Court bans Allstate from doing new business in Florida

Insurance commissioner expects company to open their books to state officials

Paul Flemming
Florida Capital Bureau
News-Press--May 14, 2008

TALLAHASSEE — With the muscle of a favorable court ruling behind him, Florida Insurance Commissioner Kevin McCarty expects a certification from Allstate Floridian that it will allow free access to its books and records.

With a signed affidavit to that effect from company officers, McCarty said this afternoon he’d lift the hours-old suspension against Allstate doing any new business in the state.

“The timeline is in their hands,” McCarty said. “Clearly they have indicated a willingness to provide further documents. It’s unfortunate that it takes a succession of court cases … to get their attention.”

For now McCarty is enforcing the order he first issued in January, shutting Allstate out of new business in an attempt to wrest documents and testimony from the company in an ongoing investigation of rates, policy cancellations and business practices.

The sanction does not affect Allstate’s existing 2 million customers.

The prohibition has been in place since this morning when an appeals court shot down Allstate Floridian Insurance Company’s request for a rehearing in its case to head off McCarty’s disciplinary action. The court earlier said the state was within its power to put Allstate out of business.

“The substance has always been to compel the company to make their books and records completely available,” McCarty said. “We have since received hundreds of thousands of documents. Most of those came after the (court) made its initial ruling” in favor of the Office of Insurance Regulation.

McCarty said he’d lift the suspension as soon as an unconditional affidavit to provide documents is signed by Allstate officers.

“The company has been working all day on this certification. We’ve been discussing it for several days.”

But that won’t be the end of it. Allstate also faces an administrative hearing charging that the company failed to turn over documents, violated a 2007 law about making true and complete rate filings and falsely labeling documents as trade secrets when they were not.

Office of Insurance Regulation General Counsel Steve Parton said that hearing process could result in further sanctions against Allstate, including a suspension of new business. Parton likened McCarty’s order as a temporary injunction designed to stop continuing violations of the law. The administrative hearing, Parton said, is akin to punishment for past actions.

Today’s 1st District Court of Appeal opinion denied Allstate’s request for a rehearing of an earlier decision that sided with the state’s Office of Insurance Regulation, giving it the power to sanction the company for failing to cooperate in an ongoing investigation into the company’s rates, policy cancellations and business practices.

The unanimous ruling from a three-judge panel reiterated the court’s initial ruling in favor of state regulators.

“Allstate’s willful, indeed potentially criminal, failure to comply with its disclosure obligations has prevented OIR from adequately investigating its reasoned belief that Allstate is systematically defrauding its policyholders,” wrote Judge Paul Hawkes.

Allstate’s 1,100 agents statewide are hit. The state’s order prohibits Allstate Floridian and 10 affiliates from selling new property, auto and health insurance policies.

“Unfortunately the terrible uncertainty the Allstate agents, their families and their employees face will continue,” said Bob Lotane, a spokesman for the Florida Association of Insurance and Financial Advisors. “As independent business owners, in the towns and cities of Florida, they face the same economic stresses we all are dealing with.”

Last month, a handful of Allstate agents met with McCarty. If the state imposes its sanction, McCarty has said Allstate could resolve the conflict by turning over documents the state has subpoenaed in its investigation.

“I am deeply sympathetic with the plight of the agents,” McCarty said today. “It’s Allstate’s violation of the law that is putting their livelihoods in peril.”

Lotane said agents are in the middle.

“But to make them political pawns and shut off the necessary avenues for them to stay afloat is unnecessary,” Lotane said. “We had hoped the court would see through this and now appeal to the parties to the dispute to find a solution to end it.”

An Office of Insurance Regulation spokesman said a more detailed response from regulators would come out later today. Allstate executives, too, were studying the 17-page ruling.

“We have just received the Court’s opinion, and are in the process of reviewing it,” said Allstate spokeswoman Amy Moore. “We are determining what options we will pursue moving forward.”

Earlier this year, Insurance Commissioner McCarty abruptly ended a hearing with Allstate officials who, he angrily said, were not forthcoming. The next day he issued his order to shut the company down. Allstate went to court to block the move and today it lost.

“At the hearing, Allstate frustrated the Commission’s efforts to conduct the required investigation,” Tuesday’s ruling from the court said. “Although Allstate claims it intended eventual compliance with the subpoenas, it did so in such ambiguous terms and with such extensive caveats as to render these assertions meaningless.”