Insurance Issues Forum

New Orleans Ladder

2010-05-02T12:00:00.000-05:00

Connect to the Insurance Issues Forum as "slabbed"

2008-03-17T11:11:00.004-05:00

http://slabbed.wordpress.com/

We're moving to wordpress

2008-03-07T20:36:00.003-06:00

Blogger has been good to us but we've decided wordpress better meets our needs. We're becoming a more comprehensive site and will cover insurance plus other recovery issues from ground zero.

Please join us on slabbed.

http://slabbed.wordpress.com/

sop

Roger Wicker's Maiden Senate Speech

2008-03-07T07:58:00.002-06:00

The Sun Herald has consistently reported he would make Hurricane Katrina recovery the major part of his speech and they were true to their words. Perhaps Congressman Taylor now has a true champion for the multi peril concept in the Senate. Without further analysis here is the insurance exerpt of Senator Wicker's maiden Senate speech:

Much has been done, but there is much left to do.

Chairman Donald Powell, the Federal Coordinator for the Office of Gulf Coast rebuilding, acknowledged these challenges last week when he announced he was stepping down. He said it would be "some time before the area recovered."

I say this to my colleagues in the United States Senate: Katrina is not over. There are tall hurdles still to overcome. There is more the United States Congress must do.

The most urgent issue facing the Mississippi Gulf Coast is insurance. If you can't insure it, you can't build it or finance it. The rising cost of insurance cripples the efforts of small businesses, increases the cost of home-ownership, and drives rental rates beyond affordability.
This is not just an issue for Mississippi. From Bar Harbor, Maine to Brownsville, Texas, millions of Americans live near the coastline, in the path of a future hurricane. For many years, insurance companies have refused to offer insurance protection for water damage caused by hurricanes; this led to the creation of the National Flood Insurance Program. After Katrina, the most important question for a homeowner or a small businessman was "wind or water?"

Wind versus water. That is the debate which still occurs today in courtrooms on the Mississippi Gulf Coast between insurance companies and storm victims.

This debate is what necessitated the multi-billion dollar supplemental appropriations package this body approved after Katrina, and unless Congress changes the law, the wind versus water debate will result in a multi-billion dollar supplemental appropriations package after the next big hurricane - wherever it may land.

Even worse, since Katrina, it is also common practice for insurance companies to not offer wind insurance at a rate that is even close to affordable. This is driving more and more homeowners and business owners into a state-sponsored wind pool, which acts as an insurer of last resort. But this is not a reasonable long-term solution, because too much risk is being placed in a too small of a pool.

The best solution available is to allow homeowners to purchase wind and flood insurance coverage in the same policy.

This will not only help the storm victims so they can know their hurricane damage will be covered; it also will protect the United States taxpayer. The American people are the most generous in the world, and their elected representatives will continue to respond to natural disasters, whether it is a hurricane on the East Coast or an earthquake in California, with supplemental disaster appropriations packages. But the size of these packages will be smaller if more people have insurance.

As a member of the House, I voted for Congressman Gene Taylor's multi-peril insurance legislation when it passed last September. I am committed to achieving the same success here in the Senate.

Breaking: Several Insurers Dropped from Whistleblower Suit

2008-03-05T19:34:00.004-06:00

It's mono y mono now. The Rigsby sisters against State Farm.

Three insurance companies dropped from whistle-blower suit

By ANITA LEE calee@sunherald.com

Ocean Springs whistle-blowers are dropping three major insurance companies from a lawsuit filed over Katrina claims handling, choosing to focus on State Farm insurance companies as they press for damages under the federal False Claims Act.

Attorneys for the whistle-blowers Cori and Kerri Rigsby, who are sisters, expect a federal judge to approve the request that Allstate, Nationwide and USAA be dismissed from the lawsuit.

"We wanted to focus our case and make it as detailed as possible against State Farm," said Anthony DeWitt, a Missouri attorney who specializes in False Claims Act cases. Such cases allow employees who uncover fraud against the government to file lawsuits.

The government is given the opportunity to press the claim. In this case the U.S. Attorneys Office for the Southern District of Mississippi has so far decided against intervening, leaving the sisters to pursue the case. They would be entitled to up to 30 percent of any damages assessed if fraud is proven.

The Rigsbys claim State Farm used biased vendors to blame Katrina damage on tidal surge covered by federal flood insurance in order to avoid paying claims for wind damage. State Farm has denied the allegations, saying the company covered Katrina damage owed under its policies.

Along with State Farm, the Rigsbys are suing seven engineering firms that assessed damage for the insurance company, a State Farm claims manager and the couple who employed the sisters as claims adjusters.

Famed attorney Dickie Scruggs filed the lawsuit on the sisters' behalf, but is no longer active in the case because he faces unrelated charges involving bribery of a state court judge. DeWitt said he expects that Scruggs will at some point officially withdraw, as he did from lawsuits being pursued on behalf of Coast policyholders.

The Rigsbys worked on State Farm claims under a contract between the insurance company and their employer, Alabama adjusting firm E.A. Renfroe. Renfroe is suing them in Alabama, claiming they breached their contract to keep State Farm records confidential.

A judge in the case issued an injunction in December 2006 that required the Rigsbys to return State Farm records they took while adjusting claims, from September 2005 until they downloaded thousands of State Farm computer records in June 2006. DeWitt said the Rigsbys will seek permission from the Alabama court to use those records in their lawsuit.

"If the facts don't fit the theory, change the facts"

2008-03-01T22:38:00.016-06:00

Einstein got that right – so did the acclaimed journalist Walter Lippman who said the news and the truth are not the same thing.

Lippman believed many people, including journalist, make judgments by condensing ideas into symbols that are stored in the brain and released when triggered. When journalists take this shortcut, it is their opinion, not fact, that influences public opinion.

Once triggered, these shortcuts to judgment are a cognitive map governing the processing of new information – denying some and inventing other.

Here, 'cognition' can be used to refer to the mental models, or belief systems, that people use to perceive, contextualize, simplify, and make sense of otherwise complex problems. Put more simply, cognitive maps are a method we use to structure and store spatial knowledge, allowing the “mind’s eye” to visualize images in order to reduce cognitive load, and enhance recall and learning of information.

Hurricane Katrina created a host of complex problems that triggered an explosion of mental maps – many stemming from the handling of insurance claims.

In many cases, public opinion on the new and complex problems of post-Katrina Mississippi was shaped with little or none of the discernment, analysis, and evaluation needed to form a solid judgment that reconciles scientific evidence with common sense – critical thinking.

Critical thinkers gather information from all senses, verbal and/or written expressions, reflection, observation, experience and reasoning. Critical thinking has its basis in intellectual criteria that go beyond subject-matter divisions and which include: clarity, credibility, accuracy, precision, relevance, depth, breadth, logic, significance, and fairness.

No where has the absence of critical thinking been more noticeable than in the rush to judgment over the intended meaning of facts contained in the various legal documents related to the federal indictment of five including attorney Dickie Scruggs and the public indictment of others such as Attorney General Jim Hood – bringing to mind the everyday application of Einstein’s wisdom – if facts and theory conflict, ignore the facts and keep the theory.

All would do well to remember this simple rhyme from one of Rudyard Kippling’s Just So stories – The Elephant’s Child – else they, too, may be seeking something they’ve already seen and denied:

I keep six honest serving-men
(They taught me all I knew);
Their names are What and Why and When
And How and Where and Who.

UPDATE:
Today’s Clarion Ledger contains a related guest opinion column, Tendency to Oversimplify Scruggs Case. Marc Harold, senior counsel and visiting professor at the National Center for Justice and the Rule of Law at the University of Mississippi School of Law, noted In certain cases, media outlets have exaggerated the impact pretrial motions may have on the outcome of the trial itself…

...the media almost inevitably attempt to simplify the events or stages of the trial process. This is not a negative, in and of itself. One of the major goals of any type of news reporting is to distill information into a digestible format for a broad audience… In most interviews, the "expert" is asked to put the legal or procedural issues "in simple terms… While explaining the law in lay terms can certainly be helpful in informing an interested general audience, oversimplifying what is not simple can act to misinform rather than educate…

The motions are often based on complex legal theories; in other words, like in math, sometimes giving the answer without "showing your work" is of little value.
Finally, and perhaps most damaging, is our desire to predict. Admittedly, this can be fun, and everyone likes to ultimately be proven correct...

In most of the interviews the legal "expert" is asked to speculate on the strategy of the prosecution or the defense. Attorneys should always be hesitant to engage in this type of speculation. Again, as in other facets of news coverage, it can, when undertaken irresponsibly, act to misinform rather than educate as the line between speculation and fact can become blurred…

Exactly Lippman’s point and ours as well– the news and the truth are not the same thing.A journalist’s version of the truth is subjective and limited to how he constructs his reality. The news, therefore, is “imperfectly recorded” and too fragile to bear the charge as “an organ of direct democracy.”

Gene Taylor Issues + Answers Lecture

2008-03-01T08:19:00.009-06:00

Gene Taylor's issue + answers lecture at USM Gulf Park was a well attended event. Besides Congressman Taylor, Senatorial hopeful Ronnie Musgrove, State Senator David Baria and Insurance Commissioner Mike Chaney were in attendance. While I organize my thoughts and before I give my personal impressions, I'll post the Sun Herald story along with the actions of our fellow blogger and friend Steve, aka Topbanana, who shouted down an insurance agent that heckled Congressman Taylor. The agent in question was forcibly removed from the premises by campus security while Steve received a round of applause from the crowd for shutting the guy up.

This news story contains a factual inaccuracy, HR 3121 does not repeal the McCarran Ferguson anti trust exemption. sop

Taylor asks residents to act

Wants support for multi-peril coverage

By MICHAEL A. BELL

Continuing his fierce pursuit of federal multi-peril insurance, U.S. Rep. Gene Taylor on Friday urged South Mississippians to flood senators with e-mails, letters and phone calls in support of a bill that would allow property owners to purchase both wind and flood insurance under one policy.

"We're all in this together," he told hundreds at the University of Southern Mississippi's Gulf Coast Campus.

Taylor's lecture, "The Insurance Crisis: A Case for Multi-Peril Coverage," was part of the Issues + Answers series sponsored by the school and the Sun Herald.

The U.S. House has approved multi-peril insurance. But the legislation faces heavy opposition in the Senate.

"We need our senators to champion this issue," said Taylor, who's trying to convince senators to support the addition of wind coverage to the National Flood Insurance Program.

Taylor argued insurance agents who probed the post-Katrina wreckage blamed the damage on wind. "I think the taxpayers got hosed on that," he said. "Insurance is killing us."

He said the private insurance industry made nearly $50 billion the year Katrina hit, then nearly $70 billion in 2006.

But people stuck in FEMA trailers - "42,000 little cubicles of love," he quipped - continue to grapple with recovery.

"A lot of people are hesitant to rebuild," he said. "And that's not a good thing for our country."

He argued his bill would provide peace of mind to residents that they won't have to prove wind or water caused property damage.

"You don't have that lingering feeling that 'maybe I ought to stay behind with a video camera and have some evidence'," he said.

He added his bill would no longer exempt the insurance industry from anti-trust laws.

Former Gov. Ronnie Musgrove and current Insurance Commissioner Mike Chaney attended Taylor's presentation.

Taylor's 60-minute speech was followed by a standing ovation and a Q&A session.

One woman asked how much Taylor's policy would cost if it were approved by the Senate.

"The answer is, 'We don't know,'" Taylor said, adding the coverage would be optional. "But it's got to pay for itself."

Kenneth Trawick, 76, of Gulfport called the insurance industry a "runaway group of thieves" and thanked the congressman.

Breaking: Scruggs Contempt Case in Alabama Dismissed

2008-02-29T15:47:00.005-06:00

David Rossmiller has broke this story on his blog. Thanks to Bellesouth for the pdf of the order and heads up.

sop

Update:

I have read the order for dismissal and await a lawyer's analysis but to me it boils down to what was very apparent from reading Judge Acker's original order; the law enforcement exception contained therein is absolute and was met as demonstrated by the facts of the case. Also Judge Vinson found Judge Acker's order was poorly written:

There is some ambiguity in the wording of the order because if the first paragraph was complied with (and the documents were given to counsel for Renfroe), then as Judge Acker himself acknowledged at the March 2007 contempt hearing [see Doc. 130 at 187-88], the second paragraph would be superfluous (i.e., the Rigsbys could not further disclose, use or is appropriate materials no longer in their possession). The special prosecutors attempt to resolve this ambiguity by arguing that the second paragraph meant only that the Rigsbys “could cooperate with law enforcement by discussing with law enforcement what they knew about the documents.” See Doc. 11 at 5. This contention overlooks the nature of the object of the injunction. The second paragraph by its own terms applied to “any material described” in the first paragraph, which plainly consisted of the tangible documents themselves. Any attempt to limit the second paragraph to “mental impressions” or “recollections” must fail.....

And finally the heart of the matter:

However, the fact remains that Scruggs did not violate the clear and express terms of the injunction. Again, as then-Judge (now Justice) Stephen Breyer has observed, courts must read injunctions "to mean rather precisely what they say."

The injunction specifically and precisely said the documents could be given "to law enforcement officials at their request." Regardless of the subjective intent that Hood may have had when he requested the documents, the undisputed fact is that he did make such a request. The objective language of the injunction expressly authorized the law enforcement exception, and it must be recognized here. Criminal contempt under such circumstances cannot be supported under the law.

While Judge Vinson did cast a wary eye on the arrangement between Mr Scruggs and Mr Hood the bottom line was that issue was ancillary to the points of law. I wonder if Marsha Thompson at WLBT will now rehash the Rigsby sister's sex lives in an attempt to save face.

This issue has been resolved and not the way the self proclaimed cyber experts predicted. At the risk of appearing snotty such things happen to the closed and weak minds.

Our best wishes and regards go out to the Rigsby sisters for their strength in the face of this assault on their characters and reputations.

sop

"You furnish the pictures and I'll furnish the war."

2008-02-28T15:00:00.012-06:00

Humanity is governed by minorities, seldom or never by majorities. It suppresses its feelings and its beliefs and follows the handful that makes the most noise. Sometimes the noisy handful is right, sometimes wrong, but no matter, the crowd follows it.

Oddly enough, Mark Twain's quote comes from The Mysterious Stranger- in the world of blogs and message boards, mysterious strangers are the norm. Here, for example, I am known as Promise; but,by any name, am a modern day muckraker.

I still believe most do; but, I am no longer so green that I can’t spot a Yellow Kid or recognize comments made by those that reflect the British English application of the word to sensationalist scandal-mongering journalist, not driven by any social principles.

Allegations and indictments have, as Cowboy would say, slabbed the integrity of our State’s legal system. Grief is a natural response, and anger is a natural part of the grieving process. Scandal-mongering, however naturally it may come to some, is not anger – it’s the sensationalized stories or outright lying that caused Joseph Pulitzer and William Randolph Hearst, two icons of American journalism, to be known as the two Yellow Kids.

Pulitzer and Hearst are often credited (or blamed) for drawing the nation into the Spanish-American War…eventually resulting in…the most famous example of the exaggeration…a version of which appears in the Hearst-inspired film Citizen Kane - the apocryphal story that artist Frederic Remington telegrammed Hearst to tell him all was quiet in Cuba and There will be no war. Hearst responded Please remain.You furnish the pictures and I'll furnish the war.

So - Who’s furnishing the pictures of Attorney General Hood and who’s furnishing the war on his integrity?

It would be less than honest not to acknowledge Hood himself is submitting a few snapshots – I didn't care who (Scruggs) supported. I wasn't crazy about being attorney general anyway.. – and equally dishonest not to consider the possibility Twain suggested - Often the surest way to convey misinformation is to tell the strict truth.

Yesterday’s edition of the Clarion Ledger generated a total of 160 reader comments from a front page story and three separate blog posts related to the allegation that indicted attorney Dickie Scruggs attempted to influence Hood.

Blogs started developing that picture on the 25th - that Jim Hood story was sitting there in Pacer at 7-8 PM or thereabouts. I started downloading stuff about then, and just didn’t get around to it till midnight.The first post was up early on the 26th and Holy S--t Balducci, State Farm, Jim Hood, Scruggs – all together in one paragraph appeared shortly therafter.

During the day related posts and news stories were linked to those already posted online.

Holy Cow! Do you see what this says? It says that Scruggs paid Balducci and Patterson half a million dollars to get Hood to back off the State Farm grand jury investigation. ..Seems to me that whole business needs to be explored some more, don't you think? If this is true, doesn't it qualify as some sort of improper influence of a public official?

By the evening of the 26th another picture was developing on the blogs – one chiding the old media are 24 hours behind the blogs…Actually, I’m going to frame this question more aggressively…What’s with the pros? – and, on the morning of the 27th, it was ready to print.

As you might expect, that $500,000 that Tim Balducci claims Dickie Scruggs (eventually, grudgingly) paid him and Steve Patterson to get Attorney General Jim Hood’s indictment of State Farm called off has made a splash in Mississippi’s largest newspapers this morning

On the 28th, the Yellow Kid went big time with a level of sensationalism that spread an outright lie coast to coast under the banner of none other than Legal News Line. Had it not been for my all time favorite blog post title - Why Legal News Line is fit only for the bottoms of virtual birdcages – the Yellow Kid’s nose would be longer than Pinocchio’s by now for claiming An FBI report released this week supported the headline Hood allegedly offered bribe from Scruggs.

