Allstate Undaunted By Florida’s Tough Subpoena Demand

Dec 9, 2007

Allstate said it is continuing to comply with a Florida regulator’s subpoena that asks the insurance giant to deliver virtually every piece of dirty linen in its files concerning improper claims handling.

The Office of Insurance Regulation on Oct. 16, announcing the subpoena in advance of a scheduled two-day hearing next month, said it was interested in the company’s policies, its reinsurance program and its relationships with rating agencies, risk modelers and trade groups.

But the subpoena itself goes much further, demanding 59 specific and general items, including any bad-faith judgments against the company in the past three years, any bad-faith federal lawsuits that have been filed in Florida, and details of accusations by ex-adjusters of questionable Allstate claims handling.

In addition, the company has been asked for details of its claims operations and communications with McKinsey & Company consultants, the firm that has reportedly advised insurers to handle claims with a policy of deny, delay and defend.

In connection with all of this, the department has also asked for any letters and other communications–including those with trade groups, reinsurers and risk-modeling firms.

In October, State Farm–after being hit with OIR subpoenas and a call to a hearing–avoided such a proceeding by reaching an agreement to reduce its Florida homeowners rates 9 percent as well as pay $23.3 million in customer refunds and $1.5 million in legal costs to the state.

OIR demanded virtually all State Farm electronic data, records and files concerning policy non-renewals and “any instructions, guidelines (official or unofficial) and training materials” related to underwriting practices.

Kathy Thomas, communication manager for Allstate in Florida, said in e-mails that she was “not aware of any negotiations concerning a settlement.” 

“We are responding to the subpoena and we are cooperating in regard to the OIR investigation,” she wrote. “Allstate Floridian remains confident in our business practices and our adherence to state law…”

She said this includes abiding by the Florida Hurricane Preparedness and Insurance Act passed earlier his year, requiring homeowners insurers to set rates reflecting savings created by reduced costs for reinsurance provided by the Florida Hurricane Catastrophe Fund.

Allstate, in addition to cooperating to fulfill the requirements of the subpoena, shares the concerns of Gov. Charlie Crist, “the OIR, and the Legislature over Florida’s property insurance market.  We continue to advocate for reforms, including a national solution,” wrote Ms. Thomas. She said her company is “committed to customers, and must remain financially solvent to meet the promise we have made to them.”

A spokesman for the OIR said it could not comment on the investigation at this time. He referred to Insurance Commissioner Kevin McCarty’s last statement on the issue.

That said, in part: “We are continuing to investigate those companies that appear to be ignoring the intent of the legislature in its efforts to reduce premiums to consumers, and we want to hear the reasons behind those companies’ actions.”

Allstate Floridian Indemnity and Allstate Florida Insurance Company, he noted then, were requesting rate hikes of 28.3 percent and 41.9 percent, respectively.