How the Other Side Lives

…other side of the Pacific that is.

Although large natural disasters outside of the United States are often associated with “less developed” nations needing our help, the reality is that a variety of disasters do strike within the 1st world economies. The European heat wave of 2003 has been estimated to have killed 14, 800 Frenchmen alone, and the Kobe earthquake of 1993 killed 5,100 people in an area of the country thought to be relatively safe from severe earthquakes.

I did run across an interesting piece that described US Government issued flood insurance policy with the earthquake insurance issued by the Japanese government.

“Insurance Issues of Catastrophic Disasters in Japan: Lessons from the 2005 Hurricane Katrina Disaster” written by Hiroaki Tsubokawa.

What is interesting is that there are so many parallels between the two countries responses to the threat of large scale catastrophe.

Both countries offer government funded catastrophe insurance, and in both countries insurance is taken only by a limited group of people.

In the US, the National Flood Insurance Program (NFIP), 41% (2,181,930) of policies are issued in Florida (as of April 2007), followed by Texas, and then Louisiana. Given that Florida has 7.05 million households (per the US census), even if only half of them are non-renters, that would put flood insurance ownership by home owners at 62%.

In Japan, the number also varies by region, but nationwide 38% of insurance policy holders have earthquake insurance.

In both countries the lack of participation drives up the cost of insurance. At the time of this study the average NFIP annual premium was $438: very high with respect to its limited benefits. One reason (though not the only one) benefits are limited is that it helps keep the premiums down. Japan actually caps the total amount that will be paid out across the country and in any case they limit the payout on earthquake insurance to ½ the value of the underlying fire insurance policy. What is also interesting is that after the Kobe earth quake, they had a large battle between the insurers and insured because fire insurance did not cover earthquake damage: yet many building burned down as a secondary effect of the earthquake.

Much of the Japanese reaction was somewhat similar to the US. They discussed more national funding of insurance policies to take care of disaster situations, and they became much more interested in accurately mapping out a natural hazard map. It is not clear from this paper that they did anything much more concrete.

GAO National Flood Insurance Program Report: A View from Outside the Industry

Yesterday we pointed out several glaring omissions and factual inaccuracies in the Reuters drive by reporting on the General Accounting Office NFIP report. Today we see better coverage courtesy of Anita Lee at the Sun Herald. In addition to our analysis, Ms Lee points out some of the other conclusions reached by the GAO on the flaws inherent to the current program design:

The first flaw involves the three wise monkeys and the concept of see no evil, hear no evil and speak no evil. While that old proverb works well in our personal conduct it is an invitation to disaster when used to manage a federal program:

The flood-insurance program cannot accurately determine flood-claim payments on properties that were subject to both winds and flooding, because FEMA does not collect information on wind claims and does not require companies to explain how they distinguish between wind and flood losses.

The second flaw involves the security the program gives to it's participants, even if property owner contracts for wind and flood insurance there is no way to know if all the damage will be covered due to Catch-22 like scams such as the anti concurrent clause built into wind policies and other coverage differences between flood and wind policies:

Property owners with separate homeowner, wind and flood insurance policies cannot know prior to a storm whether all their damage from a hurricane will be covered because of differences in the policy limits. The NFIP cedes the damage determination to the insurance company.

The system as currently designed fosters legal disputes because of Catch-22 scams such as the Anti Concurrent clause.

Legal disputes between wind and flood coverage have increased because of insurance companies' anti-concurrent causation clauses that attempt to exclude coverage of wind damage if flooding contributed to the loss.

Most interesting is that FEMA seems to oppose the common sense recommendations, especially those that would require the bureaucratic FEMA monkeys to remove their blinders and examine how flood claims are adjusted and the damage is apportioned in multi peril events such as hurricanes by private insurers.

Given the insurance money that supports Senate politicians like "Renfroe" Richard Shelby and "Pac-Man" Christopher Dodd we certainly understand their insistence to sticking with the current "heads I win, tails you lose" setup for coastal residents whereby wind policies are essentially meaningless pieces of paper and taxpayers ultimately bear the burden for multi peril events like Hurricanes. However, from the appearance of Gene Taylor's remarks quoted in the Sun Herald, the Catch-22 days of ordinary citizens unable to rely on their wind policies while insurance companies laugh all the way to the bank appear numbered. Thanks to the internet the truth will win this debate. Today's Sun Herald story:

GAO points up conflict of interest

Insurers deciding in wind vs. water

By MARIA RECIO
SUN HERALD WASHINGTON BUREAU

The Government Accountability Office issued a report Wednesday on the National Flood Insurance Program that concluded insurers have "an inherent conflict of interest" in determining flood damage the federal program must pay, with the wind damage covered by private companies.

"I applaud the GAO for confirming that insurance companies have an inherent conflict of interest when they are allowed to determine whether to assign damages to their own wind-insurance policies or to the federal flood-insurance policy claims," said Rep. Gene Taylor, D-Bay St. Louis, who lost his home in Hurricane Katrina.

The GAO concluded the program needs greater transparency and oversight of wind- and flood-damage decisions. The agency is the congressional watchdog arm and frequently investigates at the request of members.

"The report reinforces my proposal," said Taylor, "to give homeowners the option to buy wind and flood coverage in the same policy." The House passed Taylor's provision in September but the bill is stalled in the Senate.

"I urge the Senate to pass this legislation in order to stabilize the insurance market in coastal states," Taylor said. "I strongly support GAO's recommendations that insurance companies be required to turn over their wind-claims files so that FEMA can verify that the companies applied the same standards to the flood insurance claims as to their own wind claims."

According to the GAO, FEMA opposes the recommendation, which prompted Taylor to say, "I am disappointed, but not surprised, that FEMA opposes that recommendation. FEMA needs to recognize that its oversight responsibility is to protect federal taxpayers, not insurance companies."

The GAO also concluded:

• The flood-insurance program cannot accurately determine flood-claim payments on properties that were subject to both winds and flooding, because FEMA does not collect information on wind claims and does not require companies to explain how they distinguish between wind and flood losses.

• Property owners with separate homeowner, wind and flood insurance policies cannot know prior to a storm whether all their damage from a hurricane will be covered because of differences in the policy limits. The NFIP cedes the damage determination to the insurance company.

• Legal disputes between wind and flood coverage have increased because of insurance companies' anti-concurrent causation clauses that attempt to exclude coverage of wind damage if flooding contributed to the loss

Pee on My Leg and Say It's Raining Part 2: Reuters Story Contains Glaring Omissions and Falsehoods

After I read yesterday's Reuters story on the fight to reform the flood program I thought it strange it contained this paragraph which I knew to be inaccurate:

The Senate bill would extend the NFIP for five years and improve flood maps used in the program. But a vote by the full Senate on the bill has been blocked by lawmakers from Louisiana who are concerned that it would boost insurance rates there.

Fast forward to today and this Reuters story which contains almost the exact same wording for the reason for the hold on the senate version of NFIP re authorization:

The NFIP's post-Katrina debt would be forgiven under a bill approved in October by the Senate Banking Committee. The Senate bill would extend the NFIP for five years. But a vote by the full Senate on it has been blocked by Louisiana lawmakers who are concerned it would boost insurance rates in their state.

The second story, concerning the release of the GAO report on the National Flood Insurance Program, boiled the report down the following:

The GAO, the investigative arm of Congress, said questions remain about the Federal Emergency Management Agency's handling of flood-damage claims processed by private insurers under the National Flood Insurance Program (NFIP).

The GAO urged Congress to empower the agency to examine both wind and water claims data related to hurricane damages. It also said state regulators need to strengthen licensing and training requirements for insurance adjusters.

Alabama Republican Rep. Spencer Bachus said the GAO report contains "sensible recommendations" and deserves further discussion in the House of Representatives Financial Services Committee, where he is the ranking Republican member.

However, while Rep. Bachus is the ranking Republican member of the committee Mr. Drawbaugh evidently did not see fit to report on the reactions of the Democrats running the House Financial Services Committee to the GAO report they ordered. Curious.

I also found it equally strange that Mr Drawbaugh as did not report on the "inherent conflict of interest" in the current system of private wind insurers adjusting flood claims or the problems associated with damage related to multi peril catastrophes like hurricanes contained in the GAO report:

Insurance coverage gaps and claims uncertainties can arise when coverage for hurricane damage is divided among multiple insurance policies. Coverage for hurricanes generally requires more than one policy because private homeowners policies generally exclude flood damage. But the extent of coverage under each policy depends on the cause of the damages, as determined through the claims adjustment process and the policy terms that cover a particular type of damage. This process is further complicated when the damaged property is subjected to a combination of high winds and flooding and evidence at the damage scene is limited. Other claims concerns can arise on such properties when the same insurer serves as both NFIP’s write-your-own (WYO) insurer and the property-casualty (wind) insurer. In such cases, the same company is responsible for determining damages and losses to itself and to NFIP, creating an inherent conflict of interest.

