Update on Florida Insurance Wars, April 15

As you may have heard, following an adverse decision in the Florida Court of Appeal, First District, Allstate decided to release to the public the so-called McKinsey documents, which some plaintiff lawyers claim are a smoking gun showing Allstate bad faith toward bodily injury claimants.  The insurer has put some 150,000 pages of documents up on its website, after early furnishing them to the Florida Office of Insurance Regulation during an ongoing dispute with state regulators over Allstate’s refusal to play along with their strategy to roll back property insurance premiums or at least keep increases low.

As part of its strategy to put the heat on insurers, almost all of which where not following the game plan that Charlie Crist has so prominently bellowed, the Office of Insurance Regulation began targeting selected big fish, including Allstate.    

Regulators scheduled a hearing where Allstate was to come to answer questions about its underwriting and pricing decisions, and a few other things.  They also issued subpoenas for a huge number of documents.  Whether this was reasonable or just some mau-mauing by officials scared witless by Sheriff Charlie, the insurer, in fact, came up pretty far short of complying, and rather than detail the entire list, perhaps it is best to refer you to pages 3-6 of this April 4 opinion by the Court of Appeal, First District.

After Allstate failed to comply with the subpoena, the Office of Insurance Regulation issued an Immediate Final Order, or IFO, suspending Allstate from writing new insurance business in the state until it complied with the subpoenas.   Allstate went to the appeals court, and on January 18 obtained a temporary stay of enforcement of the suspension until the merits of the case were decided.  They were decided, in the April 4 decision, but against Allstate — the Court of Appeal said the Office of Insurance Regulation did not need to go to court to enforce its subpoenas under the circumstance and had the power to act as it did. 

However, the suspension still has not taken effect because the court gave Allstate 15 days to request a new hearing, and then moved the deadline up, and the insurer yesterday requested another hearing..  

The April 4 opinion is interesting, in part because it contains some inconsistent analysis.  For example, as the court says, an IFO is supposed to issue only upon a showing of danger to the public.  Remember, the purported reason regulators subpoenaed records was to see why — they suspected some sort of collusion or price fixing — Allstate had not lowered homeowners insurance rates as much as the state wanted or expected. 

Pop quiz! This expectation was —

A. Well-founded, because central command economies and state price controls have been proven effective time and time again and were in fact the economic success story of the 20th Century.

B. Entirely reasonable, because insurance companies steal so much they give piracy a bad name, which means, of course, that they would eagerly agree to take less.

C. A messianic delusion that occurred in the head of Charlie Crist after he pounded the table so hard his fist bounced back and knocked himself out. 

D. False doctrine akin to waiting for the Great Pumpkin to appear, in that it ignores the fact  insuring property in Florida is risky.

E. Not sure, let’s check with former President David Palmer, the guy who does the Allstate TV commercials — he was a good president and should know the answer.

So, as I was saying, the appellate court said the Office of Insurance Regulation had the right to issue an IFO because:

First, it alleged monetary loss to policy holders and beneficiaries. OIR received complaints regarding Allstate’s claims handling practices, and information indicating Allstate’s claims handling practices arbitrarily reduced bodily injury claim payments to its policyholders and beneficiaries by up to 20%. This allegation of widespread personal monetary loss is sufficient to meet the danger requirement of section 120.60, Florida Statutes. Second, the IFO alleged ongoing criminal activity. The Legislature made failure to cooperate with an OIR investigation a crime.   [Boring legal citations omitted].

OK, maybe, but that allegation about the 20 percent and the bodily injury and so forth is in relation to car accident claims, not homeowners insurance.  Also, if there was criminal activity, how come Charlie Crist didn’t come knocking with a pair of cuffs?

I should qualify that it is only my understanding that the McKinsey documents relate to primarily to auto insurance and not homeowners policies, I haven’t read the 150,000 pages and don’t know that for a fact.  My understanding is they concern bodily injury claims by third parties, not policyholders — so I suppose there is a small category of such claims that could derive from homeowners insurance, but not many.  You can look at that Miami Herald story again on the Allstate decision to unveil the McKinsey documents, and see some vagueness on the issue:  

[An Allstate official] noted that many attorneys misinterpreted the information from McKinsey that refers to how the company deals with claims from other parties, not from policyholders. Many of the sections often referred to by plaintiff attorneys refer to claims-handling practices for auto claims, but they were taken to be applied to homeowners policies as well.

"They were taken to be applied to homeowners policies as well." See what I’m saying? "They were taken"?  Who did the taking? The logical antecedent for this phrase is "plaintiff attorneys," but if so, one would think the sentence would say, "often referred to by plaintiff attorneys, who assert Allstate uses the strategy outlined in the documents not only for auto accident claims but for homeowners and other types of policies as well."  

All right, now where were we? Right, McKinsey documents. These have generated so much controversy over the years I have a special search on my feedreader just for stories and posts about them.  Some of the posts I’ve written about them are available here, here, here and here.

Some say these documents are a smoking gun, others say these people are blowing smoke.  Here’s a sampling of recent opinion about these developments: policyholder attorney Chip Merlin; LaBovick Injury Law Blog; Victoria Pynchon (I’m a big fan of Victoria and her blog); Dennis WallBeach Blog; and Mike the Actuary.

By the way, here’s the link to see all 150,000 documents: better plan to take a lunch.  


1 Comment

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One Response to Update on Florida Insurance Wars, April 15

  1. NW Doug

    The McKinsey Docs included four catagories of information: 1. Homeowners Review 2. Casualty Review (including but not limited to Workers Comp) 3. Auto Physical Damage Review 4. Field Work and Additional Documents.
    The purpose behind the McKinsey Documents was that McKinsey was acting as a hired consulting firm to assist Allstate in improving their claims effectiveness and cost effectiveness. Most companies do this at some time. Get another pair of eyes and such.