The modest attempt to set the record straight - Editor’s note: The following story is a corrected version of an earlier article that contained many inaccuracies – fell far short of any measure of retraction. Shortly after daylight today, Legal News Line was back to the bottom of virtual birdcages - Too bad you didn’t notify The Google, LNL. I hope this helps them sue your ass for libel.

Attributing an outright lie to an FBI report can only be called an amazing act of hubris – far stronger evidence than documented in the defense Motion to Change Venue:

the print media blitz has been supplemented by Mississippi-based web logs (blogs) that report, in excruciating detail, every event in the prosecution and defense of the Scruggs criminal case; as well as their finding people piling on. Mr. Merkel. Mr. Tollison. The notion being at last he’s getting his comeuppance.

Judge Biggers called it one of the most thoroughly researched briefs I have ever seen; later adding, but it’s hard for me to believe there were no statements favorable to Dickie and denying the motion.

Considering the unanimous, accurate blog prediction of every ruling Judge Biggers made on the Defense Motions, Judge Biggers unquestioned integrity, and the assaults on Attorney General Hood, one can only wonder who’s providing the pictures and who’s providing the war - and where all these warriors are hidden.

The only thing proven thus far is attributed to Mark Twain:

Injurious truth has no merit over an injurious lie. Neither should ever be uttered. The man who speaks an injurious truth, lest his soul be not saved if he do otherwise, should reflect that that sort of a soul is not strictly worth saving.

Don’t Mess with Texas – or Connie Moran

2008-02-27T06:36:00.009-06:00

Big Insurance, meet Connie Moran – a Fulbright Scholar with a master’s degree in finance/economics and international commerce – the Mayor of Ocean Springs, Mississippi with all perils insurance on her mind.

Moran wants more than stories about businesses and residents having trouble rebuilding due to insurance costs, she want hard data. According to the Mississippi Press Register, she plans to provide that data to Congressman Gene Taylor.

A small town Mississippi mayor may not sound like a threat – unless you happen to have read about her accusing FEMA of “creating trailer trash” in the Seattle Times.

The mayor first gained national attention when she locked horns with FEMA, preferring the traditional and sustainable Katrina Cottages to the standard-issue mobile homes that “within 18 months create a trash-heap of trailers up for auction.”

She envisioned a neighborhood of "Katrina cottages" — tiny, yellow houses built in a Southern style, with sloped metal roofs and big front porches.

Ocean City has actually created “a planned village of 20 ‘Katrina cottages” about a mile from Ocean Springs’ downtown.”

You don’t mess with Texas or Connie Moran – if you don’t believe me, contact the Mississippi Department of Transportation and ask about that bridge they almost had to sell.

Cashing In On Catastrophe

2008-02-27T04:57:00.003-06:00

How the insurance industry is protecting their proftis, not policy holders, when natural disasters strike.

Full page add in WSJ (C5) for a program this Sunday, March 2 at 10pm EST.

Sounds interesting. I don't get CNBC (We are a basic cable kind of family), but maybe it will show up as a clip on the web.

Insurance Crooks at Marsh Convicted of Price Fixin'

2008-02-26T09:31:00.005-06:00

Hey pardners why don't we go help State Farm beat up on Jim Hood. Not!

Two ex-Marsh executives convicted of bid-rigging

NEW YORK (Reuters) - Two former executives at Marsh Inc, a unit of Marsh & McLennan Cos Inc (NYSE:MMC), were found guilty on a monopoly charge on Friday for participating in an insurance bid-rigging scheme, court officials said.

William Gilman, a former executive in Marsh Inc's Global Broking unit, and Edward J. McNenney, a former global placement director, were acquitted of all other charges they faced in the ruling handed down by New York State Supreme Court Judge James Yates.

The ruling was confirmed by clerks for the judge.

"All of the charges that were thrown out sort of gutted (the government's) case, in my view," said Stephen Neal, a lawyer for McNenney. "We are going to appeal the conviction on the anti-trust count vigorously."

"Bill Gilman was really the client's best friend and the insurance carrier's worst enemy," said Gilman's attorney, Robert Cleary. "We look at this as merely round one."

The case, first brought in September 2005 by the New York Attorney General's office, was part of a sweeping investigation of insurance industry practices.

"We are gratified that the court found the defendants guilty of felony bid rigging," Jeffrey Lerner, the spokesman for Attorney General Andrew Cuomo, said in a statement.

"Bid rigging is a serious offense which deprives customers of the benefits of a competitive marketplace and this office will continue to prosecute it vigorously."

Eight former Marsh executives, including Gilman and McNenney, were indicted in September 2005 and their 10-month bench trial was the first trial in the case.

At the time of the indictments, then-Attorney General Elliot Spitzer said that between November 1998 and September 2004, the defendants colluded with executives at ACE USA (NYSE:ACE), American International Group Inc (NYSE:AIG), Liberty International Insurance Co, Zurich American Insurance Co (VTX:ZURN.VX) and others to rig the market for excess casualty insurance.

Gilman and McNenney were acquitted of charges of scheming to defraud and 19 counts of grand larceny.

Marsh, a unit of the world's largest insurance broker, itself did not face criminal charges. The company agreed to pay $850 million in January 2005 to settle Spitzer's civil lawsuit accusing it of bid rigging.

Breaking: Federal Jury Finds 5 Former Insurance Executives Guilty in Financial Manipulation Scheme

2008-02-25T14:10:00.004-06:00

Not much time for analysis but here is the news story. sop

HARTFORD, Conn. (AP) -- Five former insurance company executives were found guilty Monday of a scheme to manipulate the financial statements of the world's largest insurance company.

The verdict came following a monthlong trial in federal court.

The defendants, four former executives of General Re Corp. and a former executive of insurance industry leader American International Group Inc., sat stone-faced as the verdict was read.

They were accused of inflating AIG's reserves through reinsurance deals by $500 million in 2000 and 2001 to artificially boost its stock price.

Reinsurance policies are backups purchased by insurance companies to completely or partly insure the risk they have assumed for their customers.

The defendants were former General Re CEO Ronald Ferguson; former General Re Senior Vice President Christopher P. Garand; former General Re Chief Financial Officer Elizabeth Monrad; and Robert Graham, a General Re senior vice president and assistant general counsel from about 1986 through October 2005.

Also charged was Christian Milton, AIG's vice president of reinsurance from about April 1982 until March 2005.

Ferguson, Monrad, Milton and Graham each face up to 230 years in prison and a fine of up to $46 million. Garand faces up to 160 years in prison and a fine of up to $29.5 million.

"This is a very sad day, not only for Ron Ferguson, but for our criminal justice system," Clifford Schoenberg, Ferguson's personal attorney, said in a statement distributed at U.S. District Court in Hartford. "I and the rest of Ron's legal team will not rest until we see him -- and justice -- vindicated."

Yo Allstate: Florida Isn't Amused OIR Moves to Ban Allstate

2008-02-24T10:11:00.007-06:00

Earlier this week there was some improtant developments involving Florida's battle with Allstate. As we have repeatedly noted in our continuing coverage of Allstate there is a pattern of behavior exhibited by this insurance giant of ignoring lawful subpoenas and court orders. Worse according to the Florida Office of Insurance Regulation complaint:

Encompass Floridian Insurance Company’s chief executive officer knowingly made and filed a false certification.....

This charge involves a certification on the rate filing that the CEO of the operating company has reviewed the entire application. When sworn under oath the CEO of Allstate's Florida subsidiary admitted he signed the document only reviwing the execuitive summary and thus was unable to answer detailed questions by the Florida Senate committee.

To put this into context this was the type of defense by ignorance used by Ken Lay at Enron (the three wise monkeys). It resulted in CEO's and CFO's being required by Sarbanes-Oxley to affirmatively certify their companies financial information submitted to the Securities and Exchange Commission. Here is a link to Thomas Wilson certifing the last quarterly corporate financial statement and in the process doing what the CEO of his Florida subsidiary did not do, reading and certifing that an important document is accurate and complete. I now wonder if those internal controls Mr. Wilson swore were working on October 30, 2007 really are in light of the FLOIR Complaint. After all a good system of internal controls include those which insure compliance with applicable laws and regulations.

In any event here is the press release from Commissioner McCarty's office for our readers to consider. Events in Florida are heating up and as pointed out elsewhere by Mr CLS could directly tie into the shareholder derivative suit styled Fojas v. Ackerman.

Florida Insurance Commissioner Kevin McCarty today announced that the Office of Insurance Regulation (Office) has filed an administrative complaint on a non-emergency basis seeking to suspend the certificates of authority of the Allstate Companies (Allstate) to write new insurance policies in Florida.

The complaint is based in part on Allstate's failure to provide witnesses and documents as subpoenaed by the Office; falsely labeling subpoenaed documents as trade secret and falsely certifying its rate filings.

"Seeking to suspend a company's license is not something we take lightly," said General Counsel Steve Parton. "However, in light of their defiance of the Florida Insurance Code, we think it is necessary to make the point that actions such as we have seen by Allstate will not be tolerated."

Allstate was to have provided all appropriate company documents related to the Office's investigation at or before the Jan. 15 hearing. Instead, in late November, Allstate filed 51 pages of objections to the subpoenas. Allstate has been delivering documents to the Office since the Jan. 15 hearing, but has not delivered all documents requested by the subpoenas and is maintaining claims of privilege to some of the documents.

The Office has been asking for documents about Allstate's reinsurance program, its relationships with risk modeling companies, insurance rating organizations and insurance trade associations. The subpoenas also required appropriate witnesses to appear at the January hearing to be able to discuss issues that were subjects of the subpoenas.

The complaint also alleges that Allstate has violated Florida law by not properly certifying its rate filings as required by House Bill 1A, which passed in January 2007.

Filing the complaint is required under Florida law as part of the process that began when Commissioner McCarty issued the Immediate Final Order (IFO) Jan. 17, suspending Allstate from writing any new business in Florida. Allstate is expected to request an administrative hearing on the Office’s complaint. If requested, a hearing would be held at the Division of Administrative Hearings (DOAH).

An administrative law judge will hear the evidence and then make findings of fact. Commissioner McCarty could then issue a Final Order, which may include a suspension of Allstate's certificates of authority. Allstate could then appeal to the First District Court of Appeal.

The DOAH hearing is separate from the ongoing matter that Allstate initiated in the First District Court of Appeal (DCA) by filing its Jan. 17 notice of appeal of the commissioner’s IFO. That matter is still proceeding in the DCA.

The Allstate suspension was the first time the Office had suspended a company for failure to "freely" provide documents as required by Florida law.

The Order would apply to all Allstate companies on which the subpoenas were served:

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.
Encompass Floridian Indemnity Co. A copy of the subpoena is available
to review.

sop

Florida Again Dominates the Insurance Battle

2008-02-24T09:37:00.010-06:00

There were two big announcements out of Florida this week, one involving Allstate and one involving State Farm. I'll tackle State Farm first since it is more complex and the most disingenuous.

Some background is in order for State Farm. When Florida created a state market for cheaper reinsurance it also mandated premium reductions for those who took advantage of the program. Two major insurers filed for rate increases after buying the state reinsurance, Allstate and State Farm. When Insurance Commissioner McCarty ordered rate hearings for the increases (rate hearings in Florida involve public sworn testimony including revealing the basis for the rate increases) State Farm backed down and instead reduced their homeowner premiums in accordance with the law. As is their custom in states where they do not get their way including here in Mississippi when we dared to litigate against them they announced they will no longer write new homeowner policies in Florida. I like Beatrice Garcia's reports on insurance news from Florida so today I've linked the Miami Herald story on this development.

In a move certain to deepen Florida's insurance crisis, State Farm Florida plans to stop writing new homeowners policies throughout the state starting Saturday.

The state's largest private insurer of homes also won't offer new renters or commercial policies in order to reduce its exposure to hurricane risk in Florida.

State Farm's current policyholders won't be affected by the move. The company will continue to renew the one million homeowners and renters policies it has in Florida.

The insurer also will continue to write new auto insurance in Florida, a far more lucrative line of insurance than property coverage. It insures more than two million vehicles.

State Farm will cease writing new homeowners policies just days before lawmakers return to Tallahassee to wrestle once again with proposals to make insurance coverage more affordable and available.

However unlike Mississippi which kowtows before these large insurance companies Florida's Office of Insurance Regulation has some arrows left in it's quiver. Contrast the Florida approach as outlined yesterday and my comment to yesterday's post of Mississippi's of letting insurers dump off coast consumers in the state wind pool:

Ed Domansky, an OIR spokesman, said that as a courtesy State Farm Florida told regulators of its plan to stop writing new homeowners policies. While OIR regulates insurance company activities in Florida, it has no authority to block State Farm's move.

Domansky said Insurance Commissioner Kevin McCarty was disappointed by State Farm's decision.

Both McCarty and OIR General Counsel Steve Parton will see if State Farm will be in compliance with a new law that requires companies to sell homeowners coverage in Florida if they sell other lines here and sell homeowners insurance elsewhere in the country.

Sen. Steve Geller, a Democrat from Cooper City, said he believes State Farm will stay within the bounds of the new law because the company will be renewing existing property insurance policies.

State Farm is trying to curtail its risk if a massive storm hits, particularly in densely populated areas such as South Florida and the Tampa-St. Petersburg area. But Geller wonders if State Farm's action could also be driven by another motive.

State Farm and Allstate are aggressive backers of a bill introduced in the Florida House of Representatives last week that would create a statewide windstorm program to write hurricane coverage throughout the state, not just along the coast.

Under that proposal, insurers could decide to write policies without hurricane coverage or still sell traditional multi-peril policies. These policies wouldn't be subject to surcharges to make up any deficits in the state-run Citizens Property Insurance, the state's largest insurer of homes and condos.

State Farm's new move ''could be a threat to get more favorable consideration'' of this bill, Geller said.

The bill faces resistance. Sen. Bill Posey, R-Rockledge and chairman of the Senate Banking and Insurance Committee, sees the bill as an "insurance industry relief bill. That's why it's a non-starter with me."

Isn't it strange that the insurance company PR departments and trade groups denounce the NFIP as a taxpayer subsidy (it is and was intended as one when it was enacted in 1969) yet expect the taxpayers to bail them out every time they hit a bump in the road? Senator Posey has it exactly right in my opinion and I hope the Florida legislature does not let these insurance companies offload their least desired risk exposures on the taxpayers while continuing to profit handsomely from other lines of business.

sop

Insurance News You Can Use

2008-02-23T07:27:00.007-06:00

Welp folks this Cowboy don't know what to make of ole Chaney. One day he campaign promisin' to make the insurance commissioner appointed then after he wins he says he wasn't going to fight for that in the legislature since it was just his personal opinion. A couple weeks back he says rates is goin' up and now he says rates is goin' down. Maybe one of the others can make sense of this Sun Herald story for me.

Insurance Commissioner Mike Chaney told members of the Biloxi Businessmen's Club on Thursday he hopes to lower residential rates in the state wind pool by at least 10 percent.

Chaney said he would like to see a decrease of up to 40 percent in rates for the coverage offered by South Mississippi's wind insurance company of last resort, but doesn't know if that's possible. The wind pool is shopping for reinsurance, which would help cover its losses in case of a disaster. Chaney will be transferring $40 million to the pool between now and July to help pay for the coverage.

With reinsurance rates going down, the hope is wind pool rates also can be lowered.

Wind pool rates increased 90 percent for homeowners in October 2006 because of Hurricane Katrina. On the Coast, insurance companies also stopped offering new customers homeowner insurance that included wind coverage and in some cases cancelled policies at renewal time.

Chaney said the Coast is probably one of the "most profitable markets" for insurance companies that offer policies without wind coverage because the risk of ice storms and tornadoes, which their policies do cover, is relatively low.

A day earlier, Chaney had announced Aegis Security Insurance Co. would resume offering new policies in Mississippi, but it turns out the company will offer wind coverage only as far south as George, Stone and Pearl River counties.

In other news the leader of the Diamondhead Slingshot Group has finally settled out with them crooks at State Farm. It only took 30 months and bringin' in a lawyer to get them Gucci suit wearin' crooks to experience a come to Jesus moment and honor their obligations. Havin' to fight your insurance company tooth and nail is the new fangled way of doin' business. Besides them executives and their yearly bonuses the other folks I see benefitin' from the current system is the lawyers. Here is the Anita Lee story:

A Diamondhead homeowner who rallied policyholders to fight for payment of their Katrina claims has settled her lawsuit with State Farm Fire and Casualty Co.

Notice of the settlement was filed Friday in U.S. District Court in Gulfport. Terms were undisclosed.

Kenneth and Judy Dutruch sued State Farm in June 2007. They accused the company of breaching its contract to cover Katrina damage to the couple's vacation home and sought punitive damages for denial of their claim.

Judy Dutruch has told the Sun Herald in previous interviews State Farm refused to consider evidence of wind damage to the couple's South Diamondhead home off the Bay of St. Louis. State Farm sent experts to examine the property only after the Merlin Law Group filed the lawsuit on the Dutruchs' behalf.

Experts hired by the Dutruchs, including a forensic arborist, concluded their home suffered extensive wind damage - covered under their State Farm policy. State Farm concluded storm surge, excluded from coverage, destroyed the home.

As a result of widespread denials by State Farm and other major insurance companies, Judy Dutruch formed the Slingshot Gang in Diamondhead to unite waterfront homeowners. They pooled money to pay for expert reports, shared information and provided moral support to one another.

Many members of the group have settled their claims, but the Slingshots agreed not to disband until all claims were resolved.

