Texas Judge Extends Allstate Injunction

Travis County, Texas, District Judge Stephen Yelenosky has extended until Dec. 12 an injunction prohibiting Allstate Insurance Company from denying claims related to Hurricane Rita, the Austin American-Statesman reported.

In early October, the Texas Department of Insurance and the state attorney general filed a petition requesting that Allstate be ordered to pay the living expenses of policyholders who were unable to return to their homes after the hurricane struck Southeast Texas and Southwest Louisiana Sept. 24.

Allstate reportedly had refused to cover additional living expenses for policyholders who had little or no damage to their homes but could not return due to power outages or blocked roads. The Statesman reported that TDI maintains Allstate’s policies do not require that policyholders’ property be damaged in order to pay for additional living expenses.

Allstate has said it disagrees with the court’s decision.

In reaction to Judge Yelenosky’s decision, Austin-based Southwestern Insurance Information Service released the following statement:

“The issue involving Allstate and TDI has far reaching implications for the entire insurance industry in Texas and not just one company.

“If insurers in this state are forced to pay claims that are not covered in policies, then people will have absolutely no level of confidence in the contracts insurers have between themselves and their customers. If insurers are required to go back and rewrite these contracts after the fact, we will have a crisis in Texas which will make the mold issue look like child’s play.

“This decision could turn the insurance industry upside down with the potential of creating an availability problem the likes of which we have never seen in Texas.

“Rewording these agreements would render former contracts null and void and, potentially, could have a catastrophic impact on insurer solvency and product availability.”

According to the New Orleans Times-Picayune, Allstate, the second largest homeowners insurer in Louisiana, plans to reduce its coverage there and in neighboring Gulf Coast states as a result of claims it anticipates from Hurricanes Katrina and Rita.

In an announcement regarding its third quarter financial results, the company said it expects $4.53 billion in claims resulting from the two hurricanes.

Allstate posted its biggest quarterly loss ever – $1.55 billion – in the quarter ending Sept. 30. By comparison, the company had a third-quarter profit of $56 million in 2004..

For Hurricanes Katrina and Rita, the company said it expects to handle more than 300,000 claims from customers primarily in Louisiana, Mississippi, Alabama, Florida and Texas.