Though we are not so called "professional" news reporters at the Insurance Issues Forum, I was able to land a copy of Senator Vitter's letter to Senators Dodd and Shelby by contacting Gene Taylor's office and simply asking for it. Since Mr. Drawbaugh did not see fit to speak with either of Louisiana Senators or HR3121 sponsor Rep Gene Taylor I guess it is understandable, though somewhat unprofessional that he reported a false reason for the hold on the Senate re authorization of the National Flood Insurance Program. Concerns over "boosting insurance rates" was not the reason Senator Vitter had a problem with the Senate version of the bill, rather:

I believe any legislation reforming the flood insurance program must make an increase in the maximum coverage levels available to policyholders. As you know, your bill does not do this. The current coverage levels have not been increased since 1994. With inflation and increased home prices since that time, the current coverage levels are severely outdated. The bills passed by the U.S. House of Representatives last and this Congress increased the current maximum levels of $250,000 for residential properties and $500,000 for non-residential properties to $335,000 and $670,000 respectively. These reasonable adjustments in the coverage levels would bring more certainty and affordability to the insurance market.

Also, flood insurance reform legislation should allow policyholders new lines of optional coverage, including coverage for business interruption and full replacement costs of contents. Businesses in Louisiana continue to suffer as we recover from Hurricanes Katrina and Rita, and skyrocketing insurance costs and fewer providers offering coverage remain among the most significant barriers to full economic recovery. These new coverage options, which could be offered at market rates so as not to add any additional financial strain on the program, would go a long way in providing some stability and affordability to the insurance market.

Additionally, I believe Congress must address the overall insurance crisis along the Gulf Coast centered on the lack of coverage options and affordable rates for wind damage. Lack of available or affordable general liability coverage including wind coverage is now one of the single biggest obstacles to recovery. Rates have skyrocketed well beyond what seems necessary to cover the risk and are not abating. Either wind coverage should be added to the National Flood Insurance Program at market rates as the House-passed bill does, or we must take other action outside the flood insurance program to address the broader insurance crisis. This could include a catastrophic backstop, similar to what we have for terrorism risk insurance.

We stand ready to correct any factual inaccuracies we find in hard news reporting on this issue, which impacts so many along America's coastlines. Reuters owes us a correction.

sop

Pee on My Leg and Say It's Rainin': Big Insurance Shillin' for Flood "Reform"

Welp folks, this Cowboy has been tellin' anyone who'd listen that them insurance companies are a bunch of fancy crooks stealing from the common man many ways. This Cowboy run across one of them scams yesterday. Ole big business Bush and insurance waterboy Chris Dodd want to do us a "favor" and "fix" the flood program. All this Cowboy can say is when these big business lackeys want to fix somethin' you best hold on to yer wallets boys 'cause the fixin' is in all right. Against the people!

Lets look at the "favor" ole Dodd wants to give us.

Awash in debt, U.S. flood insurance under scrutiny

Tue Jan 29, 2008 1:47pm EST
By Kevin Drawbaugh

WASHINGTON (Reuters) - Swimming in red ink and scheduled to expire within months if not renewed, the troubled National Flood Insurance Program (NFIP) is about to encounter another round of criticism this week on Capitol Hill.

Congressional investigators are expected to call for closer scrutiny of how insurers handle homeowners' damage claims from storms in which both wind and water play a destructive role, as they did in the hurricanes of 2005, said sources familiar with the preparation of a report set for release within days.

The Government Accountability Office (GAO) report is expected to focus especially on insurers that sell both wind and flood policies to the same homeowner, a situation the GAO previously has said poses a potential conflict of interest.......

This is where it gets good folks. Remember the insurance industry shills like Robert Hartwig and Chris Dodd say Gene Taylor's bill will break the budget even though it calls for wind premiums to be actuarially sound. Who is breakin' the bank folks? Well ole Dodd of course. He dumps the flood deficit (a big chunk caused by wind claims dumpin') on the taxpayers.

The government is involved in the market because the private sector on its own does not adequately cover flood risk. Most homeowners' policies cover wind damage, but not flooding. The GAO has previously criticized FEMA's stewardship of the program and questioned how much money the agency pays private insurers for flood claims. Katrina and the other hurricanes of 2005 left the NFIP $17.3 billion in debt to the U.S. Treasury.

A FEMA spokeswomen declined to comment on the report.

The Senate bill would not expand the NFIP to cover wind damage, as was proposed in a bill approved by the House in September. In another difference with the Senate, the House bill would not forgive the NFIP's debt.

The Bush administration has threatened to veto the House bill. The insurance industry opposes expansion to cover wind.

Oh boy how does that "warm" rain feel folks? So them Reuters boys think that 17 billion can't be paid back? Well they haven't talked to Gene Taylor or looked back in history to see that we did it back in the 1980s.

All we want is a hand, not a hand out and this Cowboy and millions of folks like him stand ready to pay our way. What we ain't gonna stand for is crooks like big insurance and their waterboy Chris Dodd prentendin' like they is hepin' us when they is really stickin' it to us.

AIken v USAA: The Verdict

Hailed in some circles as a major victory for insurers, the jury has spoken and awarded David and Marilyn Aiken $64,000 in their suit against USAA. We certainly respect the jury verdict and will no doubt find irony in the praise accorded our gulf coast based jury by some who previously had written us off as incapable of fairly dispensing justice. That praise will last until Nguyen v State Farm begins next month, but that is a different case with different fact patterns. A tip of the hat also to David Rossmiller for his analysis of the verdict though I would add the "jury pummeling" of Allstate in Weiss was deserved despite Mr. Rossmiller's earlier protestations to the contrary. As I mentioned yesterday the fact the Aiken's received anything from the jury indicates they felt USAA was not monetarily fair in how this claim was adjusted.

In any event here is the story in today's Sun Herald on the Aiken verdict and link to the jury instructions as we close the curtain on Aiken and await Nguyen.


By ANITA LEEmailto:LEEcalee@sunherald.com

A jury in U.S. District Court awarded USAA Casualty Insurance Co. policyholders only $64,000 for wind damage to their Pass Christian vacation home, which was destroyed by Hurricane Katrina.

David W. and Marilyn M. Aiken already had received $178,205 from USAA, including loss of use, but sought total coverage for their home, boat house and contents. Full payment would have amounted to $427,087 more.

The Aikens also sought damages to punish the insurance company, claiming USAA purposely minimized their claim. But District Judge L.T. Senter Jr. did not allow the jury to consider punitive damages, ruling USAA had legitimate reasons for its decision.

The Aikens maintained a tornado destroyed their home long before Katrina's tide, covered by federal flood insurance, surged ashore. However, USAA said it covered damage that could have been caused by wind and excluded from payment any damage caused by tidal surge or by wind and tide acting together. The property was subjected to 20 feet of water, minus wave action, according to USAA's experts.

The plaintiffs argued those experts were biased, but the evidence failed to support this contention.

Senter told the eight jurors before deliberations that they should take into account the Aikens' acceptance of $278,000 in coverage from the National Flood Insurance Program, which indicates they acknowledged some damage from the tide. The jury also had to consider the previous USAA payment and could not award the Aikens more than the total policy coverage.

That left the jury to consider an amount from $0 to $272,238 for structural damage and $0 to $154,849 for destruction of contents. Based on the evidence, the jury awarded $17,000 for structural damage and $47,000 for contents.

Senter also told the jury the Aikens had met their initial burden under the insurance policy of showing windstorm caused an accidental direct physical loss of their property.

USAA then had the burden to prove the portion of the loss excluded by its policy, which is storm surge or a combination of surge and wind.

Tidal surge damage is excluded from coverage, Senter instructed, "even if wind contributed to cause this flood damage." He explained to the jury: "All damage to the property that was caused by storm surge flooding is excluded even if the storm winds concurrently or in any sequence caused or contributed to this excluded storm surge flood damage."

Senter's instruction on the so-called "anti-concurrent cause" exclusion dovetailed with a recent ruling from the 5th U.S. Circuit Court of Appeals in the lawsuit Tuepker vs. State Farm, a Katrina case from the Coast. The ruling clarified when a homeowner can expect to recover wind damage. As State Farm argued, the appeals court found the wind damage must occur independently of storm surge for coverage to apply.

A Different State Farm Battle

State Farm has another battle on its hands and this one has morphed into a constitutional battle. This battle is with a whole group of State Attorney Generals and State Banking Officials of the twelve states that regulate mortgage brokers.

The case started with State Farm trying to finagle its way around some requirements in the State of Ohio, that were put in place to reign in some of the worst excesses of the current lending mess.

