home prices since that time, the current coverage levels are severely outdated. The bills passed by the U.S. House of Representatives last and this Congress increased the current maximum levels of $250,000 for residential properties and $500,000 for non-residential properties to $335,000 and $670,000 respectively. These reasonable adjustments in the coverage levels would bring more certainty and affordability to the insurance market.

Also, flood insurance reform legislation should allow policyholders new lines of optional coverage, including coverage for business interruption and full replacement costs of contents. Businesses in Louisiana continue to suffer as we recover from Hurricanes Katrina and Rita, and skyrocketing insurance costs and fewer providers offering coverage remain among the most significant barriers to full economic recovery. These new coverage options, which could be offered at market rates so as not to add any additional financial strain on the program, would go a long way in providing some stability and affordability to the insurance market.

Additionally, I believe Congress must address the overall insurance crisis along the Gulf Coast centered on the lack of coverage options and affordable rates for wind damage. Lack of available or affordable general liability coverage including wind coverage is now one of the single biggest obstacles to recovery. Rates have skyrocketed well beyond what seems necessary to cover the risk and are not abating. Either wind coverage should be added to the National Flood Insurance Program at market rates as the House-passed bill does, or we must take other action outside the flood insurance program to address the broader insurance crisis. This could include a catastrophic backstop, similar to what we have for terrorism risk insurance.

We stand ready to correct any factual inaccuracies we find in hard news reporting on this issue, which impacts so many along America’s coastlines. Reuters owes us a correction.

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AIken v USAA: The Verdict

Hailed in some circles as a major victory for insurers, the jury has spoken and awarded David and Marilyn Aiken $64,000 in their suit against USAA. We certainly respect the jury verdict and will no doubt find irony in the praise accorded our gulf coast based jury by some who previously had written us off as incapable of fairly dispensing justice. That praise will last until Nguyen v State Farm begins next month, but that is a different case with different fact patterns. A tip of the hat also to David Rossmiller for his analysis of the verdict though I would add the “jury pummeling” of Allstate in Weiss was deserved despite Mr. Rossmiller’s earlier protestations to the contrary. As I mentioned yesterday the fact the Aiken’s received anything from the jury indicates they felt USAA was not monetarily fair in how this claim was adjusted.

In any event here is the story in today’s Sun Herald on the Aiken verdict and link to the jury instructions as we close the curtain on Aiken and await Nguyen.

By ANITA LEE [email protected]

A jury in U.S. District Court awarded USAA Casualty Insurance Co. policyholders only $64,000 for wind damage to their Pass Christian vacation home, which was destroyed by Hurricane Katrina.

David W. and Marilyn M. Aiken already had received $178,205 from USAA, including loss of use, but sought total coverage for their home, boat house and contents. Full payment would have amounted to $427,087 more.

The Aikens also sought damages to punish the insurance company, claiming USAA purposely minimized their claim. But District Judge L.T. Senter Jr. did not allow the jury to consider punitive damages, ruling USAA had legitimate reasons for its decision.

The Aikens maintained a tornado destroyed their home long before Katrina’s tide, covered by federal flood insurance, surged ashore. However, USAA said it covered damage that could have been caused by wind and excluded from payment any damage caused by tidal surge or by wind and tide acting together. The property was subjected to 20 feet of water, minus wave action, according to USAA’s experts.

The plaintiffs argued those experts were biased, but the evidence failed to support this contention.

Senter told the eight jurors before deliberations that they should take into account the Aikens’ acceptance of $278,000 in coverage from the National Flood Insurance Program, which indicates they acknowledged some damage from the tide. The jury also had to consider the previous USAA payment and could not award the Aikens more than the total policy coverage.

That left the jury to consider an amount from $0 to $272,238 for structural damage and $0 to $154,849 for destruction of contents. Based on the evidence, the jury awarded $17,000 for structural damage and $47,000 for contents.

Senter also told the jury the Aikens had met their initial burden under the insurance policy of showing windstorm caused an accidental direct physical loss of their property.

USAA then had the burden to prove the portion of the loss excluded by its policy, which is storm surge or a combination of surge and wind.

Tidal surge damage is excluded from coverage, Senter instructed, “even if wind contributed to cause this flood damage.” He explained to the jury: “All damage to the property that was caused by storm surge flooding is excluded even if the storm winds concurrently or in any sequence caused or contributed to this excluded storm surge flood damage.”

Senter’s instruction on the so-called “anti-concurrent cause” exclusion dovetailed with a recent ruling from the 5th U.S. Circuit Court of Appeals in the lawsuit Tuepker vs. State Farm, a Katrina case from the Coast. The ruling clarified when a homeowner can expect to recover wind damage. As State Farm argued, the appeals court found the wind damage must occur independently of storm surge for coverage to apply.

Washington State Voters Say No to Big Insurance and Yes to Ending Institutionalized Claims Abuse

This past November, despite insurance companies spending millions on the election, Washington State Votes passed the “Insurance Fair Conduct Act” which allows for treble damages against insurance companies that treat their customers in bad faith. Predictably the insurers played from the old script of threatening higher rates if they were forced to behave responsibly. Not as predictable were the voters that ratified the law, evidently tired of being mistreated by insurance companies.

“Companies (that) act in good faith are not going to have a problem, its not going to cost any more money , its not going to be any legal action and its not going to cost them treble damages because if companies deal with their customers in good faith, there is no penalty.” said Mike Kreidler, Washington State Insurance Commissioner when interviewed about Washington State Fair Claims Act.

Why would any business be against treating it’s customers fairly? One look at the profit made from institutionalized customer/claimant abuse reveals the answer.

Anderson Cooper has reported on the issue of insurance bad faith repeatedly since Hurricane Katrina, possibly because he was moved by the treatement of ordinary men and women here in Mississippi by their insurers after the storm. The following video clip is from a report on CNN on the Washington State Vote and is well worth watching. Enjoy.

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