TBO.com - TBO is Tampa Bay Online

Court Puts Allstate Back In Business

ADVERTISEMENT

By JEROME R. STOCKFISCH and MICHAEL SASSO, The Tampa Tribune

Published: January 19, 2008

Updated: 01/19/2008 12:12 am

TAMPA - Allstate agents were back at their desks Friday after a Tallahassee court lifted the state's order preventing the company from selling insurance in Florida.

The 1st District Court of Appeal gave state Insurance Commissioner Kevin McCarty 10 days to make a case that the insurer's conduct has amounted to an immediate danger to public welfare, which was McCarty's rationale for suspending Allstate's licenses to do business.

McCarty took the action Thursday in retaliation for what he called Allstate's "blatant disregard" for subpoenas related to a state investigation into how the company sets its homeowners insurance rates.

Friday's ruling means Allstate agents may continue to write auto, rental, boat, motorcycle and other types of insurance here. Agents had been barred from conducting new business in Florida as of Wednesday's order by McCarty, although the ruling did not affect existing policies.

"What we're focused on now is that we are back to selling insurance to new customers in the state," Allstate spokeswoman Amy Moore said. "We're back to where we were, and we are continuing to work with the Office of Insurance Regulation to get them the documents they need."

The court did not explain its decision.

"We intend to expeditiously prepare our response," OIR spokesman Ed Domansky said Friday.

Tension between Florida officials and insurance companies stems from a dramatic run-up in homeowners insurance rates after the devastating hurricane seasons of 2004 and 2005. The feud between the state and Allstate, however, has been particularly bitter.

In October, OIR subpoenaed Allstate and three other insurers regarding nonrenewals, claims settlement practices, reinsurance programs, and their relationships with risk modeling companies, insurance rating organizations and industry trade associations. The state is examining whether those entities were colluding to keep insurance rates high.

In his order Wednesday, McCarty said Allstate submitted 27,000 pages of documents in November that were not in compliance with the subpoenas. On Dec. 31, OIR received three more boxes of documents the office said were also noncompliant with the subpoenas' instructions.

'Frenzy And Confusion'

Allstate executives were summoned to the state Capitol this week for what was to be a two-day hearing beginning Tuesday. Saying the executives still had not complied with the subpoenas and were stonewalling in person, McCarty gaveled the hearing to a close within hours and Thursday invalidated the licenses of 10 Allstate companies to do business here.

Allstate immediately appealed. The company said in its appeal that it was acting in good faith to fulfill the subpoena orders.

The appeal states that if OIR is dissatisfied with Allstate's response, the office must turn to the circuit court to enforce its subpoenas because it does not have the authority to "self-enforce."

"There is no emergency here, and the OIR's order is facially insufficient," Allstate's appeal states. "Yet meanwhile, the very issuance of this emergency order and strategic press releases have set into motion the desired frenzy and confusion that has instantly damaged Allstate's reputation."

Central to the state's fight with Allstate are a set of internal documents created by McKinsey & Co., a global business consulting firm. The documents purportedly reveal strategies for limiting claims payouts to customers while boosting profits.

Allstate initially fought against handing over the documents to Florida's insurance commissioner. On Friday, however, Allstate spokesman Mike Siemienas said the company intends to comply. It wants to prevent the documents from being released to the public or the media, however, because they would reveal trade secrets to competitors. Siemienas did not give a timeline for giving them to the state.

Few people outside of Allstate - and a few plaintiffs' attorneys - have seen the McKinsey documents. Two people who have seen them are William "Chip" Merlin Jr. of Tampa and David Berardinelli, a plaintiff's lawyer in Santa Fe, N.M. Berardinelli wrote a book about Allstate's business practices called "From Good Hands to Boxing Gloves," which is marketed to lawyers.

Strategies Or Suggestions?

This week, Berardinelli said the documents reveal strategies such as offering auto insurance claimants a "fast track" settlement offer. Claimants would get a very low offer during the first 90 days after an auto accident. If the person resists, Allstate would back with a higher offer within 180 days of an accident based on a computer assessment of the claim's value, Berardinelli said. Often, even this second offer is lower than the person's out-of-pocket costs, he said.

People often will take the offers because most need the money during those first 180 days after an accident, Berardinelli said. Allstate judged its employees partly on whether they could limit claims payments to what the computer model suggested the case was worth, he said.

Siemienas said Allstate investigates each insurance claim's merits individually, rather than having any standardized system.

He also said the McKinsey documents are irrelevant to Florida because they were developed to address claims by auto accident victims. The battle with Florida is over homeowners insurance, he said. Also, many of the McKinsey recommendations are ideas that never became official Allstate policy, he said.

Merlin, a trial lawyer, challenged that. He said he has seen documents McKinsey developed for Allstate that address homeowners insurance, too. Merlin said he can't talk about Allstate's homeowners policies because Allstate has a court order.

Reporter Jerome R. Stockfisch can be reached at (813) 259-8402 or jstockfisch@tampatrib.com. Reporter Michael Sasso can be reached at (813) 259-7865.

Share this:

Loading Comments...

Email Print

ADVERTISEMENT