You see, State Farm has a bank. A thrift to be exact. And it likes to offer loans, and other banking products to its insurance customers. But the people that they do this through are not employees of State Farm. They are the various independent agents (as State Farm likes to call them) that run State Farm offices.

Ohio's Bank Supervisor said “If they are independent, then they are brokers. And if they are brokers, they must license as mortgage brokers and follow our laws.” We would like to know who the are and that they have a clue what they are doing. State Farm did what any business that wants to avoid regulation in this day and age does: they went to their friendly do-nothing federal regulator and got a letter from the Chief Counsel of the Office of Thrift Supervision (OTS) saying that State Farm independent agents were exempt from state regulation.

Now it should be understood that FEDERAL courts do not normally pull back the reigns on FEDERAL agencies. But the Federal District Judge Edmund A. Sargus had a very hard time understanding the methodology of State Farm and the OTS. In his opinion and order he noted that a letter from the chief agency's attorney hardly complies with the Administrative Procedures Act as set out by congress. He goes on to note that at no time prior had the OTS had any interest in the area of regulating mortgage brokers and that for the State of Ohio to hear about it for the first time when State Farm hands it a letter from the OTS is a little bit unusual.

So the Judge ruled against State Farm in their request for a declaratory judgment. State Farm has taken the case to the 6th Circuit Court of Appeals. We are currently at the point where various parties are submitting their amicus briefs. The OTC has already filed one for State Farm, and it is expected that various State Attorney General Offices, and some group from the Conference of State Banking Supervisors will submit one for the State of Ohio.

While we wait for the dust to settle, I am curious as to one point: I understand why The Federal Reserve Bank (The Fed), the Office of the Comptroller of the Currency (OCC), and OTC have done nothing to reign in the current mortgage mess. But why do only twelve States regulate mortgage brokers?

In case the link above doesn't work here is the url: http://www.goodwinprocter.com/Files/CFSA/07/rm_07_10_9_Ohio.pdf

Washington State Voters Say No to Big Insurance and Yes to Ending Institutionalized Claims Abuse

This past November, despite insurance companies spending millions on the election, Washington State Votes passed the "Insurance Fair Conduct Act" which allows for treble damages against insurance companies that treat their customers in bad faith. Predictably the insurers played from the old script of threatening higher rates if they were forced to behave responsibly. Not as predictable were the voters that ratified the law, evidently tired of being mistreated by insurance companies.

"Companies (that) act in good faith are not going to have a problem, its not going to cost any more money , its not going to be any legal action and its not going to cost them treble damages because if companies deal with their customers in good faith, there is no penalty." said Mike Kreidler, Washington State Insurance Commissioner when interviewed about Washington State Fair Claims Act.

Why would any business be against treating it's customers fairly? One look at the profit made from institutionalized customer/claimant abuse reveals the answer.

Anderson Cooper has reported on the issue of insurance bad faith repeatedly since Hurricane Katrina, possibly because he was moved by the treatement of ordinary men and women here in Mississippi by their insurers after the storm. The following video clip is from a report on CNN on the Washington State Vote and is well worth watching. Enjoy.

sop

Shareholders strike back: McKinsey Not Good for Owners

We note with some disappointment that Cowboy's efforts to enlist the help of another insurance law blogger with a case document went unanswered but in this day and age of the internet even non legal lay people can come by case documents. Such is the case in Fojas v. Ackerman et al and Allstate Corporation, a shareholder derivative lawsuit filed January 18, 2008. This news broke on the Allstate Message Board at Yahoo Finance where the authors of this blog have become board regulars telling our story of insurance bad faith and was confirmed yesterday evening by Forrestgrump55i, an ally in this battle between ordinary citizens and the insurance giants.

The suit contains a well written account of the institutionalization of claimant abuse as part of the big insurance business model:

In 1992, Allstate hired McKinsey & Co. (“McKinsey”), a global management consulting company which assists corporate executives in identifying ways to improve the performance of the company, to “redesign” Allstate’s claims handling procedures. The “new” claims handling procedure was implemented by Allstate in 1995. According to the McKinsey reports, the claims handling procedure would increase Allstate’s stock price and add $700 million to Allstate’s revenue.

The engagement of McKinsey lasted approximately five years, during which time McKinsey constantly updated Allstate management in reports and power-point presentations (“McKinsey reports”). Certain of the McKinsey reports came to light in Geneva Hager v. Allstate Ins. Co., 98-cl-2482, Fayette Circuit Court Kentucky, a civil action filed by an Allstate policyholder against the Company alleging bad faith claims handling. During the trial in October, 2007, the plaintiff’s lawyer outlined how the McKinsey reports essentially detail a course of action designed to avoid paying claims, and when claims were paid - - pay less.

According to a July 9, 2006 article in the Lexington Herald-Leader, the McKinsey reports were obtained by lawyers in several additional civil cases, but were all subject to protective orders, until a bad faith claim was asserted in New Mexico (“New Mexico litigation”). In the New Mexico litigation, the plaintiff’s attorney refused to consent to a protective order. Allstate argued that the McKinsey reports were trade secrets, and appealed the trial court’s findings that they did not constitute trade secrets. Following the unsuccessful appeal on that order two years later, Allstate refused to turn over the McKinsey reports, leading to the entry of a default judgment against Allstate, which again Allstate appealed.

In the Hager litigation, the judge ruled in 2001 that the McKinsey reports were not trade secrets; in order to avoid the inevitable appeal, however, the parties agreed to treat the documents confidential to keep the litigation proceeding. Eventually, certain pages of the McKinsey report were made public during the October 2007 trial, but the majority remains confidential.

Allstate continues to attempt to maintain the confidentiality of the McKinsey reports, no matter what effect it has on the Company, its reputation or its finances.

In a September 12, 2007 order entered in an action styled Dale Deer v. Allstate Ins. Co., Case No. 0516-CV24031, Circuit Court of Jackson County, Missouri, Allstate failed to respond to an Order to Show Cause issued to address, in part, Allstate’s prior violations of two court orders requiring responses to discovery, and was found in civil contempt of court. The court ordered Allstate to pay $25,000 per day beginning September 14, 2007 until the discovery sought was produced. Allstate instead appealed, and the appeal is pending. If penalties accrue to date, Allstate would be faced with sanctions of approximately $3 million at this juncture.

This suit represents an important new front in this battle of profits and corporate greed over people. Settling claims should not be a game of low ball and hard ball; rather claims should be adjusted fairly to the proper amount.

sop

A Big Mississippi Coast Welcome to Russell

Our readers will notice we have added Russell to our blog family as a moderator. Russell is a friend of mine from the financial blogosphere with a specialty expertise in financial services issues, mainly banking and options trading. After Katrina, Russell was one of the first people to step in and help my family in those dark early days; later he came down on helped me catch up the work in my construction practice as a field expert doing job site visits. If his lovely wife would let me, I'd steal them away from North Carolina in a heartbeat. Drago's almost sealed the deal......:)

Besides his acumen understanding the complex world of financial service companies he also brings invaluable experience working with FEMA as a disaster field employee in locales such as Puerto Rico and the Carolinas. Russell also broadens us geographically as the issues surrounding coastal insurance also impact his home state of North Carolina.

Russell is also a member of the Order of Davichy, a very select group of investors known for their range of blogging and investing expertise. I've got the gin covered Bro. ;-)

sop

Aiken v USAA: Rimkus Gets a Free Pass

Rimkus skates because they were not hired by the Aiken's according to a ruling yesterday in Aiken v USAA. I will certainly remember Judge Senter's ruling letting Rimkus off the hook next time one of my colleagues is hit with a malpractice suit by a third party over an audit report. On it's face this decision means its open season on us consumers by the hired guns of big insurance since they appear "not accountable" for their work product to third parties.

Rimkus and James W. Jordan had a contract with USAA to adjust the claim, notwith the Aikens. As a result, Rimkus did not have a duty under Mississippi law to deal fairly and in good faith with the Aikens, as does USAA. The insurance policy USAA provided the Aikens is considered a contract.

Even if the Aiken's prevail in their suit monetarily this will be a loss for the greater cause of fairness in claims adjusting so long dominated by claimant abuse since the McKinsey recommendations were adopted as the new gold standard by the insurance industry.

In any event today's Sun Herald story.

Judge dismisses Rimkus from USAA suit

Senter said there was no proof of gross negligence
By ANITA LEE

GULFPORT --Insufficient evidence of gross negligence and fraud led a judge to dismiss Rimkus Consulting Group Inc. and a company engineer from an insurance lawsuit after the policyholders' case was presented to a jury in U.S. District Court.

USAA Casualty Insurance Co. hired Rimkus to inspect the Pass Christian vacation home of David W. and Marilyn M. Aiken, which was destroyed by Hurricane Katrina. USAA is still presenting its arguments, and the case could go to the jury as early as today.

