Court upholds Allstate suspension

May 16, 2008

Miami Herald--May 15, 2008


Allstate has lost its battle in court.

The company’s nine insurance companies operating in Florida now are barred from writing new policies until Allstate fully complies with a state subpoena for documents and information about its rate-setting process and rate filings. An appeals court ruling Wednesday cleared the way for the state’s suspension to go into effect.

Existing Allstate policyholders are not affected by the ban. Also, the Office of Insurance Regulation will allow consumers who already have quotes from Allstate to buy the policies if they wish.

The company could face further penalties from a related case brought by state insurance regulators before the Division of Administrative Hearings.

”It’s unfortunate that it would take a succession of court decisions to get [Allstate] to comply,” said Insurance Commissioner Kevin McCarty.

He suspended Allstate’s license Jan. 16. The appeals court had stayed the suspension until it ruled. After the court’s initial ruling upholding the suspension, Allstate asked for a rehearing, which was denied Wednesday.

During this time, McCarty said the company has delivered the bulk of the documents that the OIR had demanded in its subpoena.

The last hurdle is for Allstate to certify that the documents it has turned over completely comply with the OIR subpoena.

It must also agree to turn over additional documents if regulators request them — or OIR can suspend its license again.

McCarty said OIR and Allstate are continuing to negotiate and the suspension may not last long.

The company released a statement in which it said it was ”taking steps” to comply with the court order and suspension. ”We hope to have this resolved shortly,” the company statement said.

The ruling by the First District Court of Appeals in Tallahassee denies Allstate’s motion for a rehearing and upholds its initial decision that OIR does have the authority to suspend Allstate’s license. But it also reinforces regulators’ get-tough stance with the insurance industry in Florida.

The Senate conducted special hearings in February to investigate the industry’s rate-setting practices.

The insurance bill passed by the Legislature earlier this month — and waiting for Gov. Charlie Crist’s signature — increased the state’s arsenal of penalties and remedies against insurers that violate the state’s insurance code.


”And that’s a beautiful thing, because the people deserve justice, and some of these insurance companies — I should be cautious because some are doing very good work. But some of them, like Allstate, have been horrific. They just haven’t been very good to our people and so I’m very, very pleased with the court,” said Crist, who was in Fort Lauderdale on Wednesday to address the annual Governor’s Hurricane Conference.

Robert Hunter, director of insurance for the Consumer Federation of America, said regulators have to be able to enforce their state’s laws. The appeals court decision allows the state to do its job, he said.

Caught in the middle between Allstate and insurance regulators are the company’s nearly 1,200 agents in Florida. They stand to lose a sizeable portion of their income because new policies are the most lucrative.

Allstate is one of the top five providers of auto insurance in Florida. Its agents can only write Allstate policies.

Independent agents are also affected by the Allstate suspension. Four of the Allstate companies operating in Florida — Encompass Insurance, Encompass Indemnity, Encompass Floridian Insurance and Encompass Floridian Indemnity — use independent agents to sell their policies.


The Florida Association of Insurance and Financial Advisors said the Allstate agents have become ”political pawns” and the suspension shuts off ”the necessary avenues for them to stay afloat,” especially when the weaker economy is squeezing them, as it is all Florida residents.

McCarty urged agents to contact Allstate’s corporate headquarters and urge executives to resolve the problems with OIR.

In the appeal court’s opinion issued on Wednesday, the 16-member panel noted Allstate’s own unwillingness to comply with the OIR subpoena “created the difficulty about which they now complain and attempt to use to seek relief.”

The opinion discussed in detail the behavior of Allstate’s executives at the Jan. 15 hearing where they came with no documents and were not prepared to answer many questions.

OIR General Counsel Steve Parton explained that while the OIR suspension was ”to bring the company in compliance,” any Division of Administrative Hearings action “would be punishment.”

The issues raised in that case involve three counts: failure to comply with OIR’s document request, falsely asserting trade secrets and false certification of its September rate filing.