Insurance Claims And Issues

Florida Office of Insurance Regulation Putins Allstate Insurance.

    For nearly a year, Allstate Insurance Company and its subsidiaries resisted investigations by the Florida Insurance Commissioner into its Reinsurance arrangements, its unauthorized Catastrophe Models that consistently predicted greater damage -- and thus the 'need' for greater Premiums -- than was predicted by the Catastrophe Models that have long been used in the industry and in Florida, and Allstate's relationships with raters and trade associations.  As readers of this web log know, many posts here have followed the developments during that time, until Allstate exhausted its appeals and Courts overruled its objections to the Insurance Commissioner's investigations.  Now, what the Florida Insurance Commissioner calls "'drastic actions'" have been agreed to by Allstate.  Tom Zucco, "Deal Cuts Allstate's Rates" (St. Petersburg Times Online, Friday, August 15, 2008).

    The capitulation to which Allstate has been forced to consent is as overwhelming in its own way, as the recent invasion of Georgia by the Russian Army.  Allstate's "agreeement" was released on Friday, August 15, 2008, the traditional day of the week to release bad news to the public and press.  The agreement includes these terms:

Allstate will pay a $5,000,0000.00 fine to the Florida Insurance Regulatory Trust Fund under its agreement with the Florida Office of Insurance Regulation, which is the Florida Insurance Commissioner's Office;

Allstate will write 100,000 new Insurance Policies in Florida over the next three years, breaking down into 50,000 new "basic" Homeowner's Insurance Policies and 50,000 new Condominium, Renters and other residential Property Insurance Policies;

Allstate will lower Premiums on its existing "Florida policies" by 5.6 %, it is reported in the linked article, although what kind of Insurance Policies they are is not reported;

Allstate will not seek a Premium Rate Increase for at least a year, although again, the linked article does not identify for what kind of Insurance Policies;

Allstate will continue to 'cooperate' with the Florida O.I.R. investigations; and

Allstate waives its rights to challenge this agreement in Court.

    Allstate is reportedly the Number 2 Automobile Insurance Company in Florida, writing an average of some $564,000.00 in new Premiums a month in that line of business.  It is also reportedly the Number 4 Property Insurance Company in Florida.

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"The scope of OIR's investigation ...."

".... cannot be limited by Allstate's unilateral actions."

Page 17 of the attached Official Opinion Denying Rehearing by Florida's First District Court of Appeal in Download Allstate_v. Office of Insurance Regulation (Fla. 1st DCA Case No. 1D08-0275, Opinion Filed May 14, 2008).pdf.

Florida's Office of Insurance Regulation (OIR) has prevailed in its judicial dispute with various Allstate Insurance Companies about OIR's right to receive subpoenaed documents and to impose a ban on selling new Insurance Policies until Allstate provided the subpoenaed documents:

The facts of this case are unique.  In order to conduct insurance business in Florida, Allstate is statutorily required to comply with OIR's investigation and make 'freely available' documents sought by OIR....  To the extent Allstate believed any documents OIR sought were privileged, Allstate was required to timely seek a protective order in circuit court.

Id.  Allstate did not seek a protective order in circuit court.  The First District denied rehearing of its earlier Order upholding the OIR's suspension of new policies until the Insurance Company complied fully with OIR's subpoenas.

     The same day that the First District Court of Appeal denied rehearing, Allstate provided a sworn affidavit to the Florida Office of Insurance Regulation that all the subpoenaed documents had now been provided.  The OIR lifted the suspension as a result.   See Florida Office of Insurance Regulation Press Release, "Florida Insurance Commissioner McCarty Stays Allstate Suspension, Continuing Compliance Required," Wed., May 14, 2008.  Anika Myers Palm, "State Lifts Allstate Ban, Allows Insurer to Take New Customers" (OrlandoSentinel.com, Saturday, May 17, 2008).