Rimkus and James W. Jordan had a contract with USAA to adjust the claim, not with the Aikens. As a result, Rimkus did not have a duty under Mississippi law to deal fairly and in good faith with the Aikens, as does USAA. The insurance policy USAA provided the Aikens is considered a contract.

The Aikens maintain USAA ordered an engineering report that would minimize wind damage to their property, insured for more than $680,000. USAA paid them $178,205 for wind damage. They received maximum benefits of $278,000 for damage from tidal surge under a federal flood insurance policy. USAA also adjusted the flood claim.

U.S. District Judge L.T. Senter Jr. noted the Aikens accepted the flood insurance money even though they contend a tornado destroyed their vacation home and boat house before Katrina moved ashore.

"At most, the evidence against Rimkus and Jordan would support no more than a finding of simple negligence in the investigation of the claim," Senter said in dismissing them from the case. "The testimony and evidence are not sufficient to support a finding that these defendants handled this matter in a grossly negligent or wanton matter with malice or with reckless disregard for the rights of the insureds."

A report Rimkus sent USAA in December 2005 concluded Katrina's wind or water was sufficient to destroy the house and boat house, saying the percentage of damage wind caused before the storm surge arrived could not be determined.

At USAA's request, Rimkus issued a supplemental report in March 2006 that detailed construction components wind could have destroyed before tidal surge destroyed the building superstructures. USAA based its payment to the Aikens on the March report. Rimkus and USAA witnesses said the supplemental report was meant to clarify how much the Aikens were owed, not to deny coverage.

Pink Pig: How Insurance Crooks View You the Customer/Claimant

Folks this Cowboy has been educatin' the public for almost a year now on how these fancy insurance crooks masqueradin' as honest businessmen screw the public. Welp folks, nothing says how these miscreants view their own customers better than their own words. In today's installment of "As the Pink Pig Turns" we hear how a insurance company was actually proud of screwin' their customers, including a man so badly injured in a car accident he couldn't work for a year yet these crooks wouldn't give him anything. He had to sue and the rest is history. For Nick Peressini Pink Pigs do fly. But what about the countless untold others - the 80-90% that just take their screwin' from Big Insurance unable to fight back?

Here is some deposition quotes from one of them crooks. Though he admits he done wrong he is still ain't sorry for what he done.

In the deposition video, it is clear that Scott is not sorry for how Peressini's claim was handled.

Livingston: "For each one of those months, April through October, you violated the regulation, correct?"
Scott: "Yes."
Livingston: "And that wasn't fair to Mr. Peressini, was it?"
Scott: "No."
Livingston: "So you think she's lying under oath about what she did, or do you think maybe you ought to accept what she said under oath and apologize to this guy?"
Scott: "I'm not going to apologize."
Livingston: "Why not?"
Scott: "'Cause I'm not going to."
Livingston: "Why not?"
Scott: "'Cause I'm not going to.

So there you have it folks, these insurance claims adjustin' crooks think you are a rube, a conquest, another notch on their belt buckle on their way to collectin' their big fat Christmas bonus and they don't care if they cheat you. It makes this Cowboy sick to his stomach! Pull up a chair and watch the news story embedded on the web page courtesy of 7news Denver.

We're all supposed to have insurance and at one time we will all likely need to file a claim. Ever wonder how the companies decide what to pay and when to pay?

7NEWS looked into a company's practice that the state's insurance commissioner calls "inappropriate and unprofessional conduct."

The company, American Family Insurance, said it's done nothing wrong

But a Boulder jury said there was something wrong and handed down a $3 million verdict against American Family Insurance.

Breaking News: Hood Opens New Criminal Investigation of State Farm

Well wouldn't you know it if good ole Jim Hood ain't steppin' in to do Dunn Lampton's job and bring them crooks at State Farm to justice for dumpin' their wind obligations on the us taxpayers via the flood program. This Cowboy did a post on the topic and Sop did one with pictures to show how them crooks did it and stole from Uncle Sam hisself.

Jim Hood has been listenin' folks and has heard our cries for justice. If George Bush and his political band of big business boot lickers at the US Justice Department in DC won't brings these crooks to justice thank God we got Jim Hood!


Hood, Moore moving into action against State Farm

By ANITA LEEcalee@sunherald.com

Mississippi's current and former attorneys general are back on the offensive against State Farm insurance companies.

Attorney General Jim Hood is asking a federal judge to dissolve a court order that prevents him from continuing a criminal investigation involving State Farm. Hood says the investigation is not related to a 2006 criminal probe by his office into State Farm's handling of policyholders' Hurricane Katrina claims.

The suspended investigation is secret, but court records indicate State Farm sued to stop it after Hood tried to subpoena company records.

Meanwhile, former Attorney General Mike Moore said in a sworn statement that he and Hood did not use the threat of criminal prosecution in late 2006 to coerce State Farm into settlement of policyholders' Hurricane Katrina claims, as State Farm alleges.

Instead, Moore's statement said, State Farm insisted Hood agree to drop his prosecution of the company before it would sign on to a proposed global settlement of policyholders' claims reached in early January 2007.

Hood did agree to end his 2006 investigation of State Farm, but he says that promise hinged federal court approval for a global settlement of policyholder claims.

The proposed settlement failed to win court approval. State Farm contends it has honored its agreement by re-evaluating claims through the Mississippi Department of Insurance. However, Hood says the company failed to live up to standards set out in the original settlement proposal.

The legal dispute has been clouded by the indictment of policyholders' attorneys from the Scruggs Law Firm, which withdrew from the legal partnership then renamed the Katrina Litigation Group. While the indictment was not directly related to policyholders' lawsuits against State Farm, the company has accused Scruggs of ethical and legal violations in the lawsuits and questioned his relationship to Hood and his criminal proceedings.

Scruggs reached a settlement of 640 policyholder claims with State Farm in November 2006, according to a State Farm letter. The global settlement of other Coast claims, reached in January 2007, was rejected by U.S. District Court Judge L.T. Senter Jr.

From Insurance Regulator to Insurance Lobbyist: Incest in the System

It turns out George Dale is not the only local insurance commissioner going straight from his elected office to work in the Insurance Industrial Complex. Strangely Adams and Reese was silent on their hiring of Robert Wooley, the first insurance commissioner in Louisiana in several years not in jail because of corruption. This quote from the story sums up why none of the authors of this blog trust our insurance regulators and is the basis for our opinion that federal oversight of this industry is well past due:

"Bob Hunter, a former Texas insurance commissioner who is director of insurance at the Consumer Federation of America, said that Dale's new job at a law firm that represents so many insurance interests is another unfortunate tale of regulators caring more about the industry than the people who elected them.

"Nothing surprises me any more. The insurance industry and the regulators are so intertwined. We've had now two presidents of the NAIC (National Association of Insurance Commissioners) go directly to lobbying jobs with the insurance industry, and we've had so many former insurance commissioners head off in that direction, it's disgusting. How can the public trust state regulation with all this going on?" Hunter asked."

sop

AIken v USAA Continues: More Employees Take the Stand

Yesterday the trial resumed after the holiday break with Rimkus and USAA employees taking the witness stand. From the looks of the Sun Herald story, yesterday was not very eventful as employees from Rimkus and USAA took the stand to deny the engineering reports were changed simply to save USAA money. Given what we have found regarding the McKinsey consulting recommendations regarding claims handling and its apparent widespread use across the insurance industry as the new claims adjusting bible I have a hard time believing those statements. This would never come out in Court but I'd love to see if just one of these altered engineering reports resulted in a favorable change for the claimant/insured. Forgive the sarcasm but I suspect if such were the case pink pigs really do fly.....

sop

USAA employees testify in case
By ANITA LEE calee@sunherald.com

GULFPORT --Employees testified that USAA Casualty Insurance Co. did not conspire with engineering firm Rimkus Consulting Group Inc. to deny coverage to a couple after Hurricane Katrina.

"Absolutely not," said Rimkus manager Paul Colman, whose denial was echoed by two USAA claims managers testifying in the second week of the U.S. District Court trial.

The three were called to the stand Tuesday by the plaintiffs' attorneys, who are trying to prove USAA pressured Rimkus to change reports that would minimize what the company owed for wind damage.

USAA paid David W. and Marilyn M. Aiken $178,205 for wind damage on a policy that exceeded $680,000 in coverage for their Pass Christian vacation home. The Metairie couple is seeking full coverage, plus punitive damages based on the allegation their claim was denied in bad faith.

USAA employee William McNamara, who supervises adjusters and coordinated work by engineering firms after Katrina, testified Tuesday afternoon. He said Rimkus provided reports for USAA on 200 properties. McNamara also verified he called Rimkus to request its engineering report on the damage be corrected and include more detail.

McNamara said he was not attempting to change the engineering company's opinion about the cause of damage. Instead, he said, USAA needed the wind damage detailed in order to estimate what the Aikens were owed.

