State bans Allstate, nine
affiliates from selling new policies
Article Courtesy of The Sun Sentinel
Published May 15, 2008
Insurance Co. and nine of its affiliates were temporarily banned by the
state insurance commissioner from selling new insurance policies in
The suspension followed a ruling issued Wednesday by the First District
Court of Appeal in Tallahassee denying Allstate's request for another
hearing in its court case with the state over property insurance prices.
The action doesn't affect existing policyholders from renewing policies
with Allstate, the state's third-largest automobile insurer and No. 4
property insurer. It stands to squeeze the company's lucrative auto
insurance business, which collects about $1.9 billion in premiums a year
statewide. Allstate hasn't sold new homeowner coverage in Florida since
Gov. Charlie Crist, who was in South Florida Wednesday for a pre-hurricane
season conference, said he hoped the suspension would lead to a more
transparent and "honest" insurance market.
"Allstate's willful, indeed potentially criminal, failure to comply
with its disclosure obligations has prevented OIR [Office of Insurance
Regulation] from adequately investigating its reasoned belief that
Allstate is systematically defrauding its policyholders," Judge Paul
M. Hawkes wrote in the court's opinion.
The court ruling comes four months after Florida Insurance Commissioner
Kevin McCarty took the rare step to suspend the 10 Allstate companies in
mid-January for not submitting all the documents subpoenaed by state
insurance officials as part of an investigation of their pricing
practices. Allstate immediately appealed, and the appeals court quickly
halted the suspension while considering legal arguments from both sides.
McCarty said Wednesday he would lift the ban, if Allstate provides a
signed affidavit from a company officer promising the company documents
Allstate spokesman Adam Shores said the company has given insurance
regulators 825,000 pages of documents.
"We're disappointed," Shores said Wednesday. "We believe we
have provided a substantial amount of information, and we're continuing to
make sure we provide them with everything they need."
Last month, Allstate appealed the suspension to the state Supreme Court,
which deferred considering it until the First District court issued a
ruling. Unless that appeal is withdrawn, the state's top court will
consider it after receiving updates on the case in two weeks.
The appellate court opinion, from a panel of three judges, says that the
state Office of Insurance Regulation sufficiently proved Allstate hurt
Florida residents by withholding documents, and the state was fair by
agreeing to end the ban when the documents are submitted.
Allstate's suspension is part of a larger, long-simmering feud over
property insurance prices in Florida. State lawmakers passed a sweeping
property insurance bill last year aimed at lowering rates and another one
this year intended to hold insurers more accountable. Gov. Crist is
expected to sign the latest measure into law just as he did the 2007
Bob Hunter, director of insurance for the Consumer Federation of America,
said it's the first time in the 40 years that he's been involved in
insurance issues that a state insurance commissioner has suspended an
insurance company for failing to provide documents.
"Most insurance commissioners are pretty soft. They hardly ask for
data much less require it," said Hunter, a former insurance
commissioner in Texas. "To protect the public, a regulator needs to
have that authority [to ask] if something seems wrong, how are they
handling claims? If something seems wrong, how are they making rates? And
the company can't just say no or say, 'OK, we'll get around to it later'
and drag it out forever."
Hunter said in the short-term the move is good for consumers because it
means the state is aggressive in protecting them. On the off-chance that
the suspension lasts long, he said it's bad for Floridians because they'll
have fewer options when shopping for insurance.
Insurance industry representatives bemoaned the ongoing battle between
Florida insurance regulators and insurers and said it fosters an
unfriendly environment for insurers, which is bad for consumers and
"Unfortunately the terrible uncertainty the Allstate agents, their
families and their employees face will continue," Florida Association
of Insurance and Financial Advisors spokesman Bob Lotane said in a
statement. "But to make them political pawns and shut off the
necessary avenues for them to stay afloat is unnecessary."
Wednesday's suspension applies to Allstate Insurance Co., Allstate
Floridian Insurance Co., Allstate Indemnity Co., Allstate Property &
Casualty Insurance Co., Allstate Floridian Indemnity Co., Allstate Fire
and Casualty Insurance Co., Encompass Insurance Co. of America, Encompass
Indemnity Co., Encompass Floridian Insurance Co. and Encompass Floridian