As part of the settlement, both sides agreed not to disclose the terms. In fact, they could say little more than they were "pleased."

Judy Dutruch added, "We are certainly glad that it is all over and we can now start thinking about future plans of rebuilding."

A State Farm spokesman said, "We're pleased to have resolved our differences with Mrs. Dutruch."

Commissioner Chaney Scores!

2008-02-21T15:01:00.004-06:00

Newly elected Insurance Commissioner Mike Chaney announced Aegis Security Insurance Company will begin writing new policies in Mississippi.

We welcome the good news, Commissioner Chaney - and look forward to more.

Breaking: Allstate Fined $250,000, Ordered to Reinstate Policies

2008-02-21T11:57:00.003-06:00

Thanks to Mr CLS for the heads up to this Times Picayune story.

BATON ROUGE -- Insurance Commissioner Jim Donelon fined Allstate $250,000 Wednesday and ordered the state's second-largest insurer to reinstate the wind and hail coverage of several hundred customers whose policies were dropped in disregard of a key consumer-protection law.

It is the only fine that Louisiana has levied against a homeowners insurance company since Hurricane Katrina, and the fine is the maximum penalty allowed by state law.

"I'm doing that because of the continuing efforts of the company to circumvent the consumer
protections that have served us so well," Donelon said. "This statute is the law of Louisiana. It was the law of Louisiana when these policies were written, and it will be enforced."

Donelon said he has tangled with Allstate three times in the past year and a half over the company's efforts to circumvent a Louisiana consumer-protection law that makes it difficult for insurers to drop policyholders after three years, and he said he is tired of it.

In July 2006, Allstate announced plans to drop 30,000 customers in south Louisiana in a way that Donelon said would violate the three-year law, and it took five months of negotiations to get the company to take a different tack. In spring 2007, Allstate conducted cursory drive-by inspections of homes and tried to cancel hundreds of homes that it deemed "abandoned" that were actually under repair or occupied before the state Insurance Department intervened.

And most recently Allstate has been reclassifying some longtime customers as new ones so their wind and hail coverage could be dropped. Donelon said the ongoing problems with Allstate's practices led him to conclude that the company was flouting the law and needed to be penalized.

Allstate admits no wrongdoing. The suburban Chicago company said it disagrees with the Louisiana Insurance Department on its interpretation of insurance laws.

But Allstate, the sponsor of the Sugar Bowl, said in the consent agreement and stipulation signed Tuesday that it decided to settle the matter "in recognition of the catastrophic events of 2005, the continuing concern for its customers and as a gesture of goodwill."

In a news release Wednesday, Allstate said it agreed to pay the money "to avoid expenses associated with a hearing."

But Donelon said the $250,000 is indeed a fine. "In my view, absolutely," he said. "No one else has gotten close to the need for punitive action."

Cursory inspections done

Though the fine was triggered by Allstate's recent efforts to drop the wind and hail coverage of longtime customers who should be protected by state law, the fine technically was levied on the company as a result of a flawed property-inspection process that was supposed to determine whether homes were occupied or being rebuilt.

Last year Allstate dropped 4,772 customers after conducting drive-by inspections of 40,500 homes in the New Orleans area that averaged about a minute a home. Allstate said it dropped the policies because the inspections revealed that the homes were unoccupied or not being repaired. Within a few weeks, 588 people filed written complaints with the Insurance Department saying they were in fact living in the home or rebuilding.

The department ordered that Allstate temporarily reinstate all policies and redo the inspections, with documentation. How many of the 4,772 customers ultimately qualified to keep their reinstated insurance coverage is unknown, but 552 of the 588 people who complained were found to have been improperly terminated and were reinstated.

When the department forged an agreement with Allstate on the issue in March, Donelon reserved the right to impose sanctions. As the department began investigating a new round of complaints that began just a month later with Gretna homeowner Michael Scioneaux, Donelon decided he needed to do so.

Dropped after 31 years

Scioneaux had been insured by Allstate for 31 years at the same home and never made a claim outside of Hurricane Katrina, but he got a letter in April saying his wind and hail coverage would be dropped because he had been with the company for less than three years.

The letter made no sense because Louisiana has a law that says once a customer has been with an insurance company for three years, it's very difficult to drop them. Customers can be dropped only if they stop paying their bills, make excessive claims for non-"act of God" events such as hurricanes or tornadoes, commit fraud, or unless the company can prove to the Insurance Department that it risks going bankrupt if it keeps them.

But several years earlier, Scioneaux had taken advantage of a good-credit discount that Allstate offered. Unknown to Scioneaux, Allstate rewrote his policy from letterhead that said "Allstate Insurance Co." to stationery that said "Allstate Indemnity Co." to process the discount.

In the April 2007 letter, Allstate now said the May 2004 change meant that Scioneaux was a new customer whose wind and hail coverage would be dropped in June. Scioneaux said he was not informed of any such risks when he accepted the discount offer and that the shift amounted to a bait-and-switch for the company's benefit. Allstate has been under a corporate mandate to reduce its exposure in coastal areas.

Scioneaux was overjoyed at the news that his policy would be reinstated. "I just heard I won. I'm in a state of shock," he said Wednesday.

Since the summer, Scioneaux has been forced to buy his wind and hail coverage from Louisiana Citizens Property Insurance Corp. But because he was angry that Allstate cut the most important part of his policy, he moved to Louisiana Farm Bureau Mutual Insurance Co. for his fire, theft and liability coverage as payback, and cut Allstate out of the deal so it would be unable to earn easy premiums.

Even though Scioneaux says he has no love for Allstate, he said he plans to return to the company because it's a better deal than a split policy. "I'm really not in a position that I can pick and choose. I need to take the best coverage and the best price to protect me and my family and our biggest investment: our house," said Scioneaux, who is also personnel director for Jefferson Parish.

For now, Scioneaux plans to celebrate. His Allstate agent, a friend who also lost his wind and hail coverage, called and invited him out to dinner Friday night. Scioneaux also will be having a celebration lunch with two other dissatisfied Allstate customers whom he met during the course of complaining to the Insurance Department.

"We're comrades in a cause," he said. "I never thought I would feel so happy about being able to go back to a company where I'm going to have to pay an expensive policy."

Unknown number affected

About 21 people in Scioneaux's situation have complained to the Insurance Department, but it is not known how many customers of Allstate or Encompass, the brand of Allstate insurance sold by independent agents, were affected. Allstate's news release says "a few hundred" are in the group.

According to the terms of the agreement, Allstate must give the Insurance Department a list of people like Scioneaux who were dropped within seven days and send customers an offer to come back within 30 days. That offer will include wind and hail coverage, but it will carry a 5 percent storm deductible, as all Allstate policies have done since June. The company must "take all reasonable and necessary efforts to contact each customer directly," and within 90 days, it must give the Insurance Department a list of how many of those people opted to come back.

Not everybody was impressed with the settlement.

Bob Hunter, director of insurance for the Consumer Federation of America, said a $250,000 fine for a company that earned $4.6 billion in net income last year is negligible. "The fine, for Allstate, is chump change. It's a cost of doing business," he said.

Hunter, who is originally from New Orleans and who served as insurance commissioner in Texas in the early 1990s, said Louisiana needs to make sure Allstate doesn't pass on the cost of its fine to customers because the state doesn't have a law barring companies from throwing the cost of fines into rate filings.

Hello! Hello! Is this the party to whom I am speaking?

2008-02-20T11:50:00.005-06:00

Saturday Night Live became Tuesday morning reality when State Farm attorney, the “honorable” Shelia L. Birnbaum, hit the wrong button and sent the media an email asking if Attorney General Jim Hood could be charged with Contempt of Court.

I bet you did Shelia – the panic button – when Hood’s office replied, “No, you can’t!

The case was dismissed because the allegations were false, according to Hood’s spokeswoman, Jan Schaefer.

Living in a travel trailer for two-and-a-half years can make folks crazy; but, it doesn’t make them dumb. No one’s ever called Shelia Birnbaum dumb either – most say she’s smart as a fox.

After yesterday, there’s no reason to doubt they’re right. Birnbaum looked at the clarification Hood’s office sent to the media and noted the General was about to take his coat off - his message to the media meant he was tugging at his tie.

Cowboy, you better saddle up – I do believe the State Farm’s fox is about to find out what Hood had waiting in the henhouse.

Robin' Hood of Support

2008-02-20T11:03:00.006-06:00

Blogs are touted as the savior of democracy – a voice for the people, a place where our cherished freedom of speech enjoys the freedom of information.

…and, by the way, did I mention the bridge I’ve got for sale up in Brooklyn?

Blogs are in the information business – news you can use but news that can use you, too.

Last week blogs were big news. The defense team for the King of Torts, indicted Mississippi attorney Richard “Dickie” Scruggs, cited the unfavorable environment created by blogs in the Motion for Change of Venue.

The named blogs responded with a “moment of silence” and noticeable absence of some of his most vicious critics. However, it wasn’t long before they were back in business -feasting on Mississippi Attorney General Jim Hood with a side dish of Scruggs and the others for desert.

Hood is a state-wide elected official and his conduct is fair game for public conversation – but this game was anything but fair. Although he recently won reelection by a larger percentage of vote than any other candidate, few of his supporters comment on these blogs. Understandably so - take a look at the titles of these posts: AG Jim Hood Goes on Offense…and Fumbles the Ball; What's the Name for Hood Posts; and Hood Pours Gasoline, Strikes Match, and Sets Self on Fire.

I don’t know who picked up the tab for this feast but I know who paid the price – the people on the Coast – particularly those with State Farm claims unsettled. Banned from one blog and then another, and threatened by yet a third, robbed Hood of his strongest supporter and those who read these blogs of a balance view.

I came to offer Promise – for every voice to be heard. Meet bellesouth a fearless fighter for the people on the Coast – a diva of a defender with a sack full of rock solid fact and a spirited opinion up against a Goliath of critics who turned on her when they had nothing of substance to throw back.

(Note from Sop: To the extent this intersects with insurance we are allowing some Jim Hood discussion. We have begun the process of contacting the Office of the Mississippi Attorney General in hopes Mr Hood will comment to the extent he can on what his office is doing for us on these insurance issues. Given the pilloring he has taken, unfairly in certain respects in our opinions, we intend to provide a blog outlet that will simply allow him to present a differing point of view, just as we welcomed the Rimkus Engineer's viewpoints on our Aiken threads.)

Also a quick hello to Mr CLS and our thanks for reading us. - sop

Xavier University v. Travelers / Chehardy v. Allstate

2008-02-20T06:27:00.002-06:00

"The wise man listens to meaning; the fool only gets the noise."
Poet C. P. Cavafy

"Favor distilled thinking, by which I mean the thinking based on information that is around us that is stripped of meaningless but diverting clutter. For the difference between noise and information has an analog: that between journalism and history."
Nassim Nicholas Taleb in Fooled by Randomness

For whatever reason I was reminded of those quotes yesterday while reading the Jim Hood commentary in yesterday's Clarion Ledger, the Folo Blog and David Rossmiller's blog. Those that have actually read Taleb's books understand he harbors a general disdain for "journalists" though the main object of his sarcastic wit in "Fooled" is George Will who is a commentator, rather than a journalist. All in the blogosphere are guilty of being Talebesque noise makers including your authors here at the Insurance Issues Forum. The trick is distilling the commentary, which task all three sources of noise I listed above failed miserably yesterday in my opinion.

So while much of the local blogosphere goes off chasing the Jim Hood br'er rabbit, some fresh off their unsuccessful chase of Billy McCoy, we will stick to our knitting of providing analysis of the insurance news which impacts so many coastal residents across this nation.

I saw this news item in today's Sun Herald and thought it most worthy of mention, mainly because we will surprise some of our readers with our take. It deals with two court cases on appeal out of the New Orleans area related to Katrina and the Supreme Court shooting down the appeals of Xavier University.

The Supreme Court refused Tuesday to offer help to Hurricane Katrina victims who want their insurance companies to pay for flood damage to their homes and businesses.

The justices rejected appeals from Xavier University and 68 other individuals and businesses seeking to allow their lawsuits against the insurers to go forward.

Xavier asked the court to step in after the 5th U.S. Circuit Court of Appeals ruled the policies did not cover damage from floods, even those that resulted from man-made failures such as the collapsed levees in New Orleans.

Other cases working their way through state courts have so far reached differing conclusions. A Louisiana appeals court has said language excluding water damage from some insurance policies was ambiguous. The Louisiana Supreme Court will hear arguments in that case Feb. 26.

Xavier and the other plaintiffs had asked the federal court to allow the state Supreme Court to rule on their suits as well. The 5th Circuit refused and the U.S. high court upheld that ruling Tuesday.

While we are certainly sympathetic to the arguments of the dubious effect the Chamber of Commerce has exacted on our judiciary we agree with the Supreme Court's ruling. The Flood Exclusion found in all private insurance policies is not ambiguous and these suits succeeded only in muddying the waters for all insurance litigation, much of which are far better grounded in insurance law. These Louisiana cases are not wind versus water; rather all the parties seem to agree flooding was the cause of damage. In our minds the obligations of insurers stop when excluded events are the clear cause of damage as is the case in these suits.

Finally we welcome Bellesouth, a real life example of the firehouse syndrome at work in the blogosphere. To their credit the Clarion Ledger has not banned Belle simply because she has a differing viewpoint though I am fairly certain Sid Salter would love to strangle her. Belle is new to the blogosphere and comes equipped with some strong opinions. We hope she will find the environment here conducive to learning the ropes and finer points of effective blogging.

sop

State Farm Cancels 50,000 Florida Policies

2008-02-19T06:07:00.008-06:00

Here you go pardners, the private insurance industry doesn't want our coastal wind business and they don't want a federal solution 'cause it might cut into their profits from offshore reinsurance. So what do they do to keep the pressure on? They cancel you out like State Farm just did in Florida and New York. We got this from our friends in Florida at the Herald Tribune:

HURRICANE INSURANCE

State Farm dumps 50,000 statewide

Longtime State Farm customer John Spencer is not wanted any more.

He is getting dumped, one of 50,000 coastal Florida homeowners whose hurricane coverage will not be renewed by State Farm this year.

"It just irritates you that you get canceled, and it makes you nervous," said Spencer, whose policy on his Englewood home expires several weeks before the start of the 2008 hurricane season.

An estimated 7,500 customers in Sarasota, Manatee and Charlotte counties will be dropped by State Farm, Florida's largest private homeowners insurer.

Many will wind up with windstorm coverage at Citizens Property Insurance Corp., the state-run insurer that is one of the few options for insurance near the coast.

For some of them, there could be a silver lining.

State Farm is among the priciest insurers for coastal properties. Citizens, after rolling back one rate hike last year and freezing rates through 2008, could be a cheaper alternative.

Punta Gorda Isles homeowner Gerald Crowley expects to switch to Citizens when his State Farm policy expires in late March.

His premium will drop about $600 from the current $3,600. But he is still not happy about being dumped.

"It's the principle of the thing," he said. "I can afford what they wanted to charge."

Sarasota insurance agent Al Malins said some private companies are writing new policies along the coast and may accept customers from State Farm.

"People certainly have options," he said. "It pays to do some shopping around."

Norm Harte, also a Punta Gorda Isles homeowner, has been searching for new coverage since he got his cancellation notice last month.

"We've pursued Citizens and others, but the coverage they are offering is pretty awful," he said.

He may save a modest amount of money by going with Citizens, but it will come in part by reducing his insured value from $350,000 to $305,000 and eliminating such coverages as a pool cage.

Harte thinks the state should block insurers from "cherry picking," or getting rid of their riskiest customers.

"If State Farm or any insurance company doesn't want to do the whole game, pull their license and find somebody else to do it," he said.

Many property insurers have trimmed their Florida exposure since the 2004-2005 hurricane seasons, which caused $37 billion in insured damage.

Allstate, Nationwide, USAA and Tower Hill are among the major players that have pared down.

State Farm stopped writing new business in some coastal counties years ago, but this was the first time the company decided it needed to drop policies, said spokesman Chris Neal.

"We kind of managed it through attrition, but we came to the point where that just wasn't working for us anymore," he said.

The 50,000 nonrenewals represent about 5 percent of its 1 million homeowners policies in Florida.

State Farm began the policy cancellations last fall but was soon blocked by the Florida Office of Insurance Regulation. The original plan was to drop customers who lived within several miles of the coast or other bodies of water, while retaining any of those with other company policies, such as auto.

The insurance regulators objected to that practice. After reaching an agreement with OIR over who would be canceled -- along with promising a 9 percent rate cut -- State Farm began resending nonrenewal notices in January. That premium reduction followed an average 53 percent rate hike in 2006.

The company is now cutting all windstorm policyholders who live within one mile of the coast, regardless of any other coverage they have.

Those customers are getting at least 120 days of advance notice so they can find new coverage. Timing can be an issue -- some insurers, including Citizens, will not quote a new policy more than 30 days before it takes effect.

Pressure from the state to lower insurance rates is driving companies to reduce exposure, Neal said, as they balance their ability to pay claims when a hurricane hits.

"You've got two choices: raise rates or lessen your exposure," he said. "Our choice here was to lessen exposure. Being closer to the water presents the highest risk. By nonrenewing 50,000 homes closer to the water, it takes a significant amount of exposure away from the company."

Spencer, a State Farm customer in Florida and elsewhere for 30 years, hopes to find wind coverage from someone other than Citizens.

"They are just dumping us into the Citizens pool," he said. "It is not as good a coverage. If they are just dumping liability back to the government, why not just have government insurance?"

