Let the Lawsuits Fly: Good Hands in Boxing Gloves

We are diligently working rumors of a shareholder suit being filed against Allstate over the ramifications of their claims practices for investors. If the rumors hold another significant legal front has opened against this embattled insurance giant.

Allstate is not sitting still though obtaining a stay against the Florida Department of Insurance Regulation’s ban of the company announced last week:

Appeals Court Blocks Allstate Order

Friday January 18, 5:18 pm ET
By Brent Kallestad, Associated Press Writer

Court: Allstate Can Keep Selling Insurance Pending Appeal

TALLAHASSEE, Fla. (AP) — A court Friday allowed Allstate Corp. to keep selling insurance in Florida while the company appeals an order barring it from writing new policies.

State regulators told Allstate on Thursday to stop writing policies for what officials said was a failure to comply with a state subpoena in a dispute over the premiums the company charges for homeowners insurance in Florida.

The 1st District Court of Appeal stayed the order from the Office of Insurance Regulation pending the appeal, although it gave the office 10 days to show why the company shouldn’t be allowed to sell insurance in the meantime.

“This allows our more than 1,100 agents and their employees across the state to continue to do business in Florida, to create jobs and to serve their communities,” said Allstate spokesman Adam Shores. “We’re going to continue to work with OIR to provide the information they’ve requested in their subpoena.”

Ed Domansky, a spokesman for the Office of Insurance Regulation, said the state has 10 days to file its response but would probably file sooner.

“This is just another step in the process that enables Allstate to further delay production of the documents we requested,” Insurance Commissioner Kevin McCarty said Friday. “I will do everything within my authority as Florida’s insurance commissioner to ensure that the suspension remains in effect.”

McCarty has demanded information about why the company hasn’t dropped rates to the satisfaction of insurance regulators following last year’s passing of a bill meant to lower premiums. As part of that investigation, McCarty subpoenaed the company and officials at OIR said this week that the company appeared to be stalling and not giving up documents state investigators wanted.

The suspension had applied to all types of insurance sold by Allstate’s 10 insurance companies doing business in the state, but does not affect existing policy owners.

Aiken v USAA Casualty Insurance Company Day 4: Expert Cross Examination

The trial continues as does the Sun Herald coverage. My own opinion based on the following story is that despite vigorous questioning from Mr. Copeland, the basic facts as introduced into evidence remain unchanged.

USAA trial testimony continues

Engineer: Tornado destroyed house
By PAM FIRMIN[email protected]

GULFPORT –Hours before Hurricane Katrina’s storm surge arrived, the Henderson Point home of David and Marilyn Aiken had been hit by a tornado and was long gone, forensic engineer Charles Ivy told the court Thursday morning.

He agreed reluctantly under questioning by Greg Copeland, attorney for USAA Casualty Insurance Co., that the surge would have been enough to destroy the house if the house were still there.

The report Ivy prepared to back up his findings went under the microscope with intensive questioning by Copeland, who lost patience with the witnesses’ often rambling responses and complained to U. S. District Judge L.T. Senter Jr., “He is not responding in any way.”

“Repeat the question,” Senter instructed.

The Aikens, represented by George W. Healy IV, are suing USAA and Rimkus Consulting Group Inc., which was employed by USAA, for conspiring to defraud them. They seek full payment of their $680,000 homeowner-insurance policy with USAA, which paid them $178,000.

Earlier testimony came from Rimkus engineers. One inspected the Aikens’ property and the other later made changes to that report without communicating with its author, which is against the company’s policy.

Rimkus attorney David Ward read verbatim from Ivy’s pretrial statement that he got data for his report from a preliminary storm model, and questioned Ivy’s reasons for not updating it when better data became available as time went on.

Healy’s next witnesses were to be Rimkus employee Paul Coleman and USAA employee David Rummel.

Aiken V USAA Casualty Insurance Company Day 3: The Experts

In our first post on the trial, testimony revealed Rimkus Engineering supervisor James Jordan altered the onsite engineer’s report on the Aiken site favorably towards Rimkus client USAA without consulting the onsite engineer, Roverta Chapa in direct violation of Rimkus procedure. The following Sun Herald story recounts the testiomony of two plaintiff experts, a metorologist and structural engineer who both introduced evidence supporting the conclusions of Rimkus onsite engineer Roverta Chapa who also found strong evidence of wind damage to the property:

Experts assert pre-surge tornado damage

Testimony in trial against insurer USAA

By PAM FIRMINmailto:[email protected]

GULFPORT –Testifying as expert witnesses, a meteorologist and a forensic engineer Wednesday afternoon described why tornadic force rather than storm surge was most likely responsible for the Katrina destruction of David and Marilyn Aiken’s home in Henderson Point.