    On Wednesday, May 21, 2008, Dennis Wall will discuss these and other major developments affecting Hurricane Insurance Preparation before the 2008 Hurricane Season.    This presentation is open to the public and there is no charge.  It is offered by the Insurance Law Committee beginning at Noon and scheduled to run through 1:00 P.M. at the Orange County Bar Association Center, 880 North Orange Avenue, in Orlando, Florida.  Dennis Wall, Chair of the Insurance Law Committee, will speak about many ways of "Preparing for Hurricane Insurance".  You are cordially invited to attend this free presentation.  As a reminder:  In Florida, the 2008 Hurricane Season officially begins on June 1, 2008.  There is no better time to begin preparing.

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Florida O.I.R. Lifted Suspension of New Allstate Policies...

... The Same Day Florida's First District Court of Appeal Denied Rehearing of its Opinion Upholding O.I.R.'s Order Suspending New Allstate Policies.

     Press reports published on Saturday, May 17, 2008 made it appear that the Florida Office of Insurance Regulation (O.I.R.) lifted its suspension on new Allstate Insurance Policies on Florida on the day before, or Friday, May 16, 2008.  As you will recall, the O.I.R. issued its Suspension Order in the first place because Allstate failed to comply with O.I.R. subpoenas for various groups of documents including unauthorized Catastrophe Computer Models purchased by Allstate in connection with its Premium Rate Increase requests.

     According to the O.I.R., it announced a stay of its Suspension Order on Wednesday, May 14, 2008, immediately after the Florida appellate court denied rehearing of its Opinion upholding the O.I.R. Order.  The reason given by the O.I.R. was its receipt of a sworn affidavit from Allstate "certifying that it has complied with Florida law by freely providing all documents requested" by the O.I.R.  See Florida Office of Insurance Regulation Press Release, "Florida Insurance Commissioner McCarty Stays Allstate Suspension, Continuing Compliance Required," Wed., May 14, 2008.

     Dennis Wall, Chair of the Insurance Law Committee, will speak at the Orange County Bar Association Center in Orlando, Florida about Preparing for Hurricane Insurance, on Wednesday, May 21, 2008 from Noon to 1:00 P.M.  The Orange County Bar Association Center is located at 880 North Orange Avenue in Orlando, Florida.

    You are cordially invited to attend this free public event.  Hope to see you there. 

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New Federal Court Decision: No Privilege Log, No Privilege.

     "Failure to produce a privilege log is sufficient grounds to deem the privilege waived."  Honda Lease Trust v. Middlesex Mutual Assurance Co., 2008 WL 349239 *3, *4 (D. Conn. February 6, 2008)(subscription required).  This is a Bad Faith case, involving a claim that the defendant liability insurance company acted in Bad Faith in failing to settle the underlying case against Honda.

     Honda sought discovery in this instance from the attorney for the injured claimant in the underlying case.  Under the quoted ruling, a United States Magistrate Judge allowed the discovery.  Here is the official (and access free) opinion from the Court's Online Docket:  Download Honda_Lease_Trust_v. Middlesex Mutual Assurance Co. (D. Conn. Case No. 3.05cv.1426, Opinion Filed Feb. 6, 2008)..pdf

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Florida Court Upholds Allstate New Business Suspension Until Documents Produced.

    Florida's First District Court of Appeal issued its Opinion on Friday, April 4, 2008 upholding an Order suspending Allstate's authority to transact new business in Florida:  Download Allstate_v. Office of Insurance Regulation (Fla. 1st DCA Case No. 01D08.0275, Opinion Filed 04.04.08).pdf.  See the posts in this space through January 24, 2008 to understand the leadup to this event.  In basic and simple terms, the saga began in the Fall of 2007 with subpoenas by the State of Florida Office of Insurance Regulation, Allstate's refusal to produce the requested materials at an O.I.R. Hearing in January, 2008, and the O.I.R.'s immediately resulting Order suspending Allstate's authority to conduct new Insurance business in Florida.