Malins said his agency tries to avoid putting customers into Citizens because they may later become "take-out" policies by other carriers.

Citizens was criticized for poor customer service after the 2004 hurricanes, but regulators and others say it has improved.

"You have to give them credit for trying to act more like an insurance company," Malins said.

Some homeowners with other State Farm lines, such as auto, are thinking about taking that business elsewhere.

Citizens does not offer auto insurance, and those homeowners could miss out on multi-line discounts they now enjoy.

State Farm, Florida's largest auto carrier, expects some of those customers will leave.

"It would be naive of us to think we won't lose some of our auto business because of the nonrenewals," Neal said.

A Price to Be Paid Boys.....

2008-02-17T22:09:00.006-06:00

Welp pardners, this Cowboy just saw something that made me laugh hard. Ole David Dugas is havin' hisself one heck of a hard time gettin' that promotion to federal judge 'cause he was soft on crime - insurance crime that is. There is a lesson in this for ole Dunn Lampton too. Look here from our friends over Times Picayune way:

Sen. David Vitter, R-La., angry that the nomination of Baton Rouge U.S. Attorney David Dugas to a federal judgeship is being held up by Sen. Mary Landrieu, D-La., tried to advance the nomination last week through a unanimous consent request on the Senate floor. He was rebuffed when Sen. Robert Menendez, D-N.J., objected. Vitter said he still hopes Landrieu will relent and allow a hearing on the nominee. "If there is a reason to stop the nomination, surely a hearing is the best venue and the best vehicle to illustrate that and talk about it," he said. Landrieu has said she has serious concerns about the nomination of Dugas because he failed, as U.S. attorney, to investigate allegations from insurance industry whistleblowers that companies had engaged in an intentional policy to deny valid wind claims after Hurricanes Katrina and Rita, in some cases passing along the liabilities to the government-subsidized Federal Flood Insurance Program.

Yippe Kia Yea Republican Big Business Bootlickers! Payback's a bitch.

Gene Taylor to Speak on Insurance Reform

2008-02-17T09:37:00.007-06:00

There has been an advertisement run in the print editions of the Sun Herald on Gene Taylor conducting an Issues + Answers lecture sponsored by the University of Southern Mississippi Gulf Park Campus on Friday, February 29, 2008 at the Advanced Education Center auditorium.

Thanks to one of our readers, I was emailed a link to the University press release and I am happy to pass it along to all so interested. Considering the other recipients listed in the address header I am honored Ida thought enough of this blog to pass me the good word.

I will be in attendance and hope we pack the house on the 29th.

sop

The Insurance Industry's GREAT ESCAPE

2008-02-15T15:43:00.002-06:00

NAIC President Questions Motives of OFC Supporters

KANSAS CITY, Mo. (Feb. 15, 2008) — Sandy Praeger, President of the National Association of Insurance Commissioners (NAIC) and Kansas Insurance Commissioner, in a letter yesterday, reiterated the strengths of state-based regulation and reasserted opposition to federal legislation that would establish an optional federal charter (OFC).

A few relevant parts of the letter:

…allowing insurers to pick their regulator threatens a regulatory “race-to-the-bottom.” This scheme would be especially dangerous in property/casualty insurance, where families and businesses faced with a storm, fire, illness or injury often rely on a hands-on regulator to make insurers keep their promises and to help rebuild quickly after an unforeseen disaster. The push for an OFC is, in reality, nothing more than a call for little or no regulation.

There are presently more than 11,000 individuals working in state insurance departments across this country who help to protect insurance consumers. It takes quite an imagination to assume the Treasury Department could assume even a partial role in regulating insurance without creating a huge bureaucracy. The plain and simple truth is optional federal chartering would create a new federal bureaucracy from scratch and allow insurance companies to “opt out” of comprehensive consumer protections and state oversight. Current proposals would gut consumer protection, while outsourcing most critical regulatory functions to an industry-run self-regulatory organization.

The Mississippi "R" Factor Part 2

2008-02-15T07:28:00.007-06:00

I've noticed that when solutions to this insurance mess are offered it is one political party that is doing the offering. Outside of a few Democrats like US Senator Christopher Dodd the Republican party is the overwhelming choice for discriminating big business and insurance political donors.

Such must certainly be the case here in Mississippi as we found this Clarion-Ledger story concerning Phil Bryant's State Senate Insurance Committee most disturbing. Lt. Governor's Bryant stated campaign goal of continuing the coastal rebuilding efforts certainly are taking a back seat to his service to monied insurance interests.

No Katrina-related insurance legislation will be taken up by the Senate Insurance Committee this year, chairman Sen. Eugene Clarke said Thursday.

Clarke, R-Hollandale, said he needed a year to get acclimated to leading the committee before passing any bills.

"I feel for people on the Gulf Coast, but we've got totally new leadership in both chambers," he said.

Clarke's decision has soured some Gulf Coast senators, though, who say nothing has been down two and a half years after Hurricane Katrina flattened the southern part of the state.

Sen. David Baria introduced seven pieces of insurance reform legislation this session, but he said Clarke told him Thursday they would all die in committee.

"It's upsetting because this is the primary reason I decided to run for the Legislature - to do something about insurance," said Baria, a freshman lawmaker who defeated Republican incumbent Sen. Scottie Cuevas in the November election.
"While I understand (Clarke) is new... we can't wait any longer to do something about this issue."

The two pieces of legislation the Bay St. Louis Democrat said he was most interested in seeing get to the floor included:
A bill to codify a premium payer's Bill of Rights and attach it to policies, as well as include plain-language exclusions and eliminate concurrent cost exclusions. He filed two versions of the bill and one would prohibit insurance companies from contributing to anyone running for commissioner of the Department of Insurance.

A bill that would offer apply a premium reduction in the private sector to those who build a "fortified" home - similar to regulations under the so-called Windpool.

Clarke said he was going to spend the "off season" studying up on the legislation.

"We want to take care of consumers," he said.

No offense to Senator Clark but if actually thinks anyone believes that load of dung he shoveled then I have some waterfront in the New Mexico I'd like to sell him.

The comments to the Clarion Ledger story tell that tale of Senator's Clark's continued study of an issue that is now almost 30 months old.

No offense to Sen. Clarke, but perhaps the Senate leadership should have asked him if he felt comfortable chairing a committee related to insurance issues BEFORE appointing him to chair the Senate Insurance Committee. I bet the beleagured folks on the Coast would have appreciated that. Why is it that after almost every article I read about our Legislature I find myself having to take deep breaths and rub my temples? I would hate to assume that he was placed there because he would be willing to block anything the insurance companies didn't want becoming law.

or this one

Thanks Mr. Clarke! The coast gets shafted because you need on the job training.

Senator Clarke is doing as he is told which is why I place the blame for this inaction on his boss Lt Governor Bryant. The Mississippi Democrat party appears in complete disarray so I doubt they capitalize on the insurance "R" factor to score political gain. I hope everyone that supported Mr. Bryant and Mr. Chaney last November and who now pay much higher insurance are taking notes.

sop

The Mississippi "R" Factor Part 1

2008-02-15T06:51:00.009-06:00

We have more insurance news out most of it involving the State of Mississippi. As I noted yesterday the contrast between Commissioner McCarty and the Republican Party in Florida and Commissioner Chaney and the Republican leadership in Mississippi is striking and very unfavorable to our leadership here. Today we are greeted with this news story in the Sun Herald on the Mississippi Windstorm Underwriting Association:

Residential policyholders have been shocked by significantly higher premiums in their wind-pool renewal notices.

Wind-pool board members approved policy changes, effective Oct. 1, that mean higher rates for the majority of policyholders who stick with a 2 percent hurricane deductible. A Sun Herald reader alerted the newspaper to the policy changes Thursday.

Wind-pool board member David A. Treutel Jr., who is from the Coast, said the change was in error. The board, he said, was trying to give the best wind discount possible while keeping options simple. He said the error was brought to the board's attention in January and members voted unanimously to correct it. A correction should apply retroactively to rates charged since Oct. 1.

"The direction from the board was to fix it," Treutel said. "That wasn't intended."

As of now, policyholders who used to have $1,000 or $2,500 deductibles for unnamed storms will feel a pinch unless they raise their named-storm deductibles. Even then, their rates might still increase even though their out-of-pocket expenses will be higher after a catastrophe.
Such was the case for Rex Chastain's family. Chastain had hoped for some insurance relief in 2008, but instead finds his family "insurance poor."

Hurricane Katrina forced the Chastains, along with thousands of other South Mississippi residents, into the state wind pool, where residential rates jumped 90 percent in 2006. The wind pool is the insurer of last resort for 36,000 South Mississippians, who must carry a separate private policy to cover fire, theft and liability.
The Chastains' total homeowner insurance bill jumped 147 percent. (Emphasis mine)

Homeowners insurance has been that dirty little secret buried in the howling wind insurance storm. Coastal consumers are routinely finding their wind excluded homeowners policy costs as much today as their wind included homeowners policies before Katrina. I have not heard of increased fire, theft or liability risk here on the coast since the storm. Curious.

We were also greeted with this story on David Baria and his attempts to pass some common sense legislation in the Mississippi Senate dealing with insurance.

Sen. David Baria has filed seven Hurricane Katrina-related insurance-reform bills, but on Tuesday legislators will finalize the list of measures that stay alive, and his are in danger of dying without a vote.

The first-term legislator, a Democrat from Bay St. Louis, attended the Senate insurance Committee meeting Thursday briefly to see if any of his bills were up for discussion, but was surprised when he found they were not.

Baria has filed a "Policyholder's Bill of Rights." The measure would put the burden of proof on the insurance companies when there is a dispute over whether a claim is covered in a policy. The House Insurance Committee approved a version of the bill Wednesday, allowing it to move forward.

Baria said it's surprising two of his Senate bills, which he considers minimal changes, haven't made it out of committee. Senate Bill 2432 would make it mandatory for insurers to attach a list of a policyholders' rights to each homeowner's policy. Senate Bill 2165 would help homeowners who use stronger construction methods get discounts on the rates they pay.

"To me, both of those bills should be no-brainers," Baria said.

Indeed we agree with Senator Baria on SB 2432 and SB 2165; these laws should be a no brainer. Insurance impacts everyone in the state but it has impacted coastal residents in an outsized way, which in turn has greatly elevated the level of awareness these issues here. The real problem in my opinion lies with Lieutenant Governor Phil Bryant and his choices for the insurance committee, which he evidently stacked with pro insurance legislators.

Of the Senate Insurance Committee's 13 members, only three are from South Mississippi - Watson, Billy Hewes, R-Gulfport, and Debbie Dawkins, D-Pass Christian. Eugene S. Clarke, R-Hollandale, chairs the committee, which is made up of eight Republicans and five Democrats.

Most of the Legislature's post-Katrina insurance reforms aimed at coverage offered through the private sector have failed. The Legislature last year approved a bailout for the state wind pool, which is the insurance of last resort for those who can't get private wind coverage.

This is R factor is at work. How quickly Mississippi Republicans have forgotten the people who elected them to office.

sop

Insurance News Today

2008-02-14T06:49:00.004-06:00

There are two news stories in today's Sun Herald that are well worth pointing out. The first deals with the House Insurance Committee's passage of a Policyholder's Bill of Rights, prompted by the treatment of consumers here on the coast after Hurricane Katrina.

Long Beach resident Kevin Buckel lost his house on Russell Avenue to Katrina, but was originally paid only $1,000 by Nationwide, but the company later settled a lawsuit with him. Buckel told the committee that putting the burden of proof on the insurance company is the most important part of the Policyholder's Bill of Rights.

"When you are denied a claim, the insurance companies would be more likely to settle with homeowners if they can't prove their case in court," Buckel said.

I have not read the bill but I take Mr Chaney's reservations concerning it to mean it must favor consumers over insurers.

The second story should come as no surprise that private insurers will continue to increase the pressure by economic strangulation of the coast enabled by former insurance agent turned inusrance commissioner Mike Chaney. I find the contrasts between Mr Chaney and Mr McCarty in Florida most telling as I do the timid reactions of Mississippi politicians in general to this issue in huge contrast to those in Florida.

Mississippi Insurance Commissioner Mike Chaney said some major insurance carriers have indicated they may no longer renew wind coverage for customers in South Mississippi.

"If they quit writing wind for existing customers, that's really going to put more pressure on the economy," said Chaney, who added that he is working to keep private carriers in the six southernmost counties and bring in new business.

He hopes enforcement of enhanced building codes, coupled with other measures his office is pursuing, will improve the market.

Is it me or were the new buillding codes passed after the storm in late 2005 or early 2006? Perhaps it's time Mr Chaney quit hoping and instead champion the people who elected him to office. Frankly I would personally never sign up with a private insurer for wind coverage, as it is a waste of money buying a policy that does not pay on wind damaged coastal properties. Like my home before the storm my rebuild will be in the wind pool which did pay on their policies as a rule.

sop

Nationwide on Your Side? Nope

2008-02-14T06:10:00.004-06:00

Any company that would screw an old lady certainly has no problems messin' with younger folks. Keep that chair pulled up as these videos illustrate why folks like Senator Chris Dodd and Richard Shelby live by "Show me the Money". If you is common folk and got no money then you don't count like their friends in big insurance.

Nationwide: Not on Your Side?

2008-02-12T07:41:00.001-06:00

Pardners when this Cowboy says big insurance will go to great lengths to screw the elderly for a buck he means it! Pull up a chair and listen to this poor ole woman's nightmare dealing with her own insurance company Nationwide Insurance. I hope insurance industry waterboys like Senators Chris Dodd and Richard Shelby are proud of themselves and their service to big insurance. Bless their hearts their mommas must not have taught them right from wrong when they was growin' up.

Insurance Complexities: The Myth of State Farm's Financial Insolvency and Conflicts of Interests.

2008-02-10T05:36:00.000-06:00

I occasionally run across “fans” of Nassim Taleb, a philosopher/visionary who is changing the way people view world events. His black swan concept, which is the name sake for his latest book, is understood and often repeated as the totality of his theory when in reality it is just a small part of his body of work. Russell and I share an interest in Taleb’s work, an interest that derives from actually reading his two books rather than simply embracing the pop culture lite version repeated in the popular media. This subject of insurance is akin to understanding Taleb and his theories; one can get a slight flavor for the concepts of subjects like wind claims dumping from the media but the nuance and complexities of the subject escape the vast majority of the popular reporting just as Taleb’s theories are revealed completely only by reading his books. Taleb’s Black Swan is an important concept but his central thesis is far more involved. Taleb’s website, named for his first book gives a better clue the larger theory he espouses.

Such is the case with the recently issued GAO report and the concepts surrounding the inherent conflicts of interest possessed by the Write-Your-Own insurer and the possible impacts of that conflict manifested in concepts like wind claims dumping following a multi peril flood event such as a Hurricane. David Rossmiller penned a particularly insightful piece on the GAO report tackling the conflicts of interest conclusions of the GAO head on.

“One, this "inherent conflict of interest" certainly exists, just as it exists whenever you file a first-party property claim. This is not very startling, because it has been said -- wait while my computer comes up with the final tally -- 3,456 kajillion times before in insurance literature. For many of you the following explanation will be something you know already, but many don't know it, so I am going to set it down in writing here. As you may or may not know, when someone makes a liability claim against you, say you ran into them with your car, your insurer owes you a fiduciary duty, assuming a duty to defend arises out of the allegations and the language of the insurance policy. A fiduciary duty is the highest duty imposed by law, and requires one to treat another's interests like one's own, resolving all conflicts of interest in favor or the insured. These type of liability claims are called third-party claims. In contrast, claims you file with your own insurer for damage to your house or other property are called first-party claims. An adversary relationship is assumed to exist between the insurer and insured from the time the claim is filed, and generally speaking, no fiduciary duty arises on the part of the insurer.”

Mr. Rossmiller gave his readers a great lesson in the law but also his post implied a great lesson in dealing with an insurer. When a consumer files a first party insurance claim and the adjuster is sent, the insurance company knows a great bit of information in advance of the first visit, including a good idea how the insurance company plans on adjusting the claim. The unsuspecting consumer, who was promised good hands treatment by a good neighbor, has no clue their friendly claims adjuster is actually an adversary, a wolf in sheep’s clothing.

As I pointed out in a post on the concepts of economic transparency and insurance in December this condition is known as Information Asymmetry, “A situation in which one party in a transaction has more or superior information compared to another. This often happens in transactions where the seller knows more than the buyer, although the reverse can happen as well. Potentially, this could be a harmful situation because one party can take advantage of the other party’s lack of knowledge.”

There are public policy implications in these conflicts of interests, both those noted by the GAO and those that are an accepted part of insurance law as explained by Mr Rossmiller. These public policy battles are being played out real time in places like Olympia Washington and Washington DC by people, including politicians who have the ability to see past the law to a greater collective good.

Is State Farm Overextended?

I have read remarks like this one several times in the blogosphere and am again reminded of Taleb and his theories:

(My independent insurance agent) “talked me out of using State Farm (who had the lowest quote), because he said that the opinion of a lot of insurance brokers was that State Farm had overextended itself, and might not be able to pay all of their claims in a widespread disaster. He directed me to a company that was about 20 per cent Higher than State Farm.”

The luck involved with that scenario is stunning. Though I don’t think it is possible to buy State Farm insurance from an independent insurance agent lets assume this statement is true. What were the motivations of that independent agent? To maximize their own commission a la commissioned retail stock brokers? Assuming this poster had combination wind-water damage and their WYO insurer paid them under both wind and flood there is also a large element of luck that the damage was distinguishable as appears the case with McIntosh.

