Insurance regulators probe Allstate's policy cancellations
as posted at www.examiner.com
by MICHAEL KUNZELMAN, The Associated Press
Mar 2, 2007
NEW ORLEANS - State insurance regulators are investigating whether Allstate Insurance Co. is canceling policies without properly inspecting homes to see if they are occupied or under construction after hurricanes Katrina and Rita.
The Louisiana Department of Insurance has received 386 complaints from homeowners who were notified by Allstate that their policies will not be renewed this year, said Insurance Commissioner Jim Donelon.
Allstate, the state's second largest residential insurer, says it inspected about 40,500 Louisiana homes after the 2005 storms and sent cancellation notices to roughly 4,500 policyholders whose homes appear to be abandoned.
However, Donelon doubts the company actually inspected many of those homes.
"Whether it's them or a subcontractor of theirs who misrepresented the alleged inspections, I can't say at this time," he said in an interview Thursday.
Allstate spokeswoman April Eaton said the Northbrook, Ill.-based company didn't send cancellation notices to policyholders without inspecting their property.
"That took us quite some time, but it is a commitment we wanted to make," she said. "We care enough not to make decisions haphazardly."
Amy Bach, executive director of the United Policyholders consumer advocacy group, accused Allstate of trying to skirt a Louisiana law that, with limited exceptions, bars insurers from canceling policies that have been in effect for three years or longer.
"Allstate needs to fix this fast," Bach said. "These people are going through hell trying to get back into their homes. They don't need any more aggravation."
Many policyholders are baffled by Allstate's cancellations.
Maria Bullard, whose family relocated to Little Rock, Ark., after Katrina flooded their New Orleans home, said she was stunned to learn that Allstate is dropping her wind and fire coverage because the company concluded her house is abandoned.
Bullard said they gutted and cleaned their house in the city's Lakeview neighborhood, hired someone to mow their lawn and posted signs outside the home that state, "Plans for future development of this property are underway."
"I don't consider it abandoned," she said. "I wonder if anybody even showed up to inspect it."
Earlier this week, Donelon's office selected a sample of 18 complaints and requested proof from Allstate that those properties were inspected. The company responded with reports that were "lacking in specificity," missing dates of inspections, names of inspectors or a detailed description of the premises, Donelon said.
This weekend, Donelon plans to dispatch his own inspectors to examine the condition of the 18 sample homes, in Orleans, Jefferson and St. Bernard parishes. He promised "strong action," including possible fines, if he finds that Allstate misrepresented its inspection program.
Eaton said the company is cooperating with Donelon's office.
"They have known for quite some time about our inspection program," she said. "This is not anything that's new for us."
Allstate's 4,500 cancellations in Louisiana include 1,400 policyholders who voluntarily gave up their coverage, according to Eaton. The rest are policyholders who failed to provide adequate documentation, such as a building permit or contracts with contractors, to show they are returning to storm-damaged homes.
The cancellation notices aren't the final word, however. Donelon said Allstate has agreed to reinstate coverage for 76 of the 386 homeowners who filed complaints with the insurance department.
After Katrina and Rita hit, Donelon's office imposed an emergency rule that temporarily barred insurers from canceling policies. After the rule expired on Dec. 31, 2006, insurers had 60 days to notify homeowners of a policy's cancellation. That notification period ended Thursday, which means cancellations can start taking effect this week.
Donelon said Allstate appears to be the only insurer that is performing "bulk cancellations" of policies in Louisiana. Mississippi Insurance Commissioner George Dale said he isn't aware of any mass cancellations by insurers in the state after Katrina.
After Katrina and Rita, Donelon's office fielded hundreds of complaints about Allstate's adjustment and payment of claims. Last week, however, the insurance department issued a report that said Allstate's delays in adjusting claims were justified considering "severe problems, impediments, roadblocks and hindrances" created by the storms.
Donelon said last week that he is surprised Allstate earned a "clean bill of health" for its claims handling practices, but he promised to probe the company's recent policy cancellations.
Bullard, the policyholder who moved to Little Rock, said she may replace her canceled Allstate coverage with a policy from the state-run Citizens Property Insurance Corp., but she doubts she can afford the higher premiums.
"We're trying to rebuild, but it might be too late for us with Allstate," she said. "Allstate is not helping with the recovery at all."
United Policyholders is a non-profit organization founded in 1991 and dedicated to educating the public on insurance issues and consumer rights. UP publishes educational materials and serves as a resource for individual and business policyholders and residents of communities with insurance problems. UP’s Amicus Project provides information to courts of law to support policyholders’ legal rights. UP unites policyholders and their advocates by sharing information. Write to UP at 110 Pacific Ave., PMB 262, San Francisco, CA. 94111, call us at (510) 763-9740, or visit our website at www.unitedpolicyholders.org.
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