TALLAHASSEE — Insurance titan Allstate Corp. can be banned from writing any new insurance policies in Florida while it refuses to turn over certain documents to state regulators, a state appeals court decided Friday.
The ruling, which lifts a stay in place for more than two months, is a major victory for Florida Insurance Commissioner Kevin McCarty, who vowed to immediately suspend Allstate's license. McCarty, however, will have to wait until at least Monday. That's when regulators are seeking a clarification from the 1st District Court of Appeal that specifically addresses when they are allowed to resume the suspension.
In the meantime, Allstate says it is continuing to write new business while it files a motion for a rehearing.
McCarty suspended the licenses of Allstate's 10 Florida companies in January, saying the Illinois-based insurer failed to comply with subpoenas demanding documents key to a state investigation into the company's underwriting practices. Regulators want an explanation of Allstate's relationships with rating agencies, trade associations and hurricane modeling companies, which are used to determine financial risk from major storms.
But a day after the suspension, the appellate court stayed the order, allowing Allstate to return to business as usual while the two sides continued their legal battle.
Allstate officials said they believe Friday's ruling is not final and insist the company will continue to write new business. The ruling does not effect any existing Allstate policyholders.
"We believe the order is very clear as to when the stay is lifted,'' said Allstate spokesman Adam Shores. "The order allowed 15 days for a motion for a rehearing, and that's the time frame we believe in is play here.
"We're doing the best we can to be compliant with the subpoena,'' Shores added, "and have produced more than 400,000 pages of documents.''
Meanwhile, McCarty's office says many documents are still missing and it wants to go forward with the suspension.
"Just to be certain, the office is seeking clarification whether the ruling is effective immediately, or not until the 15-day period to request a rehearing expires,'' said Ed Domansky, a spokesman for the Florida Office of Insurance Regulation. Domansky added that even if Allstate requests a hearing, the ban should be in effect unless the court rules otherwise.
Florida's fourth-largest property insurer with about 300,000 policies, Allstate had sought a statewide average 43 percent increase in homeowners premiums, despite changes in Florida law designed to lower rates an average 24 percent. It was the largest increase sought by any major insurer.
A suspension could severely hurt the company. While Allstate has steadily withdrawn from the Florida homeowners market, it remains the state's second-largest auto insurer, behind State Farm. Allstate's 1.7-million auto policies represent more than three-quarters of the company's business in Florida. The company sells about 3,500 new auto policies a week statewide.
McCarty has argued that Allstate's failure to comply with the subpoenas "is an ongoing crime, an ongoing violation of Florida law and harmful to Florida consumers." He also said Allstate could have asked for more time to comply, but did not.
A ban on new policies, regulators say, could finally get the attention of the largest publicly traded U.S. home and auto insurer.
Friday's ruling was welcome news to Gov. Charlie Crist, one of Allstate's sharpest critics.
"The court today ruled in the people's favor'' Crist said in a statement. "I applaud commissioner McCarty for his leadership and for standing strong in the fight for the people of Florida. My administration will continue to push to lower property insurance that has made home ownership unaffordable."
McCarty said Friday he found it "hard to contain my enthusiasm.''
"This is good news for the people of Florida and for all law-abiding companies in the state,'' he said. ''They (Allstate) have created their own situation and have blatantly flaunted the law.''
But last year's legislative efforts to lower premiums, coupled with a bill in the Florida Senate, would give regulators greater authority, and recent rulings that denied rate increases to Hartford and Florida Farm Bureau have some in Tallahassee worried that the regulatory climate in Florida could hasten the exit of key insurers. Allstate, State Farm, USAA, Nationwide and others have either stopped writing new property insurance business or cut back what they will write.
State Rep. Ellyn Bogdanoff, R-Fort Lauderdale, who is on the Republican leadership team in the House, said she and others in the House are getting nervous that property insurers will become fed up with all the recent anti-industry decisions and pull out entirely.
"We're playing chicken with corporate America, which is not a good thing to do" Bogdanoff said. "If the companies pull out of the state, we do not win. We have some work to do."
In its ruling Friday, the appeals court noted that Florida's Office of Insurance Regulation "places no extra burden on Allstate than the one Allstate voluntarily accepted when choosing to transact insurance in Florida.''
State Sen. Bill Posey, R-Rockledge, chairman of the Senate Banking and Insurance Committee, said he wasn't surprised that judges are siding with regulators and reinforcing the insurance reforms passed last year.
"I expected that what we did was constitutional, and I knew the people in the insurance industry didn't like it,'' Posey said.
Posey said he doesn't think much of insurers' rhetoric that Florida is a hostile environment for the private insurance market.
"I think they've had their way with all the states pretty much,'' Posey said, "and we just reached a boiling point in Florida where the Legislature had to do something about it."
Times staff writer Jennifer Liberto contributed to this report. Tom Zucco can be reached at [email protected] or (727) 893-8247.