As a group we do not recognize the influence of pure chance at work in our daily lives as we are far more suited to pat ourselves on the back and stroke our egos than see true reality. A central part of Taleb’s observations that deal with how we humans make sense of events was best summed up by Taleb himself when he wrote:

“It is high time to recognize that we humans are far better at doing than understanding, and better at tinkering than inventing. But we don't know it. We truly live under the illusion of order believing that planning and forecasting are possible…..

(we) are too bathed in enlightenment-style (notion of) cause-and-effect and cannot accept that skills and payoffs may have nothing to do with one another.”

So while we try to make sense of how State Farm adjusted their multi peril claims here after Katrina in terms of misguided notions like “they had to commit fraud or they would have gone bankrupt”, it would help to arm ourselves with some facts including basic financial facts such as after paying almost $4 billion dollars in claims, State Farm’s Property and Casualty Subsidiary still had over $3.5 billion dollars of “unassigned surplus” while posting over $2 billion dollars of profits in the two years ended December 31, 2006. That’s right, State Farm actually made money despite paying those Katrina related claims.

For those interested in State Farm’s financial condition the last audit of their P&C subsidiary can be found here.

Next up: Differing views on the problems with NFIP and some suggested solutions.

sop

Landrieu Legislation to Extract FEMA's Head Out of Their Ass.....

2008-02-08T05:32:00.000-06:00

Bill creates insurance oversight

Plan audits firms in flood program

Tuesday, February 05, 2008
By Rebecca Mowbray

On the heels of a federal report that found "an inherent conflict of interest" in having private insurance companies determine how much the government should pay on flood claims, Sen. Mary Landrieu, D-La., plans to introduce legislation creating an ombudsman to strengthen financial oversight of the National Flood Insurance Program.

Her bill would create the position within the Federal Emergency Management Agency to audit and monitor insurance companies and their subcontractors that do work for the government flood program.

The "report reiterates what we've long known -- when it comes to making sure the big insurance companies are living up to their promises, there's no one at the NFIP minding the store," Landrieu said in a prepared statement. "My legislation would create an independent office to make sure private insurers are acting in good faith, giving their customers the coverage they paid for. This ombudsman would be isolated from the political pressures of the powerful insurance lobby and have broad authority to hear and investigate complaints and stand up for insurance policyholders and taxpayers alike."

Homeowners policies generally exclude coverage for flood damage, so people guard against damage from rising water by buying policies from the National Flood Insurance Program. Flood policies are issued by the federal government, but private companies sell them alongside their homeowners products and determine the flood claims for the government after disaster strikes.

Consumer advocates, plaintiffs attorneys and individual homeowners began to question the arrangement after Hurricane Katrina, when private insurance companies had the power to determine whether damage was caused by wind, which they pay for, or water, which the government covers.

A study released last week by the Government Accountability Office validated those concerns. It found an "inherent conflict of interest" in having private companies with a financial stake in the outcome determine who pays for what. The report recommended that the flood program secure access to the wind files on homes that had flood damage to make sure the government is not overpaying, but FEMA resisted that suggestion.

Landrieu plans to introduce legislation to create Flood Insurance Accountability Act of 2008 before Congress adjourns for its Presidents Day recess Feb. 18. Landrieu's bill may come up for debate as the Senate considers overhauling the flood program before its authorization expires in September. The House of Representatives passed a flood insurance reform bill last fall.

Because other measures in Congress contemplate raising flood insurance rates on some homes that were built before the flood program was created in 1968, Landrieu said it's important to make sure that the program isn't subsidizing corporations before it raises premiums on homeowners.

"At a time when some in Congress are talking about raising flood insurance premiums on middle- and lower-income Louisianians, we need to make sure that this program is operating as efficiently as possible. This necessary step would fill a tremendous gap in the current oversight of the program," she said.

Landrieu's office said that the inspector general's office at the Department of Homeland Security, which houses FEMA, is not sufficient to monitor the flood program because the department has so many other responsibilities.

Her proposed ombudsman would have a broad mandate to investigate allegations of fraud and abuse, conduct random and systematic audits of companies working with the flood program, and investigate consumer complaints. A toll-free hotline would be established to make it easier for people to report concerns.

The ombudsman would have the power to subpoena computer and phone records and to compel testimony from people whose work relates to flood claims. The new position would have the power to investigate both insurance companies and vendors that provide claims adjusting, engineering and record-keeping services for the flood program.

To prevent the position from falling to a political appointee, Landrieu's bill will require the ombudsman to have an accounting, auditing, legal or management oversight background.

The ombudsman will report directly to the FEMA administrator, make an annual report to Congress, and have the power to recommend policy changes to Congress or the president. To ensure that the ombudsman is independent, the FEMA administrator will not be able to interfere with investigations. If the ombudsman is fired, FEMA will have to explain the dismissal to Congress within 15 days.

If evidence of overbilling is found, the ombudsman can levy damages worth three times the amount of the original claim. Cases of possible fraud or abuse would be referred to the U.S. Department of Justice.

Bob Hunter, director of insurance at the Consumer Federation of America, said that with FEMA turning a blind eye to concerns that insurance companies may be ripping off the federal government, Landrieu's bill is a good idea.

"No matter what the evidence is, the insurance companies can do no wrong. You need somebody who's there all the time," said Hunter, who ran the flood program in the 1970s.

If the ombudsman office is truly independent and has the money and staff to carry out its investigatory mandate, Hunter said, it shouldn't matter that it's located within FEMA.

Another Type of Insurance Problem

2008-02-07T19:58:00.001-06:00

One insurance suit settled, one begun

The Desmoines Register
February 7, 2008

By S.P. DINNENREGISTER BUSINESS WRITER

Another Des Moines area insurance company has run afoul of Minnesota’s attorney general over the sale of equity-indexed annuities, and now Iowa regulators say they’ll look to see whether any similar action is warranted here.Minnesota Attorney General Lori Swanson on Thursday accused AmerUs Group and American Investors, both business units of what is now Aviva USA, of misrepresenting terms of annuities that it sells to senior citizens. She sued them in Minnesota state court for allegedly failing to disclose key terms and conditions of equity-indexed annuities that they market.

This type of thing has been going on for some time. The 2001 downturn brought a rash of problems with oversold variable annuities (whose accumulations were tied to stock market performance). Annuities are essentially reverse life insurance once the payout stage is reached. They have their good points, but their fees are often very high.

Florida Insurance Hearings: Not Every Company is Losing Money

2008-02-07T03:02:00.000-06:00

We noted in our continuing coverage of the Florida Senate Hearings concerning their property insurance mess that Allstate used unapproved short term weather models to make actuary decisions on the purchase of reinsurance. Those poor business decisions have caused losses for Allstate's Florida operating company, losses they now wish to dump on Florida consumers.

Allstate has since been joined by Nationwide and Farm Bureau in admitting the use of unapproved short term models to drive reinsurance purchase decisions. Farm Bureau also admitted losses deriving from that fact.

In a refreshing change, we have a story from the Miami Herald that Florida based American Strategic Insurance testified Tuesday they used approved long term models and have profited from the better decisions that resulted from that fact.

American Strategic, a St. Petersburg company that managed to cut rates an average 11.5 percent due to the money it saved by buying a portion of its reinsurance from the Florida Hurricane Catastrophe Fund.

The company also lowered rates another 9.5 percent later in the year, mostly because it paid a lower cost for additional reinsurance bought in the private market and had fewer claims and better cost controls.

''Generally speaking, apples to apples, reinsurance costs were coming down for everyone in 2007,'' said CEO John Auer, who expects to see another drop this year.
Unlike many insurers, American Strategic said it is writing new homeowners policies, even some on the coast. The company has 260,000 policies, making it the third-largest insurer behind state-run Citizens and State Farm.

Sen. J.D. Alexander, R-Winter Haven, questioned American Strategic's heavy use of reinsurance to cover potential losses. He asked if it would be in financial trouble if its reinsurers, especially the state catastrophe fund, couldn't make good on their
policies.
Auer said the company, started 10 years ago, has already lived through highs and lows in the reinsurance market, noting that reinsurers are pleased with American Strategic's management. And A.M. Best raised American Strategic's rating to A-minus from B++ last December.

As I opined on the Allstate Yahoo Finance Message Board, the testimony of Allstate, Hartford, Farm Bureau and Nationwide Insurance reminded me of the confessions of an accomplished three card monte dealer. They expect their customers to foot their mistakes; both the mistaken decision to purchase more reinsurance and the decision to buy expensive reinsurance at all for that matter, rather than the cheaper variety offered by the State of Florida. Is insurance the only line of business that doesn't have to pay for their business mistakes? In the small business world where I come from there is no government backstop save bankruptcy so the concept of profit entitlement is foreign to me.

In any other line of business the shareholders, not the public would be eating these business mistakes. So while we congratulate American Strategic and their owners for their ability to profit while their competitors languish we also hope free market principles apply equally to those who make bad business decisions.

Simply put there is a point where the insurance industry needs to take ownership of their mistakes. The mess in Florida illustrates exactly why so few present day insurers would survive in a truly competitive marketplace without that anti-trust exemption they currently enjoy. Our position is that the free marketplace should reign supreme where ever possible and the culture of big insurance profit entitlement should end.

Finally the events in Florida now have me wondering if our state regulators here in Mississippi have been hoodwinked by similar tactics. Our wind pool premiums are in the stratosphere, largely due to the astronomical cost of reinsurance. Given what we have learned through the application of Sunshine to the insurance industry by the Sunshine State, I challenge Mr. Chaney to hold rate hearings for any increases in property insurance, not just those he arbitrarily deems too high. We have quickly arrived at the point where he should put the interests of the citizens of this state ahead of the profit interests of these out of state insurance companies.

sop

Florida Gets a Big Fat F

2008-02-06T20:16:00.000-06:00

Florida gets an 'F' for insurance system
from the South Florida Business Journal
February 6, 2008

Florida has one of the least-effective property and casualty insurance systems in the country, a new study that gave Florida and four other states an "F" grade said.

The joint project of the Heartland Institute and the Competitive Enterprise Institute rated all 50 states on nine criteria, including how prominent the states' roles are in the auto and home insurance markets, and the concentration of insurance companies writing policies in a particular state. California, Massachusetts, North Carolina and Texas joined Florida in getting an F. Connecticut, Idaho, Illinois, Utah and Vermont got A grades.

Florida scored at or above average in seven of the nine categories. But Florida had the worst rating in the residual homeowners category, which measures how much of the market is served by government-provided insurance. Jacksonville-based Citizens Property Insurance Corp., the state-run insurer of last resort, is No. 1 in statewide market share.

Florida also scored poorly in the regulatory environment category for having an outsized influence in the setting of rates.

I would love to see the formula. Florida is above average in 7 of 9 categories. But because the State Government holds a lot of the policies, they get an F. Apparently the fact that many insurers have not been interested in insuring Florida home owners does not matter. Amazing.

Texas, North Carolina, and California all have to deal with big natural disaster issues so I am assuming some form of state self insurance makes them a failure as well. Massachusetts probably banned personal property when Romney was governor in an effort to avoid paying out any insurance to anyone ever.

Bad Faith Insurance Bible: Screw the Common Man

2008-02-05T06:53:00.000-06:00

This Cowboy has told ayone who would listen how big insurance companies intentionally screw their customers to save a buck to pay for some obscene executive bonus. Ole Michael Sasso over Tampa Tribune way tells the story of Allstate and what they is hidin' from them insurance boys in Florida. Pull up a chair and learn more:

Secretive Allstate File Could Show 'Bad Faith'

By MICHAEL SASSO, The Tampa Tribune

TAMPA - Behind the fight between Florida's insurance commissioner and Allstate Insurance Co. is a mystery that could have come from a John Grisham novel.

Secret Allstate documents - known as the McKinsey documents - allegedly show how the insurance giant intentionally has made low-ball claims offers to its customers for years, netting Allstate billions of dollars in the process.

But the McKinsey documents have never seen the light of day.

Trial lawyers who have sued Allstate in recent years have eagerly sought them, and Allstate reluctantly has turned them over to lawyers under subpoena. However, each time a judge has prohibited lawyers from distributing them to the media and the public under a protective order.

Florida now is demanding the documents from Allstate and other insurers in a broad-based investigation of the companies' business practices, including alleged collusion with other insurers and their claims handling procedures. The issue came to a head last week, when Insurance Commissioner Kevin McCarty suspended Allstate's right to issue new insurance policies in Florida. A judge later lifted McCarty's suspension.

Allstate spokesman Mike Siemienas said the company intends to turn over the documents, but Florida might not find them all that revealing. The McKinsey documents at issue concern auto insurance - not the hot-button issue of homeowners insurance. Some of the strategies laid out in the documents were just ideas and never became Allstate policy, Siemienas said.

Still, Whitney Buchanan, an Albuquerque, N.M., trial lawyer who has seen the elusive documents, said that if Florida's insurance commissioner receives them, they could go a long way to showing that Allstate has not been playing fair.

"These documents are devastating to them in bad faith litigation," Buchanan said.

The McKinsey documents were drafted in the early 1990s, when Allstate hired the consulting firm McKinsey & Co. to review its business practices. Some of McKinsey's ideas became company practice, said David Berardinelli, a Santa Fe, N.M., trial lawyer who has sued Allstate on occasion.

In the course of one 2001 lawsuit, a judge ordered Allstate to give Berardinelli the McKinsey documents for a short period. The documents bore a watermark that prevented them from being reproduced, but the lawyer took numerous pages of notes on what he saw. He later turned those notes into a book called "From Good Hands to Boxing Gloves," which is marketed only to lawyers.

File Explains 'Fast Track' Strategy

One of Allstate's strategies: a "fast-track" settlement offer. Berardinelli claims the documents reveal how Allstate would offer insurance claimants an extremely low offer during the first 90 days after an auto accident. During these initial 90 days people are the most in need of money and most likely to accept a low-ball offer, Berardinelli said. Allstate claims adjusters were expected to persuade a certain percentage of customers to accept these fast-track offers, Berardinelli said.

Overall, Allstate tried to standardize the claims process, by using computer models that offered low-ball estimates of the value of a person's claim, Berardinelli said.

"They are charging people for coverage that they're never going to get," said Berardinelli, who has teamed up with Buchanan on occasion to sue Allstate. "That is fraud."

Siemienas, the Allstate spokesman, said Allstate investigates the merits of each insurance claim and bases its payouts on its investigation. It has no such standardized approach to payouts, he said.

Word of the McKinsey documents' existence spread among trial lawyers, and soon other lawyers began subpoenaing them from Allstate for their own insurance lawsuits.

Although some lawyers have received them, Allstate has gone to great lengths to prevent their dissemination to the public or the media. Four trial lawyers reached this week all said they are unable to give the documents to anyone else because of a protective order from the court.

Siemienas said Allstate seeks court orders because the documents contain trade secrets that could benefit Allstate's competitors if they were released.

In an ongoing Missouri case, a judge has ordered Allstate to turn over the documents to an attorney without benefit of the court order. But Allstate has refused, causing the judge to fine the company $25,000 a day until the company turns over the McKinsey papers to the attorney.

Allstate's fine in the Missouri case has grown to $2.4 million, according to new documents from the Florida Office of Insurance Regulation, which is watching the Missouri case. Rich Halberg, a spokesman for Allstate, acknowledged that there is a court order to produce the documents, but he said the judge hasn't enforced it and that Allstate hasn't incurred a fine.

What the documents mean - and how Florida's insurance commissioner might use them - is debatable.

2nd File Deals With Homeowners Policies

The McKinsey documents that have raised such a fuss nationwide were developed for auto accident cases, Halberg said. They don't relate to homeowners insurance, which has become such a major issue in Florida in recent years, he said. McKinsey & Co. created other documents for Allstate involving homeowners insurance, Halberg said, but they are not the documents that lawyers have targeted.

A spokesman for McKinsey, Mark Garrett, said in a telephone voice mail that McKinsey does not comment on matters relating to its clients.

Trial lawyers say the documents have become hot property in both auto and property insurance lawsuits.

William "Chip" Merlin, a Tampa trial lawyer, said he has subpoenaed the documents from Allstate on several occasions, and they have helped him secure settlements from the insurer on behalf of clients in auto and homeowners cases. The documents can show juries that a customer's insurance claim wasn't handled properly and that Allstate tried to keep unhappy customers from hiring attorneys, Merlin said.

Buchanan, the Albuquerque lawyer, said the documents helped him secure settlements from Allstate, too.

Still, Merlin said the documents alone aren't enough to win a lawsuit against Allstate.

In Lexington, Ky., trial lawyer Dale Golden subpoenaed Allstate for the documents and filed a class-action lawsuit against the company on behalf of auto accident victims. Even though he had the supposedly damning documents, a judge declined to make the lawsuit a class action, meaning he could not represent a wide group of people. Golden also later lost the case when he brought it on behalf of a single client.

Golden said he is appealing. He said the length to which Allstate has gone to prevent public disclosure shows how damaging they are.

"What else is Allstate hiding?" Golden asked.

Allstate Before the Florida State Senate: Squealin' Like a Pig!

2008-02-04T18:58:00.000-06:00

Welp folks, them crooks at Allstate can run but they can't hide and they is now before the Florida State Senate tryin' to explain how they cook the books. From readin' the story and comments after the story them boys best find a new shade of lipstick to slather on that Pig in the Poke they is tryin' to sell, 'cause from the sound of it them Florida Senators ain't buyin' in to the BS. Hats off to our own Sop who pegged BS weather models as one way them crooks fleece the public. Them posts, includin' the first one on this here blog are found here and here.

