Allstate is faced with 3rd inquiry

Apr 10, 2008

Senate panel wants to know if insurer lied and tried to thwart rate-cutting efforts

By Paige St. John
Herald-Tribune--April 10, 2008

TALLAHASSEE — Behind a nondescript brown door on the second floor of a Senate office building, the Florida Legislature is investigating one of the nation’s largest insurance companies.

Inside the windowless room, private lawyers and legal clerks, sworn to secrecy, are dissecting tall stacks of boxes of confidential files turned over by Allstate Insurance Co. and its subsidiaries.

The questions they seek to answer: Did Allstate deliberately try to thwart lawmakers’ efforts to cut property insurance rates, and did its executives lie to a Senate panel questioning the insurer’s request to raise home premiums 42 percent instead.

"Let’s get us into the posture where there are consequences for inaccurate, distorted, incomplete communication," said Senate President-designate Jeff Atwater, the North Palm Beach banker who co-chairs the special Senate committee that summoned the legal team.

The Senate inquiry, which began secretly several weeks ago, is separate from a broader investigation by the state Office of Insurance Regulation. That office started investigating Allstate and other insurers when they sought rate increases even after Florida pledged billions to a special fund that protects the companies from hurricane catastrophe in an attempt to reduce premiums for Floridians.

The Attorney General’s office has also said it is conducting an antitrust review of rate increases by various insurers.

Atwater said there is room for a third inquiry to find out why insurers are seeking rate increases and canceling policies near the Florida coast.

"Yes, it is unprecedented, but so is the situation we’re in," said Senate Banking and Insurance Chairman Bill Posey, R-Rockledge.

The unusual investigation provides a backdrop for legislation Atwater is championing to increase Florida’s ability to punish insurers that handle claims unfairly, engage in antitrust activities or attempt to thwart state investigations.

If re-elected, Atwater will take over the Senate presidency next year. Property insurance reform is a keystone to his political campaign.

As of Wednesday, Allstate had given the Senate 59 boxes containing more than 160,000 pages, most of the contents labeled "trade secret."

The Senate’s outside counsel digging through those files has already recommended that lawmakers take further investigative steps uncommon to the Legislature, including depositions requiring "a limited number of key individuals" to be questioned under oath.

Allstate is cooperating with the Senate inquiry, records show, but the insurer objects to the need for such scrutiny.

"We believe we have been forthcoming with information and materials, as evidenced by the extensive testimony we offered in February and the continuous flow of documentation we are providing to them," said corporate spokesman Adam Shores.

"We’re focused on finding solutions to the market’s problems. And the bigger question that needs to be asked here is, ‘Do these actions by lawmakers really do anything to strengthen the market and bring more claim-paying capacity to Florida?’"

House Insurance Chairman Don Brown, an outspoken advocate of less state regulation of insurers, criticized the Senate inquiry as "overreaching, reckless and dangerous." Brown said Allstate is the primary target because it "dared to resist the heavy hand of government."

Atwater’s Feb. 14 letter to Allstate demands that it produce internal records on its decisions to cancel hundreds of thousands of home policies in Florida while seeking a 42 percent rate increase. Allstate has since dropped the request to raise rates.

The demand covers the same ground as Insurance Commissioner Kevin McCarty’s subpoenas in October. Allstate’s refusals to fully comply resulted in McCarty’s order for the insurer to stop writing new business in Florida.

The key difference: McCarty’s investigation also covers other insurers, including State Farm.

Senate staff and Atwater confirmed they are looking only at Allstate.

"It’s not a matter of being acrimonious or punitive," said Posey, a member of the Senate Select Committee on Property Insurance Accountability and a former insurance claims adjuster. "I want to know all there is to know and when Allstate won’t tell you, you find out whatever way you can."

There is not widespread knowledge of the Senate investigation, even among those playing a central role in the chamber’s current insurance debate.

Senate Government Operations Chairman J.D. Alexander, a member of Atwater’s special committee who opposes much of the Senate’s current approach as hostile to an industry Florida sorely needs, said he was unaware of the simultaneous investigation into Allstate.

"Why do we need to do that?" Alexander asked late Tuesday.

Letters obtained under Florida public records law show Allstate began responding to Atwater’s demand for documents on Feb. 28.

On March 7, it made its biggest delivery, 47 boxes, a substantial portion of which it asserted required trade secret or confidential protection.

Senate President Ken Pruitt that same day amended Senate rules, requiring those who give the public body large amounts of confidential material to clearly separate that from what is otherwise public, while also providing Allstate an outlet to seek a court order securing its confidential status.

A week later, Pruitt hired a Panhandle law firm that specializes in suing insurers on behalf of policyholders, to assist the Senate’s "inquiry into the practices of various insurance companies."

A confidentiality agreement shows the Senate’s legal team from the Anchors, Smith, Grimsley firm include former West Palm Beach trial lawyer Jon Moyle Jr., who has lobbied for a Tampa law firm that specializes in suing insurers for bad-faith practices.