Rimkus had closed the file in December, after sending USAA a report that said, in part: "It cannot be visually determined from the remaining physical evidence the percentage of damage resulting from surge forces and the percentage of damage resulting from wind forces." Federal flood insurance covered the Aiken's damage from storm surge, paying them policy limits of $250,000 - less than half the home's value.

A day after McNamara contacted Rimkus in March 2006, the engineering firm sent USAA a "supplemental report" that listed construction components most likely damaged by wind, including gutters, the roof, siding and trim. The supplemental findings also said a storm surge of 20 feet above ground, excluding waves, destroyed building super- structures.

Bad Faith Claims Handling: The New Norm for Big Insurance

Folks we got sold a pig in the poke with tort reform as our legislators just give them crooks in Gucci suits a bigger club to hit the common man right in the head. That's right boys and girls, insurance companies will deny legitimate claims knowing most folks won't fight 'em but occasionally people do like this Tow Truck outfit. So pop some pop corn, pull up a chair and see if Pink Pigs Fly. This video is dedicated to this Cowboy's favorite corporate insurance lawyer in Portland Oregon, Mr. David Rossmiller.









Like this story says and Sop can personally vouch, there is no dollar amount too low for these crooks to try and screw you. And don't you know that corporate insurance lawyers love making big fat fees fightin' for a year over $3000. If you want to be paid fair like, be prepared to sue!

Crooks in Gucci Suits? You Betcha. Put the Screws to the Customer

Insurance companies and their scallywag lawyer enablers like Ronnie Musgrove and Greg Copeland have no problem screwin' the common man for a fee. Folks, this Cowboy won't sell you a Pig in the Poke and neither will Anderson Cooper with CNN. Ole Anderson details first hand the underhanded tactics these crooks in fancy Gucci suits use to take advantage of old folks and the general public. Pull up a chair and take a look how the bad hands people treat accident victims.

Let the Lawsuits Fly: Good Hands in Boxing Gloves

We are diligently working rumors of a shareholder suit being filed against Allstate over the ramifications of their claims practices for investors. If the rumors hold another significant legal front has opened against this embattled insurance giant.

Allstate is not sitting still though obtaining a stay against the Florida Department of Insurance Regulation's ban of the company announced last week:

Appeals Court Blocks Allstate Order

Friday January 18, 5:18 pm ET
By Brent Kallestad, Associated Press Writer

Court: Allstate Can Keep Selling Insurance Pending Appeal


TALLAHASSEE, Fla. (AP) -- A court Friday allowed Allstate Corp. to keep selling insurance in Florida while the company appeals an order barring it from writing new policies.

State regulators told Allstate on Thursday to stop writing policies for what officials said was a failure to comply with a state subpoena in a dispute over the premiums the company charges for homeowners insurance in Florida.

The 1st District Court of Appeal stayed the order from the Office of Insurance Regulation pending the appeal, although it gave the office 10 days to show why the company shouldn't be allowed to sell insurance in the meantime.

"This allows our more than 1,100 agents and their employees across the state to continue to do business in Florida, to create jobs and to serve their communities," said Allstate spokesman Adam Shores. "We're going to continue to work with OIR to provide the information they've requested in their subpoena."

Ed Domansky, a spokesman for the Office of Insurance Regulation, said the state has 10 days to file its response but would probably file sooner.

"This is just another step in the process that enables Allstate to further delay production of the documents we requested," Insurance Commissioner Kevin McCarty said Friday. "I will do everything within my authority as Florida's insurance commissioner to ensure that the suspension remains in effect."

McCarty has demanded information about why the company hasn't dropped rates to the satisfaction of insurance regulators following last year's passing of a bill meant to lower premiums. As part of that investigation, McCarty subpoenaed the company and officials at OIR said this week that the company appeared to be stalling and not giving up documents state investigators wanted.

The suspension had applied to all types of insurance sold by Allstate's 10 insurance companies doing business in the state, but does not affect existing policy owners.

Benefits of Doubt

Until this week, I thought Ground Zero was as low as you could go; but, I underestimated the power of Hurricane Katrina.


Sop's "Sunday Bonus" was intended as our collective "pass" on extending the scope of this blog to include the legal storm that hit the Scruggs Katrina Group. In fact, by the time we were up and running, the wind of that storm had broken the group apart and the Scruggs firm was "roof surfing" in the surge of an indictment.


The great lesson of Katrina, however, has been the benefits of doubt - so much so that the only certainty at times has been the storm. If it weren't for doubt about claims handling, there would have been no justice for all who lost their homes to Hurricane Katrina.


The benefits of doubt balance the scales of justice. Too many are weighing the claims related to the indictment of Scruggs without benefit of doubt - and, guilt or innocence aside, injustice is the result.


Thus, I open the scales of justice here for discussion and welcome all who want to weigh in and provide the benefit of doubt.

A day away from insurance

Today seems like a good day to step back from our quest for justice and highlight the many volunteers and the positive impact they've made here on the Gulf Coast.

sop

Aiken v USAA Casualty Insurance Company Day 4: Expert Cross Examination

The trial continues as does the Sun Herald coverage. My own opinion based on the following story is that despite vigorous questioning from Mr. Copeland, the basic facts as introduced into evidence remain unchanged.

USAA trial testimony continues

Engineer: Tornado destroyed house
By PAM FIRMINpfirmin@sunherald.com

GULFPORT --Hours before Hurricane Katrina's storm surge arrived, the Henderson Point home of David and Marilyn Aiken had been hit by a tornado and was long gone, forensic engineer Charles Ivy told the court Thursday morning.

He agreed reluctantly under questioning by Greg Copeland, attorney for USAA Casualty Insurance Co., that the surge would have been enough to destroy the house if the house were still there.

The report Ivy prepared to back up his findings went under the microscope with intensive questioning by Copeland, who lost patience with the witnesses' often rambling responses and complained to U. S. District Judge L.T. Senter Jr., "He is not responding in any way."

"Repeat the question," Senter instructed.

The Aikens, represented by George W. Healy IV, are suing USAA and Rimkus Consulting Group Inc., which was employed by USAA, for conspiring to defraud them. They seek full payment of their $680,000 homeowner-insurance policy with USAA, which paid them $178,000.

Earlier testimony came from Rimkus engineers. One inspected the Aikens' property and the other later made changes to that report without communicating with its author, which is against the company's policy.

Rimkus attorney David Ward read verbatim from Ivy's pretrial statement that he got data for his report from a preliminary storm model, and questioned Ivy's reasons for not updating it when better data became available as time went on.

Healy's next witnesses were to be Rimkus employee Paul Coleman and USAA employee David Rummel.

Breaking News: Florida Expands Suspension of Allstate

This Cowboy hopes some folks up Jackson way are taking notes.

Florida Expands Suspension of AllstateThursday

January 17, 4:07 pm ET
By Brent Kallestad, Associated Press Writer

Florida Suspends Allstate From Writing All Sorts of New Policies in the State

TALLAHASSEE, Fla. (AP) -- A day after telling Allstate Corp. to stop writing new car insurance policies in Florida, state regulators told the company to stop writing any new business in the state -- including home insurance.

Insurance Commissioner Kevin McCarty had initially planned to clamp down on just the company's auto business and its four companies doing business in Florida. But he expanded the suspension Thursday to include Allstate's 10 companies nationally and all of its insurance lines.

McCarty abruptly ended a scheduled two-day meeting Tuesday after just two hours, angered that Allstate officials failed to fully comply with a subpoena seeking information on property coverage rates.

"We're in the business of protecting homes, protecting automobiles and that's what we want to do because that's the role we play in this economy, in this marketplace," Allstate spokesman Adam Shores said Thursday. "And we want to continue to do that."

The suspended companies are Allstate Floridian Insurance Co., Allstate Indemnity, Allstate Property & Casualty Insurance Co., Allstate Insurance Co., Allstate Fire and Casualty Insurance Co., Encompass Insurance Co. of America, Encompass Indemnity Co., Encompass Floridian Insurance Co. and Encompass Floridian Indemnity Co.

Gov. Charlie Crist applauded the expended supension, which will last until the state gets the materials it demanded with the subpoena.

"I don't know why you'd want to keep 'em," said Crist, a longtime antagonist of many insurance companies he believes have gouged Floridians since the hurricanes that struck the state in 2004 and 2005. "I don't know why you'd want to pay them money for anything."

Allstate shares fell $1.35, or 2.7 percent, to $49.58 in late trading Thursday amid a broad market pullback.