A lawsuit filed by the Aikens seeks damages and full payment of their $680,000 insurance policy with USAA Casualty Insurance Co., which paid them $178,000 in structural and contents damage. The suit claims USAA and Rimkus Consulting Group Inc., which was employed by USAA, conspired to to defraud them. Earlier testimony revolved around whether changes to a property report by structural engineer James W. Jordan were made to downplay wind damage so USAA would owe less money.

On Wednesday, Day 3 of the trial projected to last several weeks, presiding U.S. District Judge L.T. Senter Jr. frequently tried to move proceedings along, one time telling attorneys who haggled over details of intricate meteorological documents that it was “not necessary to go over every bit of the document” and later that “everybody’s tired of hearing his jabbering back and forth.”

Documents were provided by meteorologist Charles Barrere of Norman, Oka., formerly of the New Orleans area, who said they showed a tornado being tracked by the National Weather Service in New Orleans around 3 a.m. Aug. 29 most likely passed directly over the Aikens’ house hours before the waters rose. The eight jurors were able to look at these on monitors in front of their seats.

Dr. Charles Ivy, a forensic engineer from Florida, said it was significant that 90 percent of the nails on surviving beams at the Aiken property were bent in a direction from north to south and that four sturdy frames still standing were “whipped toward the west, leaning toward the direction the water came from. If water caused the destruction, they would have been leaning toward the east.”

Court begins today with cross examination of Ivy by USAA attorney Greg Copeland and Rimkus attorney David Ward.

Florida Insurance Commissioner Suspends Allstate Insurance Co.

Here is the text of the press release just issued by the Florida Office of Insurance Regulation.

Wednesday, January 16, 2008

TALLAHASSEE, Fla. – Florida Insurance Commissioner Kevin McCarty today announced that he is suspending the certificate of authority of Allstate Companies to write new insurance in Florida until they fully comply with the subpoenas served Oct. 16 by the Office of Insurance Regulation (Office).

Today’s decision by the commissioner follows Tuesday’s action when he abruptly halted the scheduled two-day hearing into the Allstate Companies’ reinsurance program, their relationships with risk modeling companies, insurance rating organizations and insurance trade associations.
“In view of Allstate’s ongoing, blatant disregard of our subpoenas, I have little choice but to take an action that will send a clear message about how seriously I am taking this issue,” said Commissioner McCarty. “Suspending their certificate of authority to write new business in our state should make my point.

“If Allstate is willing to pay $25,000 per day in fines to a Missouri court for its ongoing failure to provide similar documents, it’s obvious to me that it will take more than a monetary sanction to get them to comply with our subpoenas.”

Allstate was to have provided all appropriate company documents related to the above topics at or before Tuesday’s hearing, but failed to do so. Instead, the Office received 51 pages of objections to the subpoenas.

The suspension applies to Allstate Insurance Co., Allstate Indemnity Co. and Allstate Property and Casualty Co., and it only suspends the companies from writing new business in Florida.

Existing policyholders will not be affected. Allstate must continue to service them and the companies must make all required statutory filings including, but not limited to, audited annual financial statements, quarterly financial statements and rate filings.

“The duration of the suspension is up to them,” added McCarty. “It will be lifted when I am satisfied that we have received each and every document we need to properly investigate the important issues before us.

“It continues to trouble me that Allstate has not complied with our subpoenas and is not 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 have requested. This clearly cannot be in the best interests of Florida consumers.”

This is the first time the Office has suspended a company for failure to “freely” provide documents as required by Florida law.

A copy of the subpoena is available to review.

Allstate Floridian Indemnity and Allstate Floridian Insurance Company have requested rate increases of 28.3 percent and 41.9 percent respectively. Encompass Floridian Indemnity requested a 38.4 percent increase, and Encompass Floridian Insurance Company requested a 39.7 percent increase.

About the Florida Office of Insurance RegulationThe Florida Office of Insurance Regulation (Office) has primary responsibility for regulation, compliance and enforcement of statutes related to the business of insurance and the monitoring of industry markets. Business units within the Office are organized based on regulatory expertise and include the areas of life and health, property and casualty, specialty lines and other regulated insurance entities. It is within the Office that the mission of public protection is implemented through regulatory oversight of insurance company solvency, policy forms and rates, market conduct performance and new company entrants to the Florida market.

