State bans Allstate, nine affiliates from selling new policies

Article Courtesy of The Sun Sentinel

By Julie Patel
Published May 15, 2008


Allstate Insurance Co. and nine of its affiliates were temporarily banned by the state insurance commissioner from selling new insurance policies in Florida.

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 2004.

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 requested.

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 Unless that appeal is withdrawn, the state's top court will consider it after receiving updates on the case in two weeks.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 legislation.

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 insurance agents.

"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 Indemnity Co.