Florida insurance wars continue, Allstate suspended from writing new auto policies in state

Before I get to the news, a couple things. I’ve had requests to put the "insurance" back in Insurance Coverage Law Blog, and these are fair points.  I have now finished my latest lengthy analysis for New Appleman on Insurance: Current Critical Issues in Insurance Law, so this frees up a little time for more posts on insurance.  This article, which I believe will appear in April, is on the Fifth Circuit’s Katrina jurisprudence, including a long look at some questions about ambiguity in policy drafting: Why are insurance policies so hard to read?  Would anyone read them even if they were "easy" to read? Is it desirable or even possible to draft policies the layman will comprehend while still responding to specific court precedent?  One interesting study I looked at found an auto policy more difficult to read than Albert Einstein’s The Meaning of Relativity

If you haven’t kept up with the Florida insurance market, Florida Gov. Charlie Crist has been in a long-running battle with insurers over the state’s high property insurance rates.  A year ago, Florida lawmakers passed the latest in the state’s legislative and regulatory "fixes" to the system — officials pushed Florida’s state-backed property insurer further into the market as a competitor, and added billions to a state fund for a reinsurance pool for the private market.  All this, and more, was supposed to lead to rates coming down, but whoops, they didn’t.  Instead most insurers have filed for big rate increases, sending Crist into episodes of table-pounding.

There is low political risk in railing against insurance companies at any time, but it becomes particularly attractive when the alternative might be blaming yourself for the continued failed regulatory scheme of the state, or failure to level with the people about the economic realities of the risk of insuring property in Florida.   I’ve chronicled Crist’s insurance war in a number of posts on this blog, feel free to look them up with the search bar. 

Last month, Crist announced that he had enlisted the "free" help of three trial lawyers to look into a state-backed class action lawsuit against insurers — as one reader pointed out, sounds a lot Jim Hood’s arrangement with Joey Langston and Tim Balducci in the MCI litigation.  State regulators have also issued subpoenas, including one to Allstate related to a scheduled hearing this month, where regulators wanted to ask about the company’s reinsurance costs and its relationship to risk modeling companies.  Allstate turned over some 30,000 documents, but state officials say they were nothing more than what is publicly available anyway.  Officials are after other documents to test their theory that insurers might have colluded to avoid rate cuts after last year’s much-ballyhooed insurance fix, but Allstate has refused to turn over records of communications with trade groups, according to this story in the Pensacola News Journal

A story in today’s Miami Herald says that now Florida Insurance Commissioner Kevin McCarty has suspended Allstate from writing new auto policies — Florida auto coverage is a desirable market — but the suspension apparently does not affect the company’s ability to write new property policies. Here’s an excerpt:

McCarty abruptly ended a scheduled two-day meeting Tuesday after just two hours. He was angered that Allstate officials failed to turn over some information the state requested on property coverage rates. Company officials had described the state’s request as "irrelevant."

Allstate was to have provided documents into its reinsurance program and its relationship with risk modeling companies, insurance trade associations and insurance rating organizations, but instead returned a 51-page letter of objections to the state’s subpoena.

"In view of Allstate’s ongoing, blatant disregard of our subpoenas, I have little choice," McCarty said Wednesday. "Suspending their certificate of authority to write new business in our state should make my point."

We’ll see what success state officials have.  Last year, they put heavy pressure on State Farm, leading the insurer to agree to increase its rate reduction from 7 percent to 9 percent, rebate some $23 million in surcharges (peanuts, really, in the scope of the Florida market) and pay the state’s legal bills of $1.5 million. Not sure if those bills were related to "free" trial lawyers or not.



Filed under Industry Developments

11 Responses to Florida insurance wars continue, Allstate suspended from writing new auto policies in state

  1. charles

    B-O-R-I-N-G!!! What happened to Scruggs today?

  2. Anderson

    I thought that policies were hard to read so that the advantages of the insurance company over its policyholders would be less glaringly evident.

  3. High Dudgeon

    Thanks for the update on Florida.

  4. WISam

    According to the FL OIR website, Allstate is suspended from writing ‘any new business’ in FL. They must service existing policyholders. According to the OIR, Allstate provided 51 pages of objections to the subpoena instead of complying. Suspending Allstate’s ability to write property insurance is probably no skin off Allstate’s proverbial nose, however suspending authority to write auto will hit them right in the wallet!
    I have been trying to keep up with this almost as much as the Scruggs issue, as it is interesting in a different way. Keep up the good work.

  5. David, two points on Florida market:
    According to Jeb Bush (former Gov), Charlie Crist (current Gov), and Insurance Commish Kevin McCarty “We want the national disaster coverage.” To bail us out and spread the risk around the country, is that Republican?
    Second, we have no definition for hurricanes in the insurance statutes. But we have a citizens’s state constitutional amendment process, which is why I list these petitions.
    Since I brought up Republicans (Florida’s current leadership), these petitions are Federalist in doctrine, in that they seek Florida solutions within Florida for our self-inflicted problems (as you point out).
    Hurricane petition defines Hurricane, to keep Floridians out of Federal court, as Wind &/or Flood (FHW) which covers most of the unique disaster in Florida. The petition integrates financial market response through Hurricane bonds as well as insurance market via reinsurance and State run reserve fund strictly for FHW events. The coverage would be in the property tax base and could be used as a voucher by the owner to procure added private market insurance.
    Citizens petition creates a mutual policyholder owned Citizens out of the State controlled Citizens Property Insurance Corporation.
    Homestead petition phases out Save Our Homes ( 3% tax cap ) over 10 years 10% per year , allows full portability , indexes the 25K homestead exemption and removes homestead from V flood zones. V zones are beachfront high wind high flood areas.


    hmmmmm . . . Allstate suspended from Florida, including the auto insurance cash cow bidness . . . Allstate “suspended” from Missouri (are they a coastal state?) . . . and State Farm’s has a self-imposed suspension from Mississippi. Plus the recent AG lawsuit in Louisiana. Is Allstate the company with the O.J. lookalike actor in all its advertisements?

  7. Strange. They can’t write any new policies for auto.. So customers go into allstate agency, welcome to allstate, would you like a policy from statefarm? or something.. .

  8. Florida insurance debacle

    David Rossmiller sketches in some background behind the state of Florida’s move to yank Allstate’s license to write new auto business, not long after its governor announced that he was hiring trial lawyers to make life difficult for home insurers:…

  9. Observer

    The FL OIR doesn’t seem to have accuracy as its priority, either. In a report issued late last month, they gave the misleading impression that FL was among the lowest-cost states for workers comp insurance rates as of 2006. This is contradicted by the actual study they cite, from Oregon. which puts FL as 6th highest in 2006. Someone interested in WC should blog this.

  10. Giuliani: U.S. needs national catastrophe fund
    Presidential candidate Rudy Giuliani emphasized the need for a national catastrophe fund while campaigning in Florida. “The reality is, the federal government already plays a role,” Giuliani said. “It’s more expensive and less effective than it would be if we prepared responsibly for the impact of these disasters in advance by creating a national catastrophic fund.” The Palm Beach Post (1/18)
    Is Nationalism or Federalism the better solution for the concurrent causation factors of flood & wind storm inherent in Hurricanes?

  11. jagcanes

    Reading the subpoena from the OIR gives a lot of insight as to why Allstate would have 52 pages of objection. Most of the material is unrelated to its property business and regurgitates accusations made by trial lawyers in other states regarding its auto business. Glad to see the 1st DCA applied some common sense to this witch hunt.
    Any business owner should take notice as to how the OIR and the Governor’s office is treating the insurance companies. Who knows what industry will be next to fall victim of this dictatorial administration.