Sunday Bonus Post: Excellent Scruggs Coverage

We have been debating internally whether to cover certain aspects of the ongoing Dickie Scruggs saga as it relates to the insurance litigation here on the coast. To this point we haven’t necessarily had the opportunity, as Mr. Scruggs withdrawal from the old Scruggs Katrina Group occurred before our effort here commenced.

Keeping up with those events in detail is imperative however, due to the huge ramifications for current litigants, especially those using the re-formed law venture once fronted by Mr. Scruggs, the Katrina Litigation Group.

Events in the ongoing federal investigation are now moving forward quickly with the confirmation that Mr. Joey Langston has plead guilty and agreed to cooperate with federal prosecutors. Those keeping a closer watch already knew this bit of information well in advance due to the hard work and dedication of Lotus and her excellent group of knowledgeable Mississippi based commenters at the Folo blog.

For those interested in Scruggs mania and ongoing development in what could ultimately develop into one of the biggest cases of judicial and political corruption seen in this Nation’s history (I sincerely do not believe I am overstating that). I highly recommend pulling up a chair at Lotus’ cyber table and pouring yourself a cup of joe. Warning: The posts and commentary there is highly addictive.

sop

Saturday Two for the Price of One: Consumer Federation Report Blasts Insurance Industry Practices

The Consumer Federation of America released it’s 2007 study of industry profits along with it’s analysis of the reasons behind the numbers. Those of us on the Mississippi Coast can readily identify with the conclusions of the study, conducted by former Texas Insurance Commissioner Robert Hunter. This document is well worth reading and I highly recommend it for those wondering why the 2004 tort reform promise of cheaper insurance after passage has largely never materialized.

“State and national consumer organizations joined the Consumer Federation of America (CFA) today to release a new study concluding that the property/casualty insurance industry continued in 2007 to systematically overcharge consumers and reduce the value of home and automobile insurance policies, leading to profits, reserves, and surplus that are at or near record levels. The study estimates that insurer overcharges over the last four years amount to an average of $870 per household.

The report provides extensive data demonstrating that property/casualty insurance companies are paying out lower claims in relationship to the premiums they charge consumers than at any time in decades. The pure loss ratio, the actual amount of each premium dollar insurers pay back to policyholders in benefits, was only 54.6 cents in 2007. Over the past 20 years, the amount paid back as benefits has dramatically declined from over 70 cents per premium dollar, indicating a huge loss in the value of insurance to consumers.

“Consumers ultimately pay the price for the unjustified profits, padded reserves, and excessive capitalization that exist right now in the insurance industry,” said J. Robert Hunter, the Director of Insurance for the Consumer Federation of America (CFA) and author of the study. Hunter is an actuary, former state insurance commissioner, and former federal insurance administrator.

“The insurance industry reaped record profits in 2004 and 2005, despite significant hurricane activity,” said Hunter. “Profits in 2006 rose to unprecedented heights and 2007 may set a fourth consecutive profit record,” he said. “Unfortunately, a major reason why insurers have reported record-high profits and low losses in recent years is that they have been methodically overcharging consumers, cutting back on coverage, underpaying claims, and getting taxpayers topick up some of the tab for risks the insurers should cover,” said Hunter.

In the last several years, insurers sharply increased premiums for homeowners and commercial insurance and reduced or eliminated coverage for tens of thousands of Americans in coastal areas. Insurers have succeeded in convincing Congress to continue taxpayer subsidies for terrorism losses and are seeking additional subsidies for catastrophe insurance”

Insurance Commissioner to Open Office in Gulfport

I found this Sun Herald article interesting and refreshing. Mr. Chaney is opening an office in Gulfport which is a great move. I would urge the windpool to locate closer to it’s customers as well.

New commish aims at wind-pool rates
Chaney will open Coast office
By ANITA LEE[email protected]

Commercial and residential policyholders in South Mississippi could see a decrease this year in state wind-pool rates, plus policyholders will for the first time have a state insurance office on the Coast.

Mississippi Insurance Commissioner Mike Chaney said between meetings Friday he’s busy but tired after two weeks in office.

“It’s a lot of work,” Chaney said. “I think the people in the department are dedicated to the people that pay the policy premiums. It’s been a learning curve for me… I’m going to do my best.”

He said the job has already proven to him “how staggering a responsibility I’ve got to the people of Mississippi.”