    The Order was issued by the Florida Department of Insurance or Office of Insurance Regulation.  The Order, termed an Immediate Final Order or IFO, "immediately suspended Allstate's Certificates of Authority to transact new insurance business in Florida.  The suspension would terminate upon Allstate producing documents OIR previously subpoenaed in an investigation of Allstate's insurance practices."

    The Florida Appellate Court held that OIR was within its rights to issue this narrowly tailored Order to enforce its own subpoenas.  Allstate v. Office of Insurance Regulation, attached official Opinion of the Court, at 2.  The OIR Order is narrowly tailored because it "was limited in scope."  Id. at 13.  The OIR could have issued an Order suspending any Allstate business, the First District appellate panel unanimously wrote.  "In limiting the scope to suspension of new business, OIR's action mitigates the  potential harm from Allstate's alleged insurance practices while still allowing Allstate to service existing policies."  Id.

    The documentation Allstate refused to produce -- and all 30,000 documents Allstate did produce were each and every one labeled "Trade Secret" -- were in response to subpoenas "in connection with OIR's investigation of Allstate's relationship with risk modeling companies, insurance rating organizations, trade associations and compliance" with legislation concerning Premium Rate Increases passed at the 2007 Special Session of the Florida Legislature.  Id. at 2-3.

    The Order in question was issued by the OIR in response to Allstate's refusal to produce almost all of the documents actually requested by the OIR and "Allstate's 51 pages" of objections.  Id. at 6.

    The First District's decision was to affirm and immediately lift its earlier stay of the OIR Order.  Allstate in its many manifestations which are parties to the appeal -- e.g., Allstate Floridian, Allstate Indemnity, Allstate Property & Casualty, Allstate Insurance, etc. -- has time if so advised to file a Motion for Rehearing and possibly to seek appellate review in the Supreme Court of Florida.

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Allstate and the State: Subpoenas, Catclaim Models, Reinsurance ... and Premiums.

     The Florida Office of Insurance Regulation (Insurance Department) has filed an administrative Complaint against Allstate.  The object is to force Allstate to provide documents previously demanded by subpoenas served on Allstate by the State.  The subpoenas demand documents from Allstate that describe alternative CatClaim Models favored by Allstate in computing its Premium Rate Increase Requests in Florida, Allstate's reinsurance treaties and agreements, and other matters that do or may factor into requesting higher Premiums in Florida.

    This administrative proceeding will be heard by an administrative law Judge from the Department of Administrative Hearings.  One available sanction if the State prevails on its Complaint is to yank Allstate's license to engage in the business of Insurance in Florida.

    In a separate and independent proceeding in the interim, the appeal is continuing that Allstate filed after the D.O.I.'s attempt to issue an order directly to Allstate that would halt Allstate's issuance of new Insurance Policies in Florida.  Florida's First District Court of Appeal has stayed that order while that appeal is pending, meaning that Allstate may continue its business of selling new Insurance Policies while the appellate proceeding goes forward.

    These developments are reported recently by Anika Myers Palm, "State Seeks to Block Allstate/It's the Latest Step to Obtain Documents From the Company Related to Hurricane-Risk Models" p. C1, col. 5 (Orlando Sentinel Central Florida Business Section, Wed., Feb. 20, 2008); and by Tom Zucco, "State Goes After Allstate on Code Violations/A Broader Pursuit Alleges [sic] Also Seeks to Block the Insurer From Writing New Policies" (St. Petersburg Times Online, Wed., Feb. 20, 2008).

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Results Are In, Testimony to Continue.

    After 2 days of testimony under oath by Insurance Company representatives, the Florida Senate has learned that the Insurance Companies view their rate hikes as justified.  Julie Patel, "Insurance Companies in Florida Used Loophole in Law to Bypass Required Rate Savings/Companies Used Loophole to Justify Increases" (South Florida Sun-Sentinel.com, Ash Wednesday, February 6, 2008).  More hearings are scheduled on the Premium prices charged by some Insurance Companies for Homeowner's and other Property Insurance, and on what Catastrophe Models they base their claim for increases which have all been denied in Florida.

