Allstate Strikes Back As State Expands Ban

TALLAHASSEE - The state's feud with Allstate Corp. heated up Thursday, with the company appealing an order forbidding it from doing future business in Florida after regulators expanded their ban from auto policies to all new insurance products the company sells.

On Wednesday, Insurance Commissioner Kevin McCarty said he immediately would yank Allstate's licenses to write auto insurance in response to what he considered the company's lack of cooperation with a state investigation into how it sets its homeowners' insurance rates.

The state Office of Insurance Regulation had issued a series of subpoenas to Allstate in October. McCarty said the company was reacting with "blatant disregard" and was, in fact, breaking state law.

By noon Thursday, when Allstate was served with McCarty's order, the state had expanded the freeze to every Allstate subsidiary licensed to do business in Florida.

Late Thursday, Allstate filed a petition in the 1st District Court of Appeal in Tallahassee. "We filed for an immediate stay," company spokeswoman Amy Moore said. "We believe we are in compliance with the law."

Ten different subsidiaries were named in McCarty's order. Moore said those companies provide auto, homeowners, rental, boat, motorcycle and other types of insurance.

Existing Allstate policies are not affected, and the company will be allowed to renew policies. Allstate also can continue providing financial services, including life insurance.

Allstate wrote $1.9 billion in Florida auto premiums in 2006, the latest data available. It had been increasing its auto business by about $100 million in premiums a year, making it an extremely lucrative line. Despite the fact the state was investigating homeowners' insurance, not auto insurance, McCarty said he intended to "hit them where it hurts."

Office of Insurance Regulation spokesman Ed Domansky said Thursday that after reviewing the matter with legal staff, "the commissioner felt the better decision was to have the suspension apply to all of Allstate's Florida business."

'Good Faith' Severed, McCarty Says

The strategy also may have assuaged concerns about the state's legal standing in going after a single entity unrelated to its investigation.

The original strategy of singling out the auto business for sanctions might well have been deemed an abuse of due process, said Joseph Little, a law professor at the University of Florida.

Little cautioned that he's not in a position to address the Allstate case specifically, but, "as a general proposition, someone who's got an action of some kind involving one subject matter doesn't have the power to reach over into a different subject matter in order to try to put pressure on the side he does have the power to deal with," he said.

State Sen. Steven Geller, D-Cooper City, who is a lawyer, put it more succinctly: "Once you make the decision to suspend them, it had to be on all lines."

McCarty's 15-page order released Thursday harshly criticized Allstate's response to its subpoenas. It also revealed that the state has a particular interest in the so-called "McKinsey Report," a document prepared for Allstate by global management consultant McKinsey & Co.

The McKinsey Report recommended to the company a program designed to systematically reduce payments to policy-holders without examining the validity of each claim, according to J. Robert Hunter, director of insurance for the Consumer Federation of America and former Texas insurance commissioner.

"The use of these programs appears to sever the promise of good faith that insurers owe their policy-holders," McCarty's report states, quoting Hunter in a scathing July 2007 report. "Any increase in profits that results from arbitrarily selected reductions in claims payments cannot be considered to be legitimate."

McCarty said such practices would violate Florida's Unfair Insurance Trade Practices Act.

Domansky said the McKinsey Report was "a key aspect" of the state's investigation, but for now, regulators have no idea what it contains or its potential effect on Florida consumers. "That's part of what we're looking to receive through the subpoenas, and that's part of the reason we're at the point we're at now," he said.

Crist Heats Up Criticism

The report also is being sought by regulators in Missouri, where Allstate also is under investigation for its claims-handling and is being fined $25,000 a day for not handing over documents.

If the state's ban on new business stands, about 1,200 Florida Allstate agents and 5,000 employees altogether would be in limbo, according to company spokeswoman Moore.

"They definitely are in a bit of a bind," said Jim Fish, executive director of the National Association of Professional Allstate Agents. "We are proceeding to try to help to somehow mediate this thing so we can get these agents back to work."

Gov. Charlie Crist, whose criticism of Allstate and other homeowner insurers has been unrelenting, didn't let up Thursday. Addressing the employees affected by the freeze, he said, "It's too bad they work for such a bad company."

He also encouraged customers to "fire Allstate. They're not doing any great service in my view to the citizens and consumers of the state of Florida. I don't know why you'd want to keep them," Crist said. "They're charging incredibly high rates;, they're withholding documents. They seem to be handling themselves in a way that is beyond inappropriate."