Chaney said Friday he is working with state legislators, who convened their 2008 session Tuesday, and state wind-pool officials to lower wind-pool rates that increased 90 percent for homeowners and 162 percent for businesses after Hurricane Katrina. Chaney said it is too early to discuss details, but he has met with the Coast legislative delegation and is talking to other lawmakers about insurance needs in South Mississippi.

Chaney said his top priority is to stabilize the property and casualty market so insurance is available and affordable. Working to improve the wind pool, insurer of last resort for South Mississippi, also will help stabilize the insurance market statewide, he said.

He said lawmakers from other parts of the state are getting the message that South Mississippi needs stability in its insurance market for economic recovery from Katrina’s devastation.

The Republican commissioner defeated Democratic challenger Gary Anderson in the November election, after Anderson ousted longtime Commissioner George Dale in the party primary.

Chaney also plans to open a Coast insurance office, tentatively Friday. The office will be at 1701 24th Avenue, across from the Gulfport courthouse. Chaney said he is opening the office full time, primarily as a service to consumers who have questions or complaints about insurance.

Chaney said he also will lend support to a state policyholders’ bill of rights, with some revision, and is encouraging U.S. Senate candidates to support a multiple-peril insurance bill co-sponsored by U.S. Rep. Gene Taylor. The bill would add wind coverage to the federal flood insurance program, but would require rates be set at levels appropriate for the risks insured.

US Represenative Gene Taylor on Concurrent Causation

Following is yet another clip from Gene Taylor’s town hall meeting which touches on the heart of why so many people on the Mississippi Gulf Coast feel as though they have been swindled by their insurer: The Anti Concurrent Clause. Pictured in this New York Times story from 2006 that explains the concept is Marilyn Haverty, a lady I’ve known since I was a child growing up in Waveland with her children back in the 70’s and 80’s. Miss Marilyn and people like her are the reason this blog exists.

There’s no question that the anti-concurrent clause is bad for policyholders,’’ said Adam F. Scales, an associate professor who teaches insurance law at the Washington and Lee University School of Law, in Lexington, Va. “It’s not fair because it defeats policyholders’ reasonable expectations.’

Robert Hunter, former Texas Insurance Commissioner and Director with the Consumer Federation of America contends consumers do not understand such clauses buried in the fine print of their policies. George Dale seemed to agree in an interview he gave the Sun Herald that ran back in March 2006, when he claimed ignorance that insurers would use the clause to deny coverage: (The Sun Herald link is long gone but thanks to Anita over at the Did we survive Katrina or Not? blog we have this quote from the story.)

Q: So, you might not have realized how this was going to be interpreted when it was approved?

A: Oh, I’m admitting that with just the volume of the number of type policies – and there are hundreds of them in the course of a year that comes through my rating division – there may be other things that are in policies that would have gotten approved by my department by accident.That’s just the volume of the business that they do. Let’s hope it’s a minimal number of things that were approved.

I would submit that if this nation’s *longest serving insurance commissioner and his staff of lawyers had little clue to the meaning of this language then consumers had no chance of understanding the language. In fact most down here feel such language is a scam as the reason they bought the policy in the first place was to cover the one event insurers now claim it didn’t cover, a Hurricane.

[youtube=http://www.youtube.com/watch?v=fyhHP6Emgfk]

* – Mr. Dale was soundly beat in the party primary in August 2007 thus ending his term of service to the insurance industry.

sop

The Aftermath of Katrina and the Insurance Wars – Hard Feelings Worn on a Sleeve

The insightful commentary on my Happy New Years post is the reason we are linking to Dr McFarland’s presentation at Gene Taylor’s Town hall meeting held last August in Bay St Louis. The anger from being reduced to living in a camper trailer while State Farm was opinion shopping their engineers has naturally lead to some very strong feelings among those made homeless by Katrina. It sometimes spills over into the commentary at places like the Yahoo Allstate Stock Board and the video clip below. I am more than content to let our readership gauge the depths of the anger down here both in the linked post by Coastal Cowboy and the following Youtube clip. Originally we were not going to link Dr McFarland and I am not doing so to bash the insurance industry people reading this blog. Rather it I hope it illustrates the very real frustration that has accompanied Katrina and it’s aftermath and perhaps even lead to a greater understanding of all of the perspectives among the antagonists on this issue.

sop

[youtube=http://www.youtube.com/watch?v=Bl4Nt8qPF0E]