Aiken V USAA Casualty Insurance Company Day 3: The Experts

In our first post on the trial, testimony revealed Rimkus Engineering supervisor James Jordan altered the onsite engineer's report on the Aiken site favorably towards Rimkus client USAA without consulting the onsite engineer, Roverta Chapa in direct violation of Rimkus procedure. The following Sun Herald story recounts the testiomony of two plaintiff experts, a metorologist and structural engineer who both introduced evidence supporting the conclusions of Rimkus onsite engineer Roverta Chapa who also found strong evidence of wind damage to the property:

Experts assert pre-surge tornado damage

Testimony in trial against insurer USAA

By PAM FIRMINmailto:FIRMINpfirmin@sunherald.com

GULFPORT --Testifying as expert witnesses, a meteorologist and a forensic engineer Wednesday afternoon described why tornadic force rather than storm surge was most likely responsible for the Katrina destruction of David and Marilyn Aiken's home in Henderson Point.

A lawsuit filed by the Aikens seeks damages and full payment of their $680,000 insurance policy with USAA Casualty Insurance Co., which paid them $178,000 in structural and contents damage. The suit claims USAA and Rimkus Consulting Group Inc., which was employed by USAA, conspired to to defraud them. Earlier testimony revolved around whether changes to a property report by structural engineer James W. Jordan were made to downplay wind damage so USAA would owe less money.

On Wednesday, Day 3 of the trial projected to last several weeks, presiding U.S. District Judge L.T. Senter Jr. frequently tried to move proceedings along, one time telling attorneys who haggled over details of intricate meteorological documents that it was "not necessary to go over every bit of the document" and later that "everybody's tired of hearing his jabbering back and forth."

Documents were provided by meteorologist Charles Barrere of Norman, Oka., formerly of the New Orleans area, who said they showed a tornado being tracked by the National Weather Service in New Orleans around 3 a.m. Aug. 29 most likely passed directly over the Aikens' house hours before the waters rose. The eight jurors were able to look at these on monitors in front of their seats.

Dr. Charles Ivy, a forensic engineer from Florida, said it was significant that 90 percent of the nails on surviving beams at the Aiken property were bent in a direction from north to south and that four sturdy frames still standing were "whipped toward the west, leaning toward the direction the water came from. If water caused the destruction, they would have been leaning toward the east."

Court begins today with cross examination of Ivy by USAA attorney Greg Copeland and Rimkus attorney David Ward.

Breaking news: Another Massive Reinsurance Failure

Well folks, the crooks in Gucci suits have outdone themselves this time. Out of the blue here comes another ENRON type scam and business failure

Reinsurers with MBIA ties to record Q4 charges
Wed Jan 16, 2008 8:43pm EST

By Lilla Zuill

NEW YORK, Jan 16 (Reuters) - Bermuda reinsurers RenaissanceRe Holdings Ltd (RNR.N: Quote, Profile, Research) and PartnerRe Ltd (PRE.N: Quote, Profile, Research) said on Wednesday they will write off 3-year-old investments in Channel Re, a reinsurer formed solely to do business with MBIA Inc (MBI.N: Quote, Profile, Research), the world's largest bond insurer.

The announcement comes after Channel Re notified the companies that fourth-quarter losses stemming from its business with MBIA are expected to exceed its shareholders equity.

RenRe said its investment in Channel Re carried a value of $126.7 million at the end of September. PartnerRe said it would take a $74 million fourth-quarter charge, equal to about $1.31 per share, to write down its investment.

Reinsurers effectively insure other insurers, spreading the risk of losses among more than one party.

Channel Re expects $200 million in credit impairments from a $3.3 billion mark-to-market charge at MBIA, according to Partner Re's statement.

David Lilly, an outside spokesman for RenRe, declined to comment further on the Channel Re development. PartnerRe could not immediately be reached for comment.

Rising defaults in mortgage-related bonds have threatened to wipe out a significant amount of capital for bond insurers such as MBIA, putting ratings under threat of downgrade.

Last month MBIA took steps to shore up capital, securing up to $1 billion from private equity firm Warburg Pincus, and last week sold $1 billion of surplus notes.

Investors appear to still have doubts; MBIA shares fell 16.5 percent to $13.40 on Wednesday.

OFFSHORE PROTECTION

Channel Re was jointly formed in Bermuda in 2004 by MBIA, RenRe, PartnerRe and Koch Financial to do business exclusively with MBIA, which held a 17 percent stake. RenaissanceRe was the largest owner with about 33 percent, Koch owned roughly 30 percent and Partner Re, 20 percent.

Channel Re had a triple-A rating, with a stable outlook, from McGraw-Hill Co's (MHP.N: Quote, Profile, Research) rating firm Standard & Poor's.

Bermuda, an offshore reinsurance center, is home to more than 1,500 insurers and about half a dozen bond reinsurers, including another that counted MBIA as a large customer, Ram Reinsurance Holdings (RAMR.O: Quote, Profile, Research).

Separately, RenaissanceRe said it will also take a $55 million charge in the fourth quarter to increase its incurred, but not realized, reserves for subprime-related exposures in its casualty clash reinsurance business.

RenRe said it expects to post a profit in the fourth quarter and for the full year despite the charges. It is due to report quarterly earnings on Feb. 5.

Florida Insurance Commissioner Suspends Allstate Insurance Co.

Here is the text of the press release just issued by the Florida Office of Insurance Regulation.


Wednesday, January 16, 2008

TALLAHASSEE, Fla. - Florida Insurance Commissioner Kevin McCarty today announced that he is suspending the certificate of authority of Allstate Companies to write new insurance in Florida until they fully comply with the subpoenas served Oct. 16 by the Office of Insurance Regulation (Office).

Today's decision by the commissioner follows Tuesday's action when he abruptly halted the scheduled two-day hearing into the Allstate Companies’ reinsurance program, their relationships with risk modeling companies, insurance rating organizations and insurance trade associations.
"In view of Allstate's ongoing, blatant disregard of our subpoenas, I have little choice but to take an action that will send a clear message about how seriously I am taking this issue," said Commissioner McCarty. "Suspending their certificate of authority to write new business in our state should make my point.

"If Allstate is willing to pay $25,000 per day in fines to a Missouri court for its ongoing failure to provide similar documents, it's obvious to me that it will take more than a monetary sanction to get them to comply with our subpoenas."

Allstate was to have provided all appropriate company documents related to the above topics at or before Tuesday’s hearing, but failed to do so. Instead, the Office received 51 pages of objections to the subpoenas.

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

Existing policyholders will not be affected. Allstate must continue to service them and the companies must make all required statutory filings including, but not limited to, audited annual financial statements, quarterly financial statements and rate filings.

"The duration of the suspension is up to them," added McCarty. "It will be lifted when I am satisfied that we have received each and every document we need to properly investigate the important issues before us.

"It continues to trouble me that Allstate has not complied with our subpoenas and is not willing to explain to us their relationships with rating agencies, modeling companies and trade groups and how these relationships might have influenced the huge rate increases they have requested. This clearly cannot be in the best interests of Florida consumers."

This is the first time the Office has suspended a company for failure to "freely" provide documents as required by Florida law.

A copy of the subpoena is available to review.

Allstate Floridian Indemnity and Allstate Floridian Insurance Company have requested rate increases of 28.3 percent and 41.9 percent respectively. Encompass Floridian Indemnity requested a 38.4 percent increase, and Encompass Floridian Insurance Company requested a 39.7 percent increase.

About the Florida Office of Insurance RegulationThe Florida Office of Insurance Regulation (Office) has primary responsibility for regulation, compliance and enforcement of statutes related to the business of insurance and the monitoring of industry markets. Business units within the Office are organized based on regulatory expertise and include the areas of life and health, property and casualty, specialty lines and other regulated insurance entities. It is within the Office that the mission of public protection is implemented through regulatory oversight of insurance company solvency, policy forms and rates, market conduct performance and new company entrants to the Florida market.

Allstate facing Florida Sanctions: "The Dance is Over"

Well folks, here in Mississippi our politicians kowtow to crooks in Gucci suits and let State Farm pull out of the homeowners market yet continue their lucrative business lines in Auto Insurance. The difference in Florida is huge as the GOP leadership down there must not be on the insurance payroll. In fact them boys actually put the interest of the people ahead of the big campaign contributions big insurance gives it's faithful waterboys. For Allstate today is the day of reckoning over Tallahassee way and the betting money is them crooks are gonna be shown the door, just like we should have done State Farm after they pulled out of the homeowners market. (Edited by Sop - This problem with our politicians transcends political party here in Mississippi.)

State insurance regulators cut short a two-day public hearing when Allstate executives failed to provide detailed answers to their inquires and failed to produce all subpoenaed documents.

BY BEATRICE E. GARCIA
bgarcia@MiamiHerald.com

TALLAHASSEE --

There was some sizzle, but Florida insurance regulators cut short a two-day public grilling of Allstate company officials when they failed to provide specific documents and answers.