Allstate tells why it didn't drop rates

BY BEATRICE E. GARCIA

As a special Senate committee began two days of hearings with state insurance officials and insurance company executives, Allstate Floridian's chief executive explained that the company didn't pass on savings from its reinsurance purchases directly to policyholders because Allstate's rates already were inadequate.

Joseph Richardson, who was appointed to his current position last March, explained that the 2004 and 2005 storms wiped out the company's surplus. While capital was replenished by its parent company, the Florida-based insurer sought to rebuild that capital through higher rates.

A massive insurance reform bill passed last January required insurers to pass on savings achieved by buying less-expensive back-up insurance from the state's catastrophe fund.

The purpose of this special committee's investigation is to determine why rates haven't fallen as expected.

The bill expanded the state's catastrophe fund to provide less expensive backup insurance for insurance. Insurers who bought this reinsurance were required to pass on the savings to policyholders in the form of lower rates. Only 68 percent of the 118 home insurers in the state have lowered rates so far.

Senators spent more than four hours questioning Allstate officials about how the company factored profits into its rates, how it used the computer models to determine how much of a rate increase it needed, and how much and what it paid for reinsurance in recent years.

The panel asked again and again why Allstate bought insurance and asked for a large rate increase last year, even though it has dropped about half of its homeowners policies since 2005.

Allstate requested a 42 percent increase when it provided its final rate filing required by the new law last September. In a preliminary filing in March, Allstate had said it would lower rates an average 14 percent.

The company is also showing a loss of $47 million for the first nine months of 2007, though there were no major storms. Allstate reported net income of $28 million in 2006.

Sen. Jeff Atwater, R-North Palm Beach and co-chairman of this panel, said it was ''just a little perplexing'' that the company has perceived greater risk, despite insuring few homes, many of which have withstood many, many hurricanes or are built to the higher standards of states building code.

''Every time you drop someone on the coast, you are reducing risk and profit is increased. You've set up for the worst-case scenario,'' said Sen. Bill Posey, chairman of the Senate and Banking Committee.

Bonnie Gill, Allstate Floridian's vice president, explained that Allstate's rate-making process is based on losses it expects to incur on customers in the next year. It doesn't include customers that the company will no longer carry on its books.

Indeed, Allstate had about 500,000 homeowners policies in 2004. Now the company has about 200,000 homeowners policies.

Belinda Miller, deputy insurance commissioner, said that was one of the reasons that the Office of Insurance Regulation questioned Allstate's profit factor in its rate filing because it has dropped so many policies and intends to drop more.

''That should theoretically produce a decline in rate need,'' said Miller.

Ron Stouffer, Allstate Floridian's assistant vice president, said the company spent more for reinsurance in 2007 than in 2006 because the company perceived greater hurricane risk.

The senators were concerned about Allstate's use of a computer model used for forecasting future hurricane losses that wasn't approved by Florida. This model uses a shorter-term outlook and could produce a forecast of bigger losses because it incorporates more recent hurricane activity. The state approved model looks at hurricane activity over 100 years or more.

Allstate executives said the company had adjusted its rate filings in 2006 and 2007 with data from the unapproved short-term computer model.

Richardson said the company believes Florida statutes don't specifically preclude using an unapproved model.

There no silver lining in the gold fields

2008-02-04T16:47:00.000-06:00

From IOL online news:

'Power cuts may damage insurance industry'
February 04 2008 at 04:35PM

Power cuts in South African mines will have a negative impact on the global insurance industry, risk assessment company Alexander Forbes warned on Monday.

"If hundreds of South African mines were each to claim up to R250-million for business interruption caused by power outages, the impact on the local and international insurance markets would be profound,"Debbie Geraghty, Head of Risk Services at Alexander Forbes said in a statement.

Given that South African mining and industrial debt was re-insured globally, the potential sums called upon to cover South African power-related loss could cause a global re-insurance shock, Geraghty said.

What makes those greedy minors think they can soak up all our huricane/earthquake relief money? Something just isn't working right here.

Men working at 2,000' below in South Africa's Kimberley Diamond Mine. Taken a few years ago.

The Allstate Battle in Florida: An Update

2008-02-04T07:50:00.000-06:00

The Florida District Court of Appeals last week kept a temporary stay in place against the suspension of Allstate from Florida by the Florida Office of Insurance Regulation. The ruling is a double edged sword in that the expedited appeals process puts pressure on Allstate to produce records on its business practices; records it has been unwilling to produce in the past. According to Kevin McCarty, Commissioner of the Florida Office of Insurance Regulation Allstate has become more diligent in producing the subpoenaed records:

All the documents requested in our October subpoenas were due at the Jan. 15 hearing, but I am encouraged that as a result of my suspension order Allstate within a week produced about 25,000 pages of documents.

"I remain ever committed to Florida consumers to get to the bottom of this issue and to ensure that Allstate is held accountable to the law."

The timetable for the expedited court appeal points to a resolution in early March, 2008. A copy of the court order that contains the milestones can be found here.

sop

Breaking News: Hood Fires Back

2008-02-03T15:35:00.000-06:00

Jim Hood has made the news today with his Friday court filings in response to State Farm trying to prevent a new grand jury from looking into alleged wrong doings on their part in how Katria claims were adjusted here on the coast. I write this post with a heavy heart as we have just learned of Jody Compretta's untimely passing in a parade accident last night in New Orleans. Our thoughts and prayers are with JP and his family.

The AP story:

A lawsuit filed by State Farm Fire and Casualty Co. that accuses Attorney General Jim Hood of using the threat of criminal charges to force settlements in civil lawsuits is based on "lies, speculation, and innuendo," Hood said in court papers.

State Farm sued Hood in September, claiming he violated his part of a January 2007 settlement in which the attorney general's office agreed to end its criminal investigation over the company's handling of Hurricane Katrina claims. A judge ordered Hood to temporarily shut down the probe.

The accusations in court documents have intensified over the past week as both sides prepare for a hearing on Wednesday.

"Before allowing State Farm to use this court as a three ring circus to parade its inflammatory evidentiary rhetoric of innuendo, guilt by association, and smears, there should be some factual basis alleged to support a conclusion of retaliation and/or harassment," Hood said in papers filed Friday in U.S. District Court in Jackson.

Jonathan Freed, a State Farm spokesman told The Associated Press on Friday, that the insurer is ready to "proceed with our case and we're looking forward to airing these issues in court."

Hood asked the court to dissolve the restraining order and allow him to resume his investigation. Hood's 19-page filing came just days after State Farm used some of the strongest language yet in accusing the second-term attorney general of wrongdoing.

The company claimed Hood and wealthy plaintiffs attorney Richard "Dickie" Scruggs, who is facing corruption and contempt charges in other cases, participated in an "extortion conspiracy" by trying to force the company to settle civil litigation with private attorneys.

The court battle heated up when State Farm began urging a judge to allow the company to question Scruggs under oath. Hood has called Scruggs his "confidential informant" and has said Scruggs provided allegedly incriminating information about State Farm."

General Hood is clearly concerned that his co-conspirator will either tell the truth or invoke the Fifth Amendment on specific questions related to their extortion conspiracy," State Farm said in a motion filed Wednesday.

U.S. District Judge Michael P. Mills on Friday ordered Scruggs to submit to the questioning by 5 p.m. Monday. Scruggs will likely invoke his Fifth Amendment protection against self-incrimination when questioned because of the pending charges against him.

Scruggs, one of the most influential plaintiffs lawyers in the country, is facing federal charges that he conspired with several associates to bribe a judge in an unrelated dispute over $26.5 million in fees from a mass settlement of Katrina claims. He's facing contempt charges in Alabama for allegedly violating a federal judge's order by giving leaked Katrina assessment documents to Hood rather than returning them to the company from which they were taken.

Scruggs has denied wrongdoing in either case. Scruggs is not a party to the lawsuit State Farm filed against Hood, but the company claims he worked in collusion with Hood.

The January 2007 agreement that State Farm claims Hood violated by resuming a criminal investigation was part of a broader settlement that called for State Farm to reopen and possibly pay thousands of policyholder claims. However, a federal judge refused to sign off the terms of deal and State Farm later entered into another agreement with George Dale, who was then Mississippi's Insurance Commissioner.

In August 2007, State Farm received a new subpoena for records from a grand jury. Less than a month later, the company sued Hood in an effort to stop the grand jury's investigation.Hood claims he wasn't reopening the same investigation, rather he was probing new claims.Hood has argued that he never provided "blanket immunity" from future investigations.

Pee on My Leg and Say It's Raining Part 3: Marsha Thompson Joins Kevin Drawbaugh in the Drive by Reporting Craze

2008-02-03T10:21:00.001-06:00

Since Lotus at Folo brought this report that aired on WLBT to my attention, I filed it away for further commentary, not only for its glaring factual inaccuracy (EA Renfroe is a claims adjusting firm not engineers), but also because of the sheer silliness of the logic used to frame the Rigsby sisters as document purloining perverts. I had to chuckle thinking of the State Farm commercial which no doubt aired at some point during the broadcast, informing us the good neighbor stands ready to sell us life and auto insurance; contracts that people such as Dr Leroy McFarland discovered post Katrina really were not worth the paper they were written on.

I filed Ms Thompson's revealing report away as I was vetting the first Reuters story on the GAO report past some ordinary people off the coast to gauge their reactions to it and the context which it was framed. This is the paragraph that repeatedly came up in the feedback I received.

Study after study has come back with the same results, showing there is no evidence insurance companies improperly attributed wind damage from Hurricane Katrina to water," said Justin Roth, senior federal affairs director at the National Association of Mutual Insurance Companies, an industry group.

"We fully expect this report to reach the same conclusion," Roth said

Mr Roth's artful wordsmithing must be appreciated in PR circles for its sheer intellectual dishonesty as is Mr Drawbaugh's apparent willingness to serve as a mouthpiece instead of his stated vocation of reporter in the finest traditions of misinformation that would make Dr. Goebbels proud.

So how could Mr Roth be so confident in his statement, issued one day before the GAO report was released? Easy, the Three Wise Monkeys work for FEMA, and Mr Roth knew FEMA did not collect wind damage payment data in flood claims thus they had no way of knowing if NFIP was improperly charged for wind damage. This is what the GAO had to say on that exact subject:

FEMA officials stated that they did not have the authority to collect wind damage claims data from insurers. But without the ability to examine claims adjustment information for both the wind and flood damages, NFIP cannot always determine the extent to which each peril contributed to total property damages and the accuracy of the claims paid for losses caused by flooding.

FEMA cannot be certain whether NFIP has paid only for damage caused by flooding when insurers with a financial interest in apportioning damages between wind and flooding are responsible for making such apportionments.

However, when the public adjusters in Louisiana peeked under the hood of flood claim adjusting in New Orleans, they found a far different story than was conveyed by Roth and Drawbaugh:

"....a group of former insurance adjusters, identified only as the Georgia company Branch Consultants LLC, say they have reinspected 150 properties with flood and wind damage. In all cases, private insurance companies overcharged the federal flood program for storm damage while they underestimated wind damage.

"Every single one of them," said Allan Kanner, a New Orleans attorney representing the insurance and construction experts as they pursue what they say is a violation of the False Claims Act on behalf of the federal government. "There's a pattern here."

In one striking example, the suit claims that a group of four-plex apartments in eastern New Orleans were compensated for flood damage with taxpayer money even though they experienced no flooding. Each building in same complex was paid only a pittance for severe wind damage on its regular property insurance policies."

WLBT Jackson Joins in the Drive By Reporting Craze

In their anchor captioned report "Sex, Lies and Theft" WLBT tries their hand at character assassination. The story teller, Marsha Thompson, dutifully informs her viewers of Kerri Rigsby's sex life and that the Rigby's were "Stealing documents without State Farm's knowledge or permission and then furnished copies to the Attorney general, US Attorney and Scruggs without permission."

Following Ms. Thompson's logic the Rigsby sisters, who publicly stated they believed they have witnessed crimes known in some legal circles as Racketeering, should have asked permission before calling the authorities. Following the Thompson logic means we should also obtain the permission of an armed robber before calling in a bank robbery. Thompson logic also evidently means the sex lives of witnesses to a crime are fair game too.

Is it any wonder around 26% of the public finds local TV news "believable" or that so few white collar crime witnesses are willing to come forward as whistleblowers. WLBT should hang their head in shame.

Fade out to the "Good neighbor" ad.....

sop

Insurance firms set to stump up billions

2008-02-02T18:32:00.000-06:00

Insurance firms set to stump up billions

2008-02-02
By Hu Yuanyuan (China Daily)Updated: 2008-02-02 08:57

Chinese insurers are expected to pay 3.52 billion yuan ($489 million) in damages to companies and people in central and eastern China as a result of the worst snowfall in almost half a century, the nation's insurance regulator said on Friday.

What is odd is that the insurers appear to be paying claims to people who did not even have insurance. Apparently they view their work as a service to their country. What an odd concept.

Passengers walk past a row of Chinese soldiers near the railway station, in China's southern city of Guangzhou, on February 2. China warned the worst was not over in its national weather crisis as desperate crowds trying to get home jammed transport hubs and others braved the frigid cold without power or water.

FEMA Code Violation on Fisher Island Potentially Threatens National Flood Insurance Participation for Miami Beach residents

2008-02-01T15:51:00.000-06:00

From Fox Business News
Thursday, Jan. 31 2008

FEMA Code Violation on Fisher Island Potentially Threatens National Flood Insurance Participation for Miami Beach residents

Unchecked violations of Floodplain Management regulations could cause FEMA to put Miami Beach on probation and eventual suspension from the National Flood Insurance Program (NFIP) which currently provides a 15% discount on flood insurance premiums for property owners in Miami Beach. If the city fails to enforce its regulations, it could result in higher flood insurance rates for policy holders. In suspended cities where flood disasters occur, certain types of disaster assistance from the federal government are not available at all.

The City of Miami Beach is currently rated as Class 7 out of 10 (with 10 being the lowest) on NFIP's Community Rating System. This rating entitles property owners in Miami Beach to receive a 15% discount on flood insurance premiums. NFIP bases its ratings on local governments' compliance with federal requirements and on local government efforts to eliminate or mitigate exposure to flood damage through regulation. Each 1-point increase in class rating represents an extra 5% discount on premiums, with a Class 1 rating carrying a 45% discount and a Class 10 carrying no discount at all. As of November 2007, Miami Beach had 48,233 flood insurance policies in effect, insuring $7,491,479,400 of property.

I know there is a Miami Valley in Ohio (named after the Miami Indians). But is there a Miami Beach Ohio? Is it just west of Cleveland on Lake Erie? Because if they are talking about a Beach in Florida, why on earth are they getting a discount?

Just Before Sunset

Miami Beach, OH

How the Other Side Lives

2008-01-31T20:18:00.000-06:00

…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

2008-01-31T06:28:00.000-06:00

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

2008-01-30T16:15:00.000-06:00

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"

2008-01-30T08:45:00.000-06:00

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

2008-01-29T07:34:00.000-06:00

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

2008-01-28T20:40:00.000-06:00

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

2008-01-28T06:35:00.000-06:00

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

2008-01-26T10:53:00.000-06:00

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

2008-01-25T18:50:00.000-06:00

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

2008-01-25T07:41:00.000-06:00

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

2008-01-24T06:42:00.000-06:00

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

2008-01-23T17:43:00.000-06:00

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

2008-01-23T09:44:00.000-06:00

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

2008-01-23T07:06:00.000-06:00

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

2008-01-21T20:13:00.000-06:00

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

2008-01-20T19:29:00.000-06:00

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

2008-01-20T09:00:00.000-06:00

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

2008-01-19T11:54:00.000-06:00

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

2008-01-19T09:29:00.000-06:00

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

2008-01-18T09:31:00.000-06:00

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

2008-01-17T16:07:00.000-06:00

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

2008-01-17T06:40:00.000-06:00

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

2008-01-16T22:28:00.000-06:00

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.

2008-01-16T10:38:00.000-06:00

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"

2008-01-16T05:58:00.000-06:00

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)

2008-01-15T18:00:00.000-06:00

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

2008-01-15T10:26:00.001-06:00

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

2008-01-15T09:43:00.000-06:00

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

2008-01-13T20:20:00.000-06:00

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

2008-01-12T09:40:00.000-06:00

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

2008-01-12T09:38:00.000-06:00

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.

Wind Claim Dumping on the Flood Program: The Mechanics

2008-01-11T05:49:00.001-06:00

Folks, Sop used actual photographs to explain the concept of claims dumping on his earlier post on the topic, the visual account of which set a site visit record for our little corner of the Internet. Now this Cowboy is gonna explain how big insurance did it, dumping their contractual wind obligations of the U.S. taxpayer. In a whistle blower lawsuit filed over New Orleans way the public adjusters projected that if the error rate they found held true, us taxpayers were bilked out of over $9 BILLION dollars by big insurance. Some examples found by the public adjusters include:

"a group of four-plex apartments in eastern New Orleans were compensated for flood damage with taxpayer money even though they experienced no flooding. Each building in same complex was paid only a pittance for severe wind damage on its regular property insurance policies. American National Property & Casualty Insurance Co., or ANPAC Louisiana Insurance Co., paid the owner of several buildings in the Versailles Gardens subdivision on Alsace Street about $95,000 in flood damages, or about half the value of each property's individual $200,000 flood policy, even though no flood waters got inside the buildings."