     It is not known for a fact, but after the revelation yesterday that Insurance Companies view their own rate hikes as justified, perhaps the next hearing will feature testimony, under oath or otherwise, that the sun rises in the east and sets in the west.

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The Testimony Begins in Florida!

    At last, representatives of Allstate and Nationwide testified under oath yesterday in Florida.  The scene was a Hearing Room in the Florida Senate in Tallahassee.  The people asking the questions were members of the Florida Senate Select Committee on Property Insurance Accountability.  And the people answering answered many, many questions all day.

    One person who heard the representatives' testimony yesterday was moved to describe it this way:

   

"I haven't seen so much bobbing and weaving since Muhammad Ali did the rope-a-dope," said State Senator Bill Posey, a Republican from Rockledge.

Joe Follick & Kirk Semple, "Florida Insurers Defend Increases in Home Rates" p. A19, col. 5 (New York Times Nat'l Ed., Tuesday, February 5, 2008).

    More representatives of other Homeowner's and Property Insurance Companies are scheduled to testify all day tomorrow in Tallahassee to the same Committee.

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Allstate and the Florida Office of Insurance Regulation.

    Here is a summary and the status of Allstate's appeal from an order of the Florida Office of Insurance Regulation which sanctioned Allstate for failing to produce documents subpoenaed by the OIR for a Hearing in January:

     On Jan. 17, Kevin M. McCarty, the state's insurance commissioner, banned Allstate and its affiliates from selling new insurance policies in the state after the company failed to turn over records to state officials investigating insurance pricing.  A state appeals court blocked the order pending Allstate's appeal.

Joe Follick & Kirk Semple, "Florida Insurers Defend Increases in Home Rates" p. A19, col. 5 (New York Times Nat'l Ed., Tuesday, February 5, 2008).

    Here is the opinion of one person that the Florida State Government is on the right track in pursuing the subpoenaed documents:  Robert Trigaux, St. Petersburg Times Business Editor, "It's Time for Florida to be a  Heavyweight on Insurance" (sptimes.com, Sunday, January 20, 2008).

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Allstate Provides some Documents to Florida.

            Slow Drip, Drip, Drip of Documents Planned While Appeal is Decided.

     The so-called McKinsey Report on insurance behavior in handling claims and increasing profits was among many, many documents subpoenaed by the State of Florida from Allstate.  History helps to understand.  See previous posts here as well as the brief summary below.

     With at least 60 days to respond to subpoenas served on it by the Florida Office of Insurance Regulation, Allstate on January 15 announced its decision not to provide documents.  Instead, Allstate filed 51 pages of objections that day.

     On January 16, the OIR suspended Allstate's certificate to do business by issuing any new Automobile Insurance Policies until it complied with the OIR subpoena.  On January 17, the OIR apparently entered a further order suspending Allstate's certificate for all new Insurance Premium business of any kind in Florida until Allstate complied with the supoenas.  That meant that Allstate could not collect new Premium money while its certificate was suspended.

     Allstate appealed this decision on January 17.

     On January 18, a Florida appellate court stayed the OIR order until the appeal was done.

    The latest development for now occurred on January 23, 2008.  It is now reported that one of Allstate's 51 pages of objections was that the McKinsey Report addressed  how to maximize profits for Allstate from handling Automobile Insurance claims rather than any other kinds of claims for losses such as Homeowner's and other Property Insurance claims.

    On Wednesday, January 23, 2008, Allstate produced some documents in response to the Florida subpoena even as Allstate pursues its appeal.  Allstate's limited production includes the seeming distraction of the McKinsey Report.  According to the news article, Allstate apparently plans to produce more documents in phases as it hopes for a favorable ruling on appeal.  See Anika Myers Palm, "Allstate Provides Documents to State" p. C1, col. 5 (Orlando Sentinel Central Florida Business Section, Thursday, January 24, 2008).  To be fair, the headline on this newspaper report should read, of course, "Allstate Provides Some Documents to State".

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