Florida Court Denies Allstate Rehearing; Business Ban in Force

Florida’s First District Court of Appeals fired the latest volley in an ongoing saga between Allstate Insurance and the Office of Insurance Regulation, re-suspending the insurer from writing new business in Florida.

The court affirmed in its opinion released on May 14, that the OIR can suspend Allstate’s certificates of authority as a consequence of Allstate’s refusal to comply with its statutory obligations under an OIR investigation.

The latest legal ruling denied Allstate’s request for a rehearing on a suspension issued on April 4, stemming from an initial suspension on Jan. 17, followed by a stay of the suspension on Jan. 18.

The game of legal tag originated last October when Insurance Commissioner Kevin McCarty subpoenaed Allstate Companies to comply with requests for information regarding their reinsurance program, their relationships with risk modeling companies, insurance rating organizations and insurance trade associations.

Midway through a two-day hearing in January between OIR and Allstate, McCarty abruptly halted the proceedings, claiming Allstate’s “blatant disregard of our subpoenas.”

In an effort to drive home the gravity of the issue from the state’s standpoint, McCarty exercised a legal prerogative.

“I have little choice but to take an action that will send a clear message about how seriously I am taking this issue,” McCarty said at the January incident. “Suspending their certificate of authority to write new business in our state should make my point.”

While Allstate produced thousands of documents during the curtailed January hearing it had not complied with the subpoenas, according to DCA Judge Paul Hawkes.

In the May 14 ruling, Hawkes wrote, “Specifically, Allstate had labeled every one of the approximately 30,000 documents it had produced as ‘trade secret.’ Some of these ‘trade secret’ documents were public records posted on OIR’s Web site. Many of the documents had pages removed. Most of the required documents were withheld.”

Some of the documents McCarty requested in the subpoenas were also subpoenaed in other states. At the same time Allstate sat down with the OIR, the insurer was in contempt of court in Missouri with a $25,000-per day fine for its failure to produce documents. As of the date of the hearing, those fines exceeded $2 million, according to Hawkes.

Throughout the ordeal, Allstate has stood firm in its claim that it is complying with OIR’s requests, although the insurer failed to request an extension on the subpoenas. Upon review of the court’s latest ruling,

Allstate said it is determining what options to pursue moving forward.

“We are taking steps to comply with the First District Court of Appeal’s order,” said Amy Moore, Allstate senior communications consultant. “We are asking our agents to stop binding new policies. Systems capabilities will be shut down shortly. We have supplied a certification to the OIR for review and are working to resolve any remaining issues. We hope to have this resolved shortly.”

In the court’s ruling, Hawkes wrote that Allstate claims it intended eventual compliance with the subpoenas, but its ambiguous terms and extensive caveats rendered the assertions meaningless. The record supports the immediate final order allegation that Allstate’s conduct is likely to continue, based on its representations at the hearing, and its history of choosing to incur millions of dollars in fines rather than comply with court-ordered production.

McCarty praised the court’s decision in upholding the suspension which prohibits the insurer from writing new business in Florida effective at 9:30 a.m. on May 14. He added that the OIR will immediately stay the suspension upon receipt of an affidavit, signed by an Allstate officer, asserting that it has produced all documents requested. McCarty emphasized that the stay will only be granted under those circumstances and is dependent on Allstate’s continued compliance with Florida law and cooperation with the OIR’s investigation.

“This case illustrates the effectiveness of an immediate final order, such as the one upheld today by the District Court,” McCarty said. “Were it not for that order, we do not believe that we would have the documents available for our ongoing investigation. We now have received hundreds of thousands of documents that Allstate had not previously produced.”

The suspension applies to Allstate Floridian Insurance Co., Allstate Indemnity Co., Allstate Property & Casualty Insurance Co., Allstate Insurance Co., Allstate Floridian Indemnity Co., Allstate Fire and Casualty Insurance Co., Encompass Insurance Co. of America, Encompass Indemnity Co., Encompass Floridian Insurance Co. and Encompass Floridian Indemnity Co., and it only suspends the companies from writing new business in Florida.

The suspension does not affect existing policyholders or consumers who were in the process of securing a policy when the court’s opinion was issued.

A June 16 hearing is scheduled with the Florida Division of Administrative Hearings to address a collateral legal matter involving Allstate’s alleged failure to comply with the document request; there also are two other counts – falsely asserting trade secrets and false certification of Allstate’s September rate filing.

McCarty said he sympathizes with Allstate agents and encourages them to contact the company’s corporate headquarters with questions or comments.

Sources: Florida First District Court of Appeal
Florida Office of Insurance Regulation