Over here in Mississippi, State Farm used faulty and on occasion even altered engineered reports to dump their wind obligations on us. Take a look at these two engineering reports, the first one authored by engineer Paul Monie and verified by him as his work product. The second one was altered to let State Farm off the hook without his knowledge or consent. After Steve helped Mr. Beckham track down Paul Monie and it was brought to light that State Farm and their lackeys at Rimkus engineering had no problem defrauding a 70 year old man guess what happened next? You got it folks, State Farm experienced a Come to Jesus moment and paid Mr. Beckham. In fact they paid him so much money he can't talk about it any more. This Cowboy can talk about how them crooks tried to steal from an old man though and he just did. :)

In fact, thanks to Congressman Gene Taylor we got us a whole list of examples of how crooks in Gucci suits and their scalleywag corporate lawyer enablers tried to screw the good folks on the coast who lost their houses out of big money. We started with ole man Beckham cause Steve knows him but he ain't the only one by a long shot.

Gene Taylor in his Own Words

2008-01-10T06:54:00.000-06:00

Folks this final installment of our Gene Taylor Youtube series is courtesy of Kdreporter, a news intern with the ABC affiliate in Santa Barbara California who interviewed Gene last summer. So lets climb on in the FEMA trailer and hear Gene on Katrina, FEMA and Multi-peril insurance in his own words.

US Represenative Gene Taylor on Concurrent Causation

2008-01-08T07:07:00.001-06:00

Following is yet another clip from Gene Taylor's town hall meeting which touches on the heart of why so many people on the Mississippi Gulf Coast feel as though they have been swindled by their insurer: The Anti Concurrent Clause. Pictured in this New York Times story from 2006 that explains the concept is Marilyn Haverty, a lady I've known since I was a child growing up in Waveland with her children back in the 70's and 80's. Miss Marilyn and people like her are the reason this blog exists.

“There’s no question that the anti-concurrent clause is bad for policyholders,’’ said Adam F. Scales, an associate professor who teaches insurance law at the Washington and Lee University School of Law, in Lexington, Va. “It’s not fair because it defeats policyholders’ reasonable expectations.’’

Robert Hunter, former Texas Insurance Commissioner and Director with the Consumer Federation of America contends consumers do not understand such clauses buried in the fine print of their policies. George Dale seemed to agree in an interview he gave the Sun Herald that ran back in March 2006, when he claimed ignorance that insurers would use the clause to deny coverage: (The Sun Herald link is long gone but thanks to Anita over at the Did we survive Katrina or Not? blog we have this quote from the story.)

"Q: So, you might not have realized how this was going to be interpreted when it was approved?

A: Oh, I'm admitting that with just the volume of the number of type policies - and there are hundreds of them in the course of a year that comes through my rating division - there may be other things that are in policies that would have gotten approved by my department by accident.That's just the volume of the business that they do. Let's hope it's a minimal number of things that were approved."

I would submit that if this nation's *longest serving insurance commissioner and his staff of lawyers (including a private group that also double as insurance industry lobbyists) had little clue to the meaning of this language then consumers had no chance of understanding the language. In fact most down here feel such language is a scam as the reason they bought the policy in the first place was to cover the one event insurers now claim it didn't cover, a Hurricane.

* - Mr. Dale was soundly beat in the party primary in August 2007 thus ending his term of service to the insurance industry.

sop

US Representative Gene Taylor on his Multi-Peril Insurance Bill HR3121

2008-01-07T04:26:00.000-06:00

Following is an interview Gene Taylor gave WLOX TV on HR3121 and the politics involved in passing the measure out of the House of Representatives. He also addresses bogus claims the bill will place an unfair burden on the taxpayers.

The Aftermath of Katrina and the Insurance Wars - Hard Feelings Worn on a Sleeve

2008-01-04T17:20:00.001-06:00

The insightful commentary on my Happy New Years post is the reason we are linking to Dr McFarland's presentation at Gene Taylor's Town hall meeting held last August in Bay St Louis. The anger from being reduced to living in a camper trailer while State Farm was opinion shopping their engineers has naturally lead to some very strong feelings among those made homeless by Katrina. It sometimes spills over into the commentary at places like the Yahoo Allstate Stock Board and the video clip below. I am more than content to let our readership gauge the depths of the anger down here both in the linked post by Coastal Cowboy and the following Youtube clip. Originally we were not going to link Dr McFarland and I am not doing so to bash the insurance industry people reading this blog. Rather it I hope it illustrates the very real frustration that has accompanied Katrina and it's aftermath and perhaps even lead to a greater understanding of all of the perspectives among the antagonists on this issue.

sop

Tish Williams on the Impact of the Insurance Crisis on Small Business

2008-01-03T07:25:00.000-06:00

"Small business were simply left out", said Tish Williams, executive director of the Hancock County Chamber of Commerce to the assembled congressional delegation gathered in Bay St Louis. She told story after story of long time small business owners fighting to stay open, some living off their savings so their employees could be paid. She also recounts the horror stories of businesses unable to fully insure their risks due to the high costs.

Wind Pool Board Member David Treutel on Multiperil Insurance

2008-01-02T06:13:00.000-06:00

"We are all affected by catastrophies, even if we are not in affected areas", explained Mississippi Windstorm Association vice chair David Treutel as the costs of reinsurance impacts all who buy insurance. Dave goes on to explain the many ways events here on the Mississippi coast have changed the insurance equation in far away places like Rhode Island and how this issue literally impacts everyone in the country.

Happy New Year from the Mississippi Gulf Coast

2008-01-01T07:48:00.000-06:00

When I agreed to take on this project the possibility it may fail crossed my mind, after all, the sum total of our collective experience on blogger could fit in a thimble. Motivated by those who are actively working against the people on the coast getting a fair shake from their insurer we began undaunted by the long odds that we could actually interest a potential readership in this very complex issue.

While the spillover from the "insurance wars" captivates the nation we continue to stick to our knitting of educating the public on the very real problems exposed by Katrina's wind and water over two years ago. Though we have not been burning up the proverbial commentary meter, Coastal Cowboy summed up our goal best early on, "The measure of our success will not be the amount of comments we get or the number of readers we attract, rather it is having the RIGHT folks reading us."

By that measure our first month online is a resounding success as we've attracted readers from 3 foreign countries as well as from across the US. We count people from diverse places like Washington DC, Lincoln Nebraska, and Bloomington Illinois to small towns like New Albany, Mississippi among our readership. We hope to continue educating all on our perspective, that of ordinary men and women here on the coast who struggle with the costs of insurance everyday and the related local fallout from insurance companies refusing to honor their contracts on the coast post Katrina.

So we thank our readers, even those who may disagree with our viewpoint, for spending time with us this past month as we too hope the New Year brings resolution to more of the good folks of the Mississippi Gulf Coast. God Bless us all in 2008.

sop

"Lawyer’s spend a great deal of their time shoveling smoke."

2007-12-31T14:28:00.000-06:00

We end the third year since Katrina with more lawyers shoveling smoke in Mississippi than in any other state - certainly on a per capita basis, if not by actual count. The question yet to be answered is "Where's the fire?"

Katrina left over 60,000 Mississippi families homeless. One of those happened to be the family of a man the Wall Street Journal has called the King of Torts. To those on the Coast slabbed first by Katrina and then by their insurance provider, he was known as Dickie, King of Hope

Now, he has lawyers; his son has lawyers, his associate has lawyers and there is no longer a group of lawyers known as the Scruggs Katrina Group – and all are shoving smoke blown their way by a lawyer named Balducci – reportedly working for either Scruggs or SKG – who made what can only be called a significant error in judgment by either attempting to bribe a judge or confessing to such. There's still too much smoke to tell exactly which it was; but, under all that smoke is a case filed against Scruggs by a group of lawyers that were associated with the Katrina Group. Now they have lawyers, too.

We've got such a booming lawyer business going here that our Insurance Commission picked up the tab for lawyers to represent State Farm when SKG deposed a member of the Department's staff on matters related to claims filed by State Farm policy holders. The Commissioner had to get approval to pay State Farm's lawyers from the Attorney General who has lawyers of his own because State Farm is suing him – remember Mississippi is the Hospitality State. Come to find out, that what we got for our money was a State Farm lawyer telling the man, "Don't answer that".

In light of that shovel full of smoke, it's hard to believe that State Farm has now filed a suit to make Scruggs "answer that" - at least, they're paying their own lawyers this time. If you're confused, don't be ashamed. The judge got so confused he couldn't tell whose interest Scruggs was representing. It seems like he could have asked; but, at Ground Zero, points of law and common sense can be two entirely different matters.

We don’t shovel smoke here at the Mississippi Insurance Forum. Our purpose is to blow all the smoke away and see if there’s any fire under the hot tin roof that’s smoldering down here – and that would be Tennessee Williams and not John Gresham, by the way. Stay tuned for more and Happy New Year.

George Schloegel of Hancock Bank on the Insurance Crisis in Mississippi

2007-12-31T07:45:00.000-06:00

"The status quo of doing nothing is absolutely not acceptable", said George Schloegel, Chairman and CEO of Hancock Bank, to the assembled members of Congress on our insurance crisis. Banks will not lend on projects that aren't insured and the lack of insurance options on the coast has killed many otherwise economically viable projects.

Dave Dennis on Insurance

2007-12-29T10:29:00.000-06:00

"For the average person it is fundamentally not working..." said Dave Dennis, owner of Specialty Contractors and current board member on the New Orleans Federal Reserve on the insurance market in Mississippi, specifically the Gulf Coast. This issue is not about liberal or conservative, republican or democrat as all of us here on the coast are suffering the proverbial boot to our throats applied by big insurance and their Mississippi based scallywag enablers.

Update: Today the Sun Herald ran this story on Dave Dennis and his retirement from the New Orleans Fed:

"For many people, the Federal Reserve might be a mysterious board that deals mainly with interest rates. Following Hurricane Katrina, the Fed helped South Mississippians and New Orleanians in a very concrete way. And a Coast businessman can be credited with helping make that possible.

Dave Dennis, president and CEO of Specialty Contractors & Associates Inc., in Gulfport, has served on the New Orleans branch of the Federal Reserve Board of Directors since 2001 and was appointed by the governors. He is retiring from the board when his term expires this month.

"He has been an outstanding director," said Bob Musso, senior vice president and branch manager of the Federal Reserve Bank of Atlanta, New Orleans branch. "And he's been an outstanding ambassador for the Federal Reserve."

Another Great Editorial in Today's Clarion Ledger

2007-12-28T06:02:00.000-06:00

Here is another very well reasoned editorial from our friends at the Clarion Ledger in Jackson:

Insurance: Katrina demonstrates need for bill

Fourth District U.S. Rep. Gene Taylor says he will fight again in 2008 for a bill to add wind coverage to federal flood insurance for protection from another hurricane like Katrina.

But, if so, he's going to have to find an ally in the Senate.

The House bill, which Taylor co-sponsored, with the support of House Speaker Nancy Pelosi, D-Calif., added wind coverage to the National Flood Insurance Program. But the wind coverage provision was not included in a bill the Senate Banking Committee approved, The Associated Press reported. Sen. David Vitter, R-La., has blocked a vote by the full Senate because optional wind coverage and higher coverage limits were not included.

The Senate bill was sponsored by Banking Committee Chairman Chris Dodd, D-Conn., and Richard Shelby, R-Ala. Taylor said he can understand Dodd's objections because of the insurance interests headquartered in his state. "Shelby is the one I keep scratching my head over," he said, because of his constituents in coastal Alabama.

Republican Mississippi Sen. Thad Cochran supports the multiple-perils bill. He should lobby his colleagues for it. Democratic Sen. Hillary Rodham Clinton had introduced a similar bill in the Senate.

Taylor's bill had already been massaged by the House to meet potential objections. Pelosi led a 13-member congressional fact-finding mission to the Coast in August. Listening to victims at a town hall meeting in Bay St. Louis, she pledged to help, but even she acknowledged: "We're up against a mighty force (lobbying efforts of the insurance industry)."

Pelosi helped push Taylor's "multi-peril" Flood Insurance Reform and Modernization Act of 2007 through the Financial Services Committee in July, and it went to the Senate with full House backing as HR3121. It would allow flood insurance policyholders to purchase wind insurance or as a stand-alone policy, and increases limits.

Catastrophic insurance for hurricanes remains a need for U.S. coastal areas nationwide, so it could - and should - be resurrected. Mississippi is not alone in facing higher insurance premiums, if it's available.

As has been noted in www.clarionledger.com/forums under "Katrina-related issues," home insurance rates are skyrocketing in all the nation's coastal areas. The experience with Katrina on the Coast, still waiting for insurance and government promised relief, is evidence for HR3121.

As one reader wrote: "My husband and I chose to stay here, even though we lost everything we owned, because of his business. It cost everything we had and then some to build a new home, miles away from the water and insurance was still astronomical. But ... if we waited for progress to be made down here, we would be dead."

HR3121 should not be allowed to die. The very life of the Coast could be at stake.

HR3121 News Out Today

2007-12-27T09:59:00.000-06:00

Folks, when Gene Taylor isn't fighting us here on the Coast he is looking after our Mississippi boys serving in Iraq, this time bringing them 50 gallons of Tony Trapani's best seafood gumbo for a special Christmas Eve dinner in Iraq. Now Gene is not some tin horn chicken hawk content to send other people sons and daughters to fight George Bush's war as his own flesh and blood is on the wall for us in Middle East. God bless Gene Taylor and his service to all of us here in the Mississippi 4th congressional district.

There are two stories out today about the status of HR3121. Some local background is in order as it was clear to me back in August at Gene's town hall meeting that the assembled democratic leadership (which included Jim Clyburn and Nancy Pelosi) saw our nation's coastal insurance problems as a potent campaign issue. Gene may have taken the first shot today at a now locally famous GOP corporate water boy, Senator Richard Shelby of Alabama.

"The Senate bill was sponsored by banking committee Chairman Chris Dodd, D-Conn., and Richard Shelby, R-Ala. Taylor said he can understand Dodd's objections because of the insurance interests headquartered in his state. "Shelby is the one I keep scratching my head over," said Taylor, who thought the senator would support the measure because of his constituents in coastal Alabama."

Now it appears the AP story picked up by the Clarion Ledger derives from Anita Lee's story at the Sun Herald but contains a few paragraphs (the last two in this excerpt) not found in the Sun Herald piece:

"Taylor, D-Miss., who represents south Mississippi in Congress, said Wednesday that people won't build back on the Gulf Coast until they are able to buy insurance they can depend on.

Critics of multiple-peril insurance say such a program would be financially unsound, leading to more debt on top of the $20 billion NFIP incurred from Hurricane Katrina.

Taylor said it would be better to spread hurricane risk among coastal states rather than have individual states assume those risks. Mississippi, for example, offers wind insurance for six coastal counties. Florida and other states also have wind pools."

To date this Cowboy is not aware of one shred of evidence these "critics" have presented to support their assertion that HR 3121 would be financially unsound. Also the critics the story quotes leave out the unpleasant fact that it has been alleged that as much as $9 BILLION dollars of wind claims may have been dumped on the taxpayers via the flood program.

Down here folks when someone intentionally spreads a half truth it's called, "pissing on your leg and saying it's raining." When it comes to the debate on HR3121 and it's unnamed critics, it's best to come to the hoe down equipped with an umbrella.

Mr. Rogers Couldn't "Make Believe" this Neighborhood

2007-12-27T06:48:00.000-06:00

Before Katrina, the mix of neighborhoods in the three coastal counties of Mississippi was typical small town America and the place called home to those living there.

Home after home looked like this in neighborhoods from Ground Zero to the Alabama state line after Katrina. Because the wind had earlier blown the roof off this house, when the water came, the lucky owner and his family were able to roof raft their way to safety in what he later called the ultimate water ride.

Over two years after Katrina, this home and countless others look like this - each in some way a casualty of the insurance war. Many, like this homeowner, are victims of the uncertainty. As Mr. Rogers sang, he "wants to have a neighbor just like you...to live in a neighborhood with you."

Rebuilding is more than construction. Neighborhoods are the infrastructure of both the built and social community. Unless a home owner can self insure, he is limited to the current $250,000 limit of flood insurance since windstorm policy recovery has proven problematic. At the current cost of construction, that equates to a home of approximately 1800 square feet - larger than the largest Katrina Cottage but considerably smaller than many of the homes lost to the storm.

The longer the uncertainty lingers, the more difficult it becomes to rebuild the social community. Social networks provide relationships that connect people to essential social supports in much the same way that roads connect the built community. Many consider these social networks "the 'scaffolding' or framework upon which successful community-building efforts are created."

The wind came first, then the water - washing away all but the truth. "Somewhere deep inside each one of us human beings is a longing to know that all will be well."

Purchasing Insurance: Market Transparency and Other Important Concepts Part 1

2007-12-26T11:09:00.000-06:00

At the Mississippi Insurance Forum we have identified two main problems with Property and Casualty insurance in the aftermath of Hurricane Katrina:

1. Unfair and predatory claims handling as demonstrated by the unrefuted fact patterns in cases like McIntosh v. State Farm where State Farm threatened to fire their own engineers who found wind damage as the primary cause of the loss rather than flooding. State Farm actually ordered additional engineering reports until they received the "answer" they requested in such cases.