Frustration was high for the regulators since Allstate Floridian and several sister companies had three months to comply with subpoenas for documents and prepare for Tuesday's hearing.

''To say we have come with a contrite heart and say some day in the future we'll negotiate simply isn't satisfactory,'' said Insurance Commissioner Kevin McCarty, who called off the hearing after just two hours.

McCarty noted the insurer did have time to file a 51-page objection to the subpoena issued by the Office of Insurance Regulation.

Steve Parton, OIR's general counsel, said Allstate's objection asserted that most of the 59 areas where the agency sought documents and information were considered trade secrets by the company and thus couldn't be turned over to regulators.

During the hearing, George Grawe, Allstate Floridian's general counsel, complained repeatedly that OIR's subpoena was ``breathtakingingly broad.''

McCarty said many of the documents provided by Allstate already were public because they had been included in rate filings.

Gov. Charlie Crist, who has made lowering insurance rates one of his mantras in the past year, was taken aback by Allstate's behavior at the hearing.

''I find it stunningly arrogant and I can't believe they would actually do that and if there's anything we can do from the governor's office that can help . . . we stand at the ready to do,'' Crist said.

Regulators and lawmakers have been eager to question Allstate because they want to know why the company failed to comply with a new insurance law passed last year.

That bill expanded the Florida Hurricane Catastrophe Fund to give insurers access to cheaper back-up insurance, even though the state would be shouldering big losses if another massive hurricane hits the state. Then, insurance companies were to apply the savings to lower rates.

Allstate initially indicated it would drop rates. But last fall, the company filed for a massive rate hike averaging nearly 42 percent.

''This dance is over,'' said State Sen. Jeff Atwater, R-North Palm Beach, who sat through the hearing Tuesday morning and was clearly disturbed by Allstate's refusal to provide detailed answers to just about every question posed by OIR.

Both McCarty and Atwater asked if Allstate's intent was to limit the scope of OIR's investigation by selectively producing documents and the witnesses it brought to the hearing.

During Tuesday's hearing, Grawe pointed out that Allstate provided OIR with 30,000 pages of documentation so far and would continue turning over documents. But neither Grawe nor the two other company officials and its outside attorney would answer questions from the OIR panel on how Allstate decided which documents to turn over and which ones to withhold.

''Consumers are going to get relief and they will also get justice,'' Atwater added. The senator will be chairing a joint Senate committee that will also investigate why many insurers haven't complied with the new law and lower their rates.

Tuesday's unprecedented inquiry was meant to examine Allstate's reinsurance program and how it deals with agencies that rate its financial strength and the companies that have developed sophisticated computer models to help gauge exposure to future losses.

Though the OIR hearing was postponed for now, the heat on Allstate -- and the industry -- hasn't been turned off.

McCarty said he will call Allstate back to testify -- and hopefully get more information.

But given Allstate's track record in Florida and other states, he wasn't too optimistic. That leaves the insurance commissioner to consider what remedies OIR can take to compel Allstate to meet the state statute. One possibility: fines of $10,000 a day until the company delivers the documents and information the OIR is seeking. The ultimate sanction would be to revoke Allstate's license to sell insurance in Florida.

OIR also is holding a news conference Wednesday morning to discuss an important property insurance issue. No other details were released.

The joint Senate committee, meanwhile, issued a list with its first witnesses for hearings on Feb. 4 and 5: Nationwide Insurance, Hartford Insurance, American Strategic Insurance, Florida Farm Bureau -- and Allstate.

Rep. Dan Gelber, D-Miami Beach, called for hearings in the Florida House as well.

''I am also extremely concerned that the clock will run out on any savings because the enhanced reinsurance capacity of the CAT fund will soon expire,'' said Gelber, noting that the expansion of the state CAT fund was set up for one year.

Breaking News: Allstate Stonewalls Florida Insurance Regulators (Updated)

What a day folks and now we have breaking news. Allstate has been less than forthcoming with insurance regulators and them boys are hoppin' mad over Tallahassee way. First the AP news story and a copy of the subpeona Allstate saw fit to ignore.

Fla. Regulators Cut Off Allstate HearingTuesday
January 15, 4:45 pm ET
By Brent Kallestad, Associated Press Writer

Florida: Frustrated at Allstate, Regulators Shorten Insurance Hearing

TALLAHASSEE, Fla. (AP) -- Florida insurance regulators angrily and abruptly ended a hearing with Allstate executives Tuesday, upset that the company and its attorneys failed to fully comply with a subpoena demanding information on property coverage rates.

The hearing was scheduled to last two days but state officials cut it short after just two hours during which company officials and lawyers were badgered by regulators about why they hadn't supplied all the documents the state wants, and whether they are following a new law meant to lower premiums.

Insurance Commissioner Kevin McCarty said he planned to bring the Illinois-based insurance giant back later this year when it has answers to the state's questions.

McCarty said the company faces severe sanctions, including the possibility of losing its license to operate its four Florida companies if it fails to comply again.

"We will take appropriate enforcement actions," McCarty said. "Their certificates are certainly under review."

Allstate's response to some requests as "irrelevant" was "a slap in the face to the regulatory agency," McCarty said.

Allstate's legal team and company executives, who were under oath, largely avoided questions about whether it has complied with a Florida law passed last year to give consumers premium relief. That infuriated McCarty.

"What have you got to hide?" McCarty asked as the hearing opened.

Regulators were looking for information on Allstate's relationships with insurance rating and risk monitoring companies and insurance trade associations.

The panel focused on a new hurricane model that Allstate began using to calculate its rates after Florida lawmakers passed new insurance legislation in January 2007. Under the new model, rates went up, although the company said that wasn't its intent. That model wasn't approved by the state.

At one point before taking a 10-minute break halfway through the testy testimony, McCarty laughed aloud at the response to one of the committee's questions.

"Clearly they're frustrated with the situation," Allstate spokesman Adam Shores said. "And we're frustrated too. We want to have an open and active dialogue to work this thing out."

Allstate Floridian Indemnity and Allstate Florida Insurance Co. have requested rate increases of 28.3 percent and 41.9 percent respectively. Encompass Floridian Indemnity requested a 38.4 percent increase, and Encompass Floridian Insurance Company requested a 39.7 percent increase

While Allstate told McCarty it planned to drop its request for double-digit rate increases, that did little to assuage him or Sen. Jeff Atwater, R-North Palm Beach. Atwater is chairman of a newly created Senate panel investigating why so few companies have complied with the insurance law.

Atwater wasted little time inviting five insurance executives, including Joseph Richardson, Allstate Floridian Indemnity's chief executive officer, to testify under oath at a Senate hearing Feb. 4-5.

House Democrats also want in the act.

Rep. Dan Gelber, the Democratic leader from Miami Beach, asked Rep. Ron Reagan, R-Bradenton, to schedule hearings and put insurance executives under oath to find out what's causing the delays.

"The Florida House should not foster the perception that we are a 'safe house' for insurers," Gelber wrote in his letter to the House insurance committee chair. "We have done very little to prove otherwise."

Update: the Florida Office of Insurance Regulation has scheduled a news conference for tomorrow morning. Rumors are swirlin' that Allstate will be kicked out of the State!

Follow the Money Part II: Putting the Screws to the Common Man

Folks this Cowboy saw this in today's Sun Herald and would like to give a big tip of my 10 gallon hat to Anita Lee over Sun Herald way. Our work raising insurance awareness would not be possible without the bang up job done by Ms. Lee covering these issues and this Cowboy would like to thank Ms. Lee for her dedication to this issue. Notice who represents USAA. It's none other than our boy Greg Copeland who has his fingers in every insurance pie here in Mississippi.

Today we see her story on the Aiken lawsuit against USAA and once again the hos at Rimkus and their proclivity to change on site work sight unseen is on display. Don't worry folks them boys are telling us all these changed engineering reports are just an honest mistake.....and if you believe that I got some gold spray painted Pig Scat I wanna sell you for $400/ounce. The story in it's entirety:


Structural engineer testifies in USAA trial

By ANITA LEE
SUN HERALD

GULFPORT --A structural engineer admitted he changed a report that detailed Hurricane Katrina damage to a homeowner’s property, but told a jury he did so for accuracy and clarity rather than to downplay wind damage so USAA Casualty Insurance Co. would owe less money.


Structural engineer James W. Jordan reviewed several changes he made to the report completed by engineer Roverta Chapa, who actually inspected the property at Henderson Point on the Bay of St. Louis in Harrison County. Chapa and Jordan did not communicate before Jordan made the changes, which was against policy established by Jordan’s employer, Rimkus Consulting Group Inc.

Policyholders David W. and Marilyn M. Aiken claim Rimkus and USAA conspired to defraud them. They want their insurance claim paid in full, plus extra damages to punish the companies. Their lawsuit will resume this morning with testimony from Chapa.

