Insurance Law

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

By David Rossmiller

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.

Full post as published by Insurance Coverage Law Blog on January 16, 2008 (boomark / email).