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Court clears way for Allstate ban

TALLAHASSEE — It all hinges on an affidavit.

After four months of court challenges and clerical errors, Florida insurance Commissioner Kevin McCarty was finally able Wednesday morning to force Allstate Corp. to stop writing any new insurance policies in the state until it hands over documents regulators say are key to an investigation into Allstate's rate-making practices.

"Floridians across our state have suffered due to the high cost of insurance," Gov. Charlie Crist said in a statement. "I applaud today's action by the 1st District Court of Appeal" — which affirmed the state ban on Allstate.

But Allstate has an out. Regulators said late Wednesday that they had received several draft affidavits from Allstate in which the giant insurer certified that it already has produced all the documents the state has requested. McCarty said he will lift the suspension if the affidavits meet his criteria.

"Allstate has agreed to cooperate," McCarty said. "When our office is satisfied Allstate has made all the documents available, I will immediately stay the suspension. Failure to do so will result in an immediate resumption of the suspension."

That's not likely, said Allstate spokesman Adam Shores. "We believe (the affidavits) will be acceptable to them," he said.

In the meantime, Allstate can't write any new business in the state, including its lucrative auto line. Last year, Allstate wrote an average of about $564,000 a month in new auto business in Florida. The company sells about 3,500 new auto policies a week statewide.

The suspension does not apply to existing Allstate policyholders.

The state's fourth-largest property and second-largest auto insurer, Allstate still has another large hurdle in front of it.

In a separate action here, the Illinois-based insurer faces possible suspension at a June 16 administrative hearing regarding its 2007 rate filing. The company is accused by Florida regulators of failing to comply with subpoenas, falsely asserting trade secrets and false certification of its filing.

A decision in that case will be made by an administrative law judge and could be appealed to the 1st District Court of Appeal, the same court that Wednesday affirmed McCarty's order.

"Allstate's willful, indeed potentially criminal, failure to comply with its disclosure obligations," Judge Paul Hawkes wrote in the court's opinion, "has prevented (regulators) from adequately investigating its reasoned belief that Allstate is systematically defrauding its policyholders."

Allstate's Shores said an appeal of Wednesday's ruling to the Florida Supreme Court is "definitely one of the options'' his company is considering.

Crist and members of the Florida Legislature have bashed Allstate in recent weeks for everything from dropping half a million policyholders over the last five years and using unapproved hurricane risk models to set rates, to possibly colluding with rating agencies and trade associations. The company recorded profits of $4.6-billion in 2007.

But the key charge has been that Allstate circumvented a 2007 Florida law that requires insurers to lower their rates. Before the company withdrew the request this year, Allstate had asked for a 42 percent average statewide rate hike, the largest increase of any major insurer.

Even if the suspension lasts a few days, it will hurt the state's 1,100 Allstate agents and nearly 4,000 support staff, said Jim Fish, executive director of the National Association of Professional Allstate Agents, a group not affiliated with Allstate Corp.

"The agents are going bananas," Fish said. "They've been sitting on the edge of their seats, and now they'll be put back in limbo again. Nobody knows for sure if the state won't turn Allstate off again.

"Allstate must make a decision," Fish added. "Either they stay in Florida and give (regulators) the documents, or they leave."

Insurance Commissioner McCarty said he sympathized with the agents. "But Allstate left us with no other choice," he said. "They were in violation of Florida law, and we could not allow that to continue.''

Tom Zucco can be reached at [email protected] or (727) 893-8247.

Oct 16, 2007: Amid accusations of collusion and price fixing, state insurance regulators send subpoenas to Allstate officials to look into relationships with companies that sell backup insurance, design hurricane risk models and rate insurance companies.

Jan. 15: Insurance Commissioner Kevin McCarty, left, abruptly ends a hearing involving Allstate when company officials say they either can't or won't turn over documents subpoenaed by the state.

Jan. 16: McCarty files an order suspending Allstate from writing any new insurance policies until the company complies with the subpoenas. Allstate files an appeal in district court in Tallahassee.

Jan. 18: The 1st District Court of Appeal overturns McCarty's order and puts Allstate back in business.

Jan. 23: State regulators file a brief seeking to reinstate the suspension, arguing that Allstate broke the law.

Jan. 30: The court rules in Allstate's favor.

Feb. 19: McCarty files an administrative complaint against Allstate alleging multiple violations of the Florida Insurance Code.

April 4: In a major victory for the state, the court rules Allstate can be banned from writing any new policies in Florida. Allstate seeks a rehearing.

April 21: Allstate's motion is denied, but withdrawn an hour later after the court realizes it released the ruling too soon.

Wednesday: The court denies Allstate's motion for a rehearing, saying state regulators can suspend Allstate's license for failing to comply with the subpoenas.

Court clears way for Allstate ban 05/14/08 [Last modified: Friday, May 16, 2008 10:33am]
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