Rimkus and USAA claim the Aikens are seeking more money than they deserve because federal flood insurance paid them policy limits for tidal surge damage, while USAA offered a check to cover what the wind could have destroyed. USAA and other insurance companies exclude such flood damage from coverage, which has led to hundreds of disputes between policyholders and insurers. However, this is the first case with claims of fraudulent engineering reports to reach trial in federal court.


The Aikens maintain a tornado destroyed their vacation home before 25 feet of water inundated the property.

USAA attorney Greg Copeland told the jury during opening arguments that the Aikens simply wanted to maximize their payments for Katrina damage. Their flood coverage totalled $278,000. USAA paid $178,205 in structural and contents damage on a policy that provided more than $680,000 in coverage.

But the Aikens’ attorney, George W. Healy IV, told the jury that evidence would show the companies “intentionally and with forethought came up with a plan to deny legitimate claims.”


Rimkus attorney David Ward said testimony will show the Aikens hired their own engineer because David Aiken accompanied the Rimkus engineer on his inspection and knew the engineer thought water had caused most of the damage. Ward told the jury they would hear firsthand about communications between Rimkus and USAA, so they should not believe Healy. “You can be the judge of the facts,” he said, “not the allegations.”

Follow the Money Pardners to The Fox in the Henhouse

Now this Cowboy has known for a long time that the insurance industry was in charge of the Mississippi Insurance Department, especially when George Dale was in charge and layin' down with them crooks. Now they is becoming more brazen as one of them hired guns has sashayed out of hiding to do the bidding of his master USAA Insurance Company. His name is Greg Copeland and when he ain't hepin' his pay master to keep people homeless or lobbyin' against the little man for his pay master at big insurance or representing George Dale in court he is is eating at the public trough over at the Mississippi Windpool. Ole Greg sure does get around folks.

Take a look at the windpool website and see if you can tell who runs it? Them boys sure must not be proud of their work up there or else they'd tell us who was on the Board of Directors and such beyond, "The MWUA is administered by a Board of Directors and all rules and regulations are subject to the review of the Commissioner of Insurance. The Board of Directors consists of eight members, five (5) to be representatives of the member companies and three (3) representatives of agencies from the coast area appointed by the Commissioner of Insurance."

This Cowboy is reminded of the cockroach theory (tip of the 10 gallon hat to Sop for that one) when it comes to that bunch at the windpool. Nothing but bad news and ohhh dawgie do they hide from the sunshine. This Cowboy wonders how much wind pool premium went to things like lavish travel and commish for Greg and the gang? Like Sop pointed out to me after he looked at their financial statement for 2006 that these folks must not have an annual audit. Even worse is the fact that almost 22% of the premiums collected from us good folk in the 6 coastal counties went to commissions in 2006. It don't take no financial expert to smell the stink on Crane Ridge Drive in Jackson. That smell is so bad this Cowboy can smell it all the way down here on the coast and it stinks worse than pig shit mixed with dead fish!

So this Cowboy is gonna give the folks reading us a two-fer Tuesday as Mr. Copeland and his band of greedy corporate lawyers who make money keeping folks homeless deserves two posts. I also challenge the good folks reading us in New York, Jackson and Washington to follow their nose to the stink this Cowboy describes.

Sunday Bonus Post: Excellent Scruggs Coverage

We have been debating internally whether to cover certain aspects of the ongoing Dickie Scruggs saga as it relates to the insurance litigation here on the coast. To this point we haven't necessarily had the opportunity, as Mr. Scruggs withdrawal from the old Scruggs Katrina Group occurred before our effort here commenced.

Keeping up with those events in detail is imperative however, due to the huge ramifications for current litigants, especially those using the re-formed law venture once fronted by Mr. Scruggs, the Katrina Litigation Group.

Events in the ongoing federal investigation are now moving forward quickly with the confirmation that Mr. Joey Langston has plead guilty and agreed to cooperate with federal prosecutors. Those keeping a closer watch already knew this bit of information well in advance due to the hard work and dedication of Lotus and her excellent group of knowledgeable Mississippi based commenters at the Folo blog.

For those interested in Scruggs mania and ongoing development in what could ultimately develop into one of the biggest cases of judicial and political corruption seen in this Nation's history (I sincerely do not believe I am overstating that). I highly recommend pulling up a chair at Lotus' cyber table and pouring yourself a cup of joe. Warning: The posts and commentary there is highly addictive.

sop

Saturday Two for the Price of One: Consumer Federation Report Blasts Insurance Industry Practices

The Consumer Federation of America released it's 2007 study of industry profits along with it's analysis of the reasons behind the numbers. Those of us on the Mississippi Coast can readily identify with the conclusions of the study, conducted by former Texas Insurance Commissioner Robert Hunter. This document is well worth reading and I highly recommend it for those wondering why the 2004 tort reform promise of cheaper insurance after passage has largely never materialized.

"State and national consumer organizations joined the Consumer Federation of America (CFA) today to release a new study concluding that the property/casualty insurance industry continued in 2007 to systematically overcharge consumers and reduce the value of home and automobile insurance policies, leading to profits, reserves, and surplus that are at or near record levels. The study estimates that insurer overcharges over the last four years amount to an average of $870 per household.

The report provides extensive data demonstrating that property/casualty insurance companies are paying out lower claims in relationship to the premiums they charge consumers than at any time in decades. The pure loss ratio, the actual amount of each premium dollar insurers pay back to policyholders in benefits, was only 54.6 cents in 2007. Over the past 20 years, the amount paid back as benefits has dramatically declined from over 70 cents per premium dollar, indicating a huge loss in the value of insurance to consumers.

“Consumers ultimately pay the price for the unjustified profits, padded reserves, and excessive capitalization that exist right now in the insurance industry,” said J. Robert Hunter, the Director of Insurance for the Consumer Federation of America (CFA) and author of the study. Hunter is an actuary, former state insurance commissioner, and former federal insurance administrator.

“The insurance industry reaped record profits in 2004 and 2005, despite significant hurricane activity,” said Hunter. “Profits in 2006 rose to unprecedented heights and 2007 may set a fourth consecutive profit record,” he said. “Unfortunately, a major reason why insurers have reported record-high profits and low losses in recent years is that they have been methodically overcharging consumers, cutting back on coverage, underpaying claims, and getting taxpayers topick up some of the tab for risks the insurers should cover,” said Hunter.


In the last several years, insurers sharply increased premiums for homeowners and commercial insurance and reduced or eliminated coverage for tens of thousands of Americans in coastal areas. Insurers have succeeded in convincing Congress to continue taxpayer subsidies for terrorism losses and are seeking additional subsidies for catastrophe insurance"

Insurance Commissioner to Open Office in Gulfport

I found this Sun Herald article interesting and refreshing. Mr. Chaney is opening an office in Gulfport which is a great move. I would urge the windpool to locate closer to it's customers as well.

New commish aims at wind-pool rates
Chaney will open Coast office
By ANITA LEEcalee@sunherald.com

Commercial and residential policyholders in South Mississippi could see a decrease this year in state wind-pool rates, plus policyholders will for the first time have a state insurance office on the Coast.

Mississippi Insurance Commissioner Mike Chaney said between meetings Friday he's busy but tired after two weeks in office.

"It's a lot of work," Chaney said. "I think the people in the department are dedicated to the people that pay the policy premiums. It's been a learning curve for me... I'm going to do my best."

He said the job has already proven to him "how staggering a responsibility I've got to the people of Mississippi."

Chaney said Friday he is working with state legislators, who convened their 2008 session Tuesday, and state wind-pool officials to lower wind-pool rates that increased 90 percent for homeowners and 162 percent for businesses after Hurricane Katrina. Chaney said it is too early to discuss details, but he has met with the Coast legislative delegation and is talking to other lawmakers about insurance needs in South Mississippi.

Chaney said his top priority is to stabilize the property and casualty market so insurance is available and affordable. Working to improve the wind pool, insurer of last resort for South Mississippi, also will help stabilize the insurance market statewide, he said.

He said lawmakers from other parts of the state are getting the message that South Mississippi needs stability in its insurance market for economic recovery from Katrina's devastation.

The Republican commissioner defeated Democratic challenger Gary Anderson in the November election, after Anderson ousted longtime Commissioner George Dale in the party primary.

Chaney also plans to open a Coast insurance office, tentatively Friday. The office will be at 1701 24th Avenue, across from the Gulfport courthouse. Chaney said he is opening the office full time, primarily as a service to consumers who have questions or complaints about insurance.

Chaney said he also will lend support to a state policyholders' bill of rights, with some revision, and is encouraging U.S. Senate candidates to support a multiple-peril insurance bill co-sponsored by U.S. Rep. Gene Taylor. The bill would add wind coverage to the federal flood insurance program, but would require rates be set at levels appropriate for the risks insured.