Allstate must restore policies
as posted at www.nola.com
by Rebecca Mowbray
Mar 7, 2007
BATON ROUGE -- Insurance Commissioner Jim Donelon ordered Allstate Insurance Co. on Tuesday to reinstate all 4,772 homeowners policies that were involuntarily canceled and launch a new inspection process -- this time providing proof that the homes were inspected and the reasons for terminating their coverage.
"As a result of our findings and our meeting yesterday with Allstate, I have ordered the reinspection of all properties and the reinstatement of all cancellations," Donelon said Tuesday at a news conference that showcased photographs of homes improperly canceled by Allstate. "At best it was a very ill-conceived and sloppy inspection program. At worst, they wanted off of those properties."
Allstate did not immediately say it would comply with Donelon's order. "We are reviewing the Department of Insurance order at this point," Allstate spokeswoman April Eaton-Robinson said.
Allstate began canceling insurance coverage on New Orleans area homes this month after saying that drive-by inspections late last year revealed homes that were abandoned or remained in poor condition after Hurricane Katrina and were not being repaired. But questions surfaced about Allstate's inspection process after 486 people called the insurance department to complain that they got cancellation letters even though they were living in their homes and repairing them.
Last weekend, insurance department staffers visited 18 homes that had been the subject of complaints and determined that it should have been apparent to Allstate inspectors that the owners were living on site, either in the homes or in trailers, and were repairing. On Tuesday, pictures on display depicted the 18 homes as well-maintained or under repair, with the owners living on site.
One picture showed a trench with new pipes being laid to the house. Others showed garbage cans, new power poles and FEMA trailers. Several had cars parked in the driveway and freshly cut lawns. One even had young palm trees and flowers planted in what appeared to be new landscaping.
Eaton-Robinson said there's been a lot of time for progress since Allstate inspected homes in the New Orleans area.
"Roughly three months have passed since we conducted our inspections, and a lot can happen in three months," Eaton-Robinson said, noting that these inspections are not as detailed as claims inspections. "We looked for any signs of life -- FEMA trailers on the property, blue tarps, construction materials. . . . When we saw those things, we continued on. It was when we saw those homes that we thought looked like hadn't been touched that we reached out to customers."
Sanctions possible
Insurance companies were allowed to begin canceling coverage on blighted homes this month, provided that they inspected the properties to ascertain that the owners had shown no intent to begin repairs. Homeowners with building permits or who have started repairs aren't supposed to be canceled.
Donelon said he is upset that the state's second-largest residential insurer handled cancellations poorly and that hurricane victims had to face the additional stress of losing their insurance. Allstate insures about 20 percent of Louisiana's homeowners insurance market.
While he was happy to intervene on behalf of consumers, Donelon said his office needs to be focused on getting new insurance companies in south Louisiana because so few insurers are writing policies here.
The commissioner said he is "seriously thinking about sanctions" against Allstate depending on how the reinstatement and reinspection process goes and has asked insurance department attorneys to investigate his options. "We'll determine that down the road. Right now my focus is on protecting homeowners and their need for insurance," Donelon said.
Bob Hunter, director of insurance at the Consumer Federation of America, said Donelon was wise to order Allstate to reinstate coverage and scrap its inspection process. Hunter said sanctions seem appropriate since Allstate appears to have flouted the spirit of the insurance department's rules on cancellations.
"It seems to me that they probably should be subject to some sort of fine or penalty," said Hunter, who is originally from New Orleans and was an insurance commissioner in Texas.
Drive-by inspections
In a "cordial" meeting Monday afternoon, Allstate told the insurance department that the company inspected 40,500 homes in Orleans, Jefferson, St. Bernard, St. Tammany and Plaquemines parishes before the end of last year.
Some 10 to 12 teams of two Allstate employees drove pre-set routes, with each team checking out 300 to 500 homes per day. They completed the inspections in about a week, some at the end of October before Donelon issued a letter advising that it was too early for inspections, and the rest in December.
Based on the results of those inspections, Allstate sent warning letters to 8,853 homeowners saying the company thought the homes had been abandoned and were in disrepair and that the coverage would be canceled if the homeowner didn't send copies of building permits and repair contracts to prove the house was being fixed.
In response, 1,354 policyholders voluntarily terminated their coverage and 2,727 others sent documentation and retained their insurance coverage, but 4,772 people who didn't respond properly got notices of cancellation.
When the insurance department asked for proof of inspections on a sample of 18 complaints the department received, Allstate sent back a list of the properties with the word "vacant" circled next to each one.
Allstate told the department Monday that its inspection process is the industry standard and that no supporting documentation for the findings is given.
"I decided that it was not sufficient," Donelon said.
Requirements added
For new inspections, Donelon said he will require Allstate to have individual reports on each property it wants to cancel that are dated and signed by an inspector, with notes about the property and why it is deemed vacant.
Amy Whittington, a spokeswoman for the insurance department, said the new inspection procedures are just for Allstate, but she said the department will consider whether the process should become the standard for all companies seeking to terminate coverage because of unrepaired Katrina damage.
"We don't want to have the same thing happen again," she said.
The new inspection process will be more time-consuming than Allstate's initial effort. Whittington said a team of two insurance department staffers visited nine homes each day on Friday and Saturday, took pictures, and talked with the owners if they were home.
The Allstate cancellations were the first mass terminations since the expiration of a rule that forced insurers to hold coverage in place since the storms. Because of the problems with the Allstate cancellations, Donelon will record a bunch of radio public service announcements that will explain what's happening, inform consumers of their rights, and encourage people to call the insurance department if they think they have been canceled improperly.
The complaint number at the insurance department is 1 (800) 259-5300.
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Rebecca Mowbray can be reached at rmowbray@timespicayune.com or (504) 826-3417.
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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