2. A lack of transparency in insurance product pricing, especially in the area of reinsurance.

While we will tackle both issues its worth noting the first has already received a fair amount of press attention while the second has not been addressed in detail except at a few web sites like this one. I suspect the reason the economic concept of market transparency has received such little attention is because it is complicated to explain and understand. I endeavor with this entry to start our readership along the path to understanding these important yet basic economic principles.

First we need to start with the decision to purchase a multi-peril homeowner's policy and examine the criteria consumers use when selecting an insurer. Think about it, how did you choose your insurance agent and insurer? Did you let your fingers do the walking or perhaps you received a referral from a friend of the agent? Or maybe we thought the ad we saw during the football game was good and we feel safe knowing the local agent in the spot showed up when the house burned down. Maybe as a first time homebuyer you got a good tip from your mortgage broker on who to use. Another good question is why did you buy the policy? Because it was it required by the bank or mortgage company? What about the policy limits, were they set to only cover paying off the mortgage because it was cheaper than insuring the total value? How many times since you first purchased the policy have you evaluated the risks you are paying to insure?

These are all very important questions. My professional experience preparing post Katrina income tax returns with casualty loss is that most people literally are asleep at the wheel when it comes to assessing the risks that may impact them in the future. In fact I submit it is basic human nature to avoid thinking about such unpleasant possible future events. The end result of burying ones head in the sand is invariably bad for the consumer once disaster strikes.

Post disaster hindsight reveals the complete inadequacy of the original criteria we used to select an insurer. For instance, the fact your local State Farm agent is a good guy (mine is for certain) is meaningless when the "good neighbor" refuses to pay for an insured risk. And all the accumulated advertising we've seen never prepared us for the very real possibility the good neighbor will force many of it's customers to use the court system to collect on the policy as a matter of internal claims handling policy.

Had we used good criteria originally to purchase insurance, we would have considered variables such as recent claims handing histories of these companies in our purchase decision. I've had people I know off the coast tell me they are not worried about State Farm covering windstorm risks because they are "too high to flood". Human nature then takes over for a time, refusing to believe that State Farm refused to cover obvious wind damage in Oklahoma City after an F5 tornado struck there in May 1999 or that a jury there found, "that State Farm "recklessly disregarded" its duty to deal fairly with policyholders, doing so "intentionally and with malice" through the use of biased expert opinions after the 1999 tornado." Perhaps we decide to switch to another insurer such as Allstate only to find out their internal documents describe treating a claimant/customer with "Boxing Gloves" instead of "good hands" and their record in customer treatment in automobile insurance claims appears abysmal. In fact we find out that according to the AM Best, "In the decade after Allstate instituted the McKinsey program in 1995, the amount of money it paid out per premium dollar in car accident cases declined from about 63 cents to 47 cents". Most importantly we find out the lack of good information the consumer has to evaluate insurers is stunning.

Insurers on the other hand know a good bit about their customers. They know your credit score for instance and will rely on a computer model to determine how your claim is handled. In a previous post on this forum I detailed how insurers spend big money on weather modeling to assess the risk they face. In short most consumers use subjective, sometimes emotional criteria to purchase insurance while insurance companies use objective criteria in how they conduct business. The gap in market knowledge between insurers and consumers is referred to in economics as Information Asymmetry, and is defined as "A situation in which one party in a transaction has more or superior information compared to another. This often happens in transactions where the seller knows more than the buyer, although the reverse can happen as well. Potentially, this could be a harmful situation because one party can take advantage of the other party’s lack of knowledge."

In future posts we will further examine the concepts of Asymmetric information and how it translates into premium pricing, especially in reinsurance.

sop

Home for Christmas...only in dreams

2007-12-24T00:10:00.000-06:00

Since Christmas 2004, many of the people of Katrina Ground Zero have been home for Christmas...only in their dreams.

All do dream. Whatever they called "home" - humble or grand, rented or owned, is gone. Some 14,000 are celebrating yet another Christmas in a travel trailer. Others are sharing space in another family's home. Many of those able to find temporary housing found little more than a roof over their head.

The emotional and financial toll is staggering and there is no Santa Clause delivering a Gulf Coast version of Miracle on 34 Street for those caught in the crossfire of the "insurance war" or the logjam in Congress over HB3121.

As they have done since Katrina, the people of Ground Zero continue to give to others at Christmas - even when all they have to give is themselves.

Although most had been "slabbed" by Katrina, the remaining members of the Coast Choral - about one-third the number before the storm - gathered to sing their annual concert that first Christmas. Yet unable to replace the music and other items lost to Katrina by Christmas 2007, they continue to bring "Joy to the World of Ground Zero.

In the spirit of Christmas, please remember the people of Ground Zero who will be home for Christmas...only in dreams.

Good Editorial in Todays Clarion Ledger

2007-12-21T07:47:00.000-06:00

Here is a well reasoned opinion on the impact of the current legal mess and it's impact on coast residents seeking justice.

"Katrina lawsuits: Coast residents want justice

The Clarion-Ledger

For Mississippi Hurricane Katrina victims, hope for recovery from the storm took a sickening turn with the charges lodged against attorney Dickie Scruggs.

State Farm Fire and Casualty Co. is seeking to have attorneys with Scruggs' "Katrina Litigation Group" representing policyholders thrown off a key case because the insurer claims the lawyers have behaved unethically.

Scruggs withdrew from most of his firm's Katrina cases after his indictment on charges he tried to bribe a judge for a favorable ruling in a dispute over legal fees.

The newly formed group, which includes members of Scruggs' legal team, is now handling hundreds of cases on behalf of Coast policyholders in "wind vs. water" disputes, alleging the insurer failed to honor claims.

State Farm claims that Scruggs and members of his team have committed "highly unethical acts," such as illicitly obtaining internal claims records, and have "irreparably perverted the litigation process."

Scruggs' indictment has muddied the water for policyholders. The more cases are delayed, the longer the recovery can take - if homeowners don't just give up or move away. About 14,902 families still are in temporary housing units in Mississippi.

In clarionledger.com's Forums, under Katrina-related issues, Mississippi Insurance Forum, readers commiserate. Says one: "'Ain't life grand?' For some people, maybe, but nothing's grand for the people on the Coast that were 'slabbed' by Katrina, 'stabbed' by their 'good neighbor,' and forced to live out a horror story that even Hitchcock would find frightening.

"Life's not going to be grand for anyone in our state until we get to the bottom of this mess ... Unfortunately it's going to take a long time - longer, I fear, that folks with valid claims can hold on."

Mississippians have the "want to" for rebuilding. The legal disputes need to be resolved."

Wind: "Breaking News"

2007-12-17T23:02:00.000-06:00

If you missed Sop’s post last Friday, scroll down and take a look and look at the pictures he took after Katrina. Pay particular attention to picture number three. Note his question - How is it that the majority of the houses on this street stood while three houses in close proximity of one another were reduced to rubble?- and his answer – a tornado or mini-tornado – evidenced by the damage to nearby trees.

Some claim there were no tornadoes documented in Katrina as the storm hit and passed over the coastal counties.

Could this be a case where there are two sides of the story and both are true? Let’s visit the University of Illinois at Urbana-Champaign, take a look at a hurricane, and see what we can find out.

Hurricanes initiate from an area of thunderstorms. Once these thunderstorms become a hurricane, an “eye” is located near the center and surrounded by an “eye wall” containing the most damaging wind and intense rain. Tornadoes [are] found within the eye wall and in the spiral bands outside.

However, a tornado’s circulation is present on the ground either as a funnel–shaped cloud or a swirling cloud of dust and debris. In other words, evidence of a tornado will be a damaged area somewhat circular in shape.

The damage Sop pointed out was linear. Nonetheless, it was very real and distinctly different from other wind damage – exactly the type of damage caused by what is called a plough wind.

Plough winds belong to a family of strong, straight-line downburst winds found in thunderstorms. When they strike the ground the air spreads horizontally in a burst of wind, much like water pouring from a tap and striking the sink below.
Plough winds can blow continuously but the damage is usually confined to an area less than 3 km [or approximately 2 miles] across. They are more common than tornadoes and have the power of a twister but the damage pattern looks different - a starburst or more commonly a straight line.

How could the linear pattern of damage in Sop’s picture be the result of anything other than plough winds from the thunderstorms that formed hurricane Katrina?

Ask Sop who paid. "I personally know of at least one such resident who was only paid on their flood policy instead of their private wind policy. That's right ladies and gents, the bill was on you, the taxpayers."

Insurance Weather Modeling - Others Have Questions Too

2007-12-17T07:15:00.001-06:00

Last week I posted a couple of different links to stories on the use of weather modeling in setting insurance rates. I shared some questions that are stuck in my mind on the reliability of the long range forecast. Given the magnitude of coastal insurance rate increases since Katrina struck, the issue of whether consumers of insurance are being treated fairly on price and the use of weather modeling to justify drastic price increases was addressed last week as well in the Boston Globe.

"HOME INSURANCE rates are skyrocketing on Cape Cod, the islands, and in other coastal areas. Driving the increases are concerns by insurers that a major hurricane could wreak the kind of devastation that hurricanes have brought to other parts of the country. Some companies have simply stopped insuring in shore areas, forcing homeowners into the state's FAIR Plan, the insurer of last resort.

But Massachusetts need not simply accept this price spiral, because the state has options for making insurance more affordable. One is for state officials to take a closer look at the models of hurricane devastation that insurers use to justify their higher rates.

Companies hold these "black box" models closely, but a legislative commission recommended earlier this month that state officials seek access to them. The panel called for a new "independent public entity" to study the reliability of the models. Two members - state Senator Robert O'Leary of Barnstable and state Representative Eric Turkington of Falmouth - went further, calling for the state to create its own model or require that any private model be open to review by the attorney general. Such efforts make sense; rates for a product that homeowners have little choice but to buy ought to be based on defensible criteria."

Merlin Law Blog

2007-12-15T13:57:00.000-06:00

Folks, this Cowboy has been letting the totality of this mess sink in and then I read this comment on David Rossmiller's blog that appears to sum things up well:

"For those scoring at home:
1.Maria Brown blew the whistle and sued Nutt & McAlister of SKG, alleging sexual harassment, hostile work environment, and mentions N&Ms failure to turn over records to Judge Acker.
2. Scruggs and Bartimus, Frickleton, Robertson & Groney have filed suit against State Farm, Nationwide, Allstate, USAA, and several engineering firms for overbilling the federal government for Hurricane Katrina damage.
3. Jones, Funderburg have sued Dickie Scruggs, Don Barrett, Scruggs law firm, Barrett law office, Nutt & McAlister, and Lovelace law firm over payment of disputed funds. Jones and Funderburg have asked to court to take control of SKG assets.
4. United States of America v. Dickie Scruggs, Zach Scruggs, Sidney Backstrom, Tim Balducci, and Steve Patterson for attempting to bribe Judge Henry Lackey.
5. Balducci blew the whistle against Scruggs & Co, and pleads guilty to bribing Judge Lackey.
6. Jim Hood, AG, sued State Farm for breach of the settlement agreement.
7. State Farm sued Jim Hood, AG for breach of the settlement agreement.
8. State Farm sued to disqualify Dickie Scruggs from Katrina cases.
9. E.A. Renfroe & Co sues whistleblowers Cori and Kerri Rigsby for violating the Alabama Trade Secrets Act and breaching confidentiality agreements.
10. Judge Acker appoints special prosecutors to prosecute Dickie Scruggs with criminal contempt related to the E.A. Renfroe suit against the Rigsby sisters."

Except this post really sums up nothing about the real insurance issues or insurance law. Notice folks the implied threats against the Rigsby sisters, who by all accounts have had no involvement with the allegations against Scruggs. Most of what makes the so called insurance blogs these days is either old news, or half the story as Mr. Rossmiller himself pointed out in an rare moment of balanced commentary.

Well folks, here on the Mississippi Insurance Forum you'll get just insurance talk; straight talk in fact, the kind that even a Cowboy can understand without a bunch of frue-frilly legal double talk. That's probably why this Cowboy-farmer enjoys reading Mr. Chip Merlin's insurance law blog. While the talking heads sit in places like New York City and Portland Oregon ole Chip was over New Orleans way at the Fifth Circuit Court of Appeals listening to the actual arguments. He presents an analysis of the recent Broussard arguments that you won't find anywhere else and he makes it understandable. I highly recommend it.

In his reply to me there he summed up why you can't trust a carpetbagger with this issue. Like in most cases it's what these talking heads don't tell you that matters most. Remember folks, State Farm threatened the engineers with termination because they found 2 instances of wind rather than flood in over 90 reports. Whadda you think the "boxing glove" hands people would do to a lawyer that doesn't tote the company line?

"Claims Dumping" - A Primer

2007-12-14T09:17:00.000-06:00

There is an informal brotherhood of those slabbed and/or destroyed. Among that brotherhood all know at least one person whose house was destroyed by wind but was only paid their flood coverage (if they had it). We are not professionally trained licensed engineers but in some cases the cause was most evident, such as in the picture of this house in Lakeshore which was also flooded but not subjected to wave action.

This is a picture of the house across the street also smashed and flooded. The window in the house was removed by the owner as they salvaged some of their contents from the interior. In both cases the contents of these houses stayed with the house instead of being swept from it like so many others.

This picture finishes the story, notice the house down the street left standing. All the homes on the street were built within a year or so of each other by the same builder. Also notice the hole in the roof of the house down the street that stood. How is it that the majority of the houses on this street stood while three houses in close proximity of one another were reduced to rubble? A tornado or mini tornado is the cause. There was a line of snapped trees that lined up perfectly with the woods across the field from the destroyed houses on this street and through to the woods on the other side. I personally know of at least one such resident who was only paid on their flood policy instead of their private wind policy. That's right ladies and gents, the bill was on you, the taxpayers.

The Right Side of Hurricane Katrina

2007-12-14T01:56:00.000-06:00

The right side of a hurricane is the wrong side to be on.

You could take that sailor's warning to the bank after Katrina – if there had been one after Katrina.

The weather wizards say "ground zero" is where the eye of a hurricane makes landfall.

Katrina's eye passed just to the right of the Louisiana-Mississippi state line in Hancock County, Mississippi. We're the orange spot on the map.

Of course, it didn't take the wisdom of a wizard for any of us to figure out we were "ground zero". All we had to do was take a look around and see nothing - "zero" - on the "ground" escaped Katrina's wrath.

There's still more nothing than something down here, rebuilding is stalled in the court, the economy is heading further south, and some are starting to wondering if we haven't hit "Ground Zero for Hope".

The right side of an insurance claim is the wrong side on after a hurricane.

When you purchase a homeowner's policy with hurricane coverage, you expect the insurance provider to know what a hurricane is and what it does. If they don't, you'd sure expect them to look it up and not make it up. Nonetheless, make it up appears to be exactly what some did.

All 82 Mississippi counties were included in the disaster declaration and 60% (49) were eligible for full federal disaster assistance. The insurance folks north of the Coast didn't seem to have a problem understanding that water damage is covered if the wind blows a hole in your roof and water gets in your house.

Most of us didn't even have a roof after Katrina blew through here. You would think, then, it wouldn't be hard for the ones they sent down here to figure that water damage was done before the surge followed Katrina inland. Actually, it appears they did figure it out – probably right about the time they started trying to figure out ways to get by without paying when all that Katrina left behind was a slab.

The wrong side of a hurricane to be on is the one it takes a lawyer to make right.

Insurance 101

2007-12-12T18:06:00.000-06:00

Here are a few key definitions and concepts which might help those new to the insurance forum more rapidly understand the nature of the insurance problems our society faces. I will add more as time allows and hopefully we might combine them with other concepts.

What is Insurance?

One definition of insurance is a system to make large financial losses more affordable by pooling the risks of many individuals and business entities and transferring them to an insurance provider for a premium. More basically insurance is the process of the assumption of risk from one party to another for a fee.

The key to understanding insurance is the concept of risk assumption. In insurance terms risk is the chance of loss of that which is insured.

For the purposes of this web site the main type of insurance studied is property/casualty in general and catastrophe insurance (CAT) in particular. ISO defines a catastrophe as an event that causes $25 million or more in insured property losses and affects a significant number of property/casualty policyholders and insurers.

What is the role of insurance providers?

Insurance providers core function in society is that of helping to manage risk. Insurance plays a vital role in helping individuals and businesses prepare for and recover from the potentially devastating effects of a disaster such as a catastrophic hurricane or earthquake.

Insurance providers help society pre-pay for their risk needs. Catastrophic insurance providers have a special role in helping entire communities pre-pay for their disaster needs. Because their losses are more volatile the property/casualty insurers invest largely in high-quality liquid securities, which can be sold quickly to pay claims resulting from a major hurricane, earthquake or man-made disaster such as a terrorist attack.

Who are the leading providers?

Data from the National Association of Insurance Commissioners (NAIC) identifies the 10 leading writers of non-governmental property/casualty insurance by direct premiums written during the 2006 calendar year.

NAIC percentages were based on the U.S. total including territories before reinsurance transactions, excluding state funds.

State Farm Group 10.0%
American International Group 7.6%
Zurich Insurance Group 5.6%
Allstate Insurance Group 5.6%
Travelers Group 4.4&
Liberty Mutual Insurance Group 3.7%
Nationwide Group 3.2%
Berkshire Hathaway Insurance Group 3.1%
Progressive Group 2.9%
Hartford Fire & Casualty Group 2.4%

It should be noted the federal government is considered by many CEO's of insurance and individuals as the insurer of last resort. The federal government is also the sole insurance provider for basic flood coverage in the United States.