Allstate back in business

Judges say the state, which wants more information on rate hikes, can't ban the insurer.

By TOM ZUCCO, Times Staff Writer
Published January 19, 2008

Allstate's journey into Florida insurance regulation purgatory lasted all of one day.

A three-judge appellate panel on Friday overturned an order by state Insurance Commissioner Kevin McCarty banning Allstate Corp. from selling new policies in any line of insurance in the state. Regulators say Allstate has refused to comply with subpoenas seeking documents that explain why the Illinois-based insurer wants to raise homeowners rates in defiance of a state law passed last year.

Without issuing an opinion, 1st District Court of Appeal Judges Edward T. Barfield, Michael E. Allen and James R. Wolf ruled that Allstate could resume normal business immediately.

A spokesman for McCarty's office said regulators are drafting a response detailing why Allstate's license should be suspended and would file the brief within the court's 10-day limit. Regulators also have the option of imposing a one-time fine of up to $25,000 on the nation's largest publicly traded home and auto insurer. Separately, Allstate has been fined $25,000 a day since September for refusing to comply with similar subpoenas in Missouri, but it has yet to pay the fine.

Gov. Charlie Crist, one of the industry's most ardent critics, said Friday that he was disappointed by the court's action.

"I urge Commissioner McCarty to act as early as Tuesday to show why the order suspending Allstate's license should remain in effect," Crist said in a statement. "For too long, insurance companies have ignored the needs of their customers and unfairly taken advantage of Florida homeowners."

Allstate officials, however, took the ruling as vindication. "This now allows our agents to continue to offer our products," said company spokesman Adam Shores.

"Allstate is back in business."

In its motion to overturn the order, Allstate argued that McCarty's office had "abused its power by issuing an emergency order that is intended to function as a punitive stick."

Allstate also argued that since McCarty's office claimed Allstate was not responding to subpoenas, state statutes require regulators take their case to the Circuit Court of Leon County.

"The key argument, we believe, was that we have worked very diligently to comply with what the Office of Insurance Regulation requested of us," Shores said. "The fact the court ruled so swiftly indicates they recognized how this affects our business."

Appellate lawyer Tom Elligett, an adjunct professor at Stetson University College of Law, said that had Allstate been found to be financially impaired, the order might have been different. But that's hardly the case.

Allstate estimates net income of $5-billion in 2007, a company record. Nonetheless, news of Friday's court ruling didn't help Allstate's stock, which lost $1.12 2.26 percent to close the day at $48.46.

"Part of what's driving this," Elligett said, "is that Allstate is a giant company. They're not going to go out of business. If they overcharged their customers, they can be forced to give back the money.

"You don't have to put them out of business in the state."

Elligett said the appellate court likely looked for balance, specifically what harm would be created if the ban was lifted or the order remained in effect.

"I think one would deduce this is about acquiring documents," Elligett said. "But Allstate will still be here and pay if it turns out money needs to be rebated."

What remains uncertain is how much damage McCarty's order has already done, not only to Allstate, but to other companies looking to move or expand in Florida. Allstate was roundly criticized this week by Crist and several state lawmakers. "I don't know why you'd want to pay them (Allstate) money for anything," Crist said Thursday.

"The problem is you'll never be able to measure how this will hurt Allstate," said Tim Meenan, a lobbyist for the Florida Association of Insurance and Financial Advisors, an industry trade group. "How do you count the people who didn't show up in an agency office? There will be those who won't, and who blindly follow the comments of the governor.

"The message this is sending to the (insurance industry) is don't come here to do business."

Regulators insist that isn't the case, and that the goal - compliance with Florida law - has not changed.

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

Tom Zucco can be reached at zucco@sptimes.com or (727) 893-8247.

Troubles elsewhere

Allstate's tough stand in Florida has sparked separate litigation across the country.

Allstate Corp. chief executive officer Thomas J. Wilson and 12 other directors mismanaged the company, hurting its reputation with excessive litigation, a shareholder said in a federal court complaint filed Friday.

The directors, including former CEO Edward M. Liddy, conspired to withhold documents from litigation and from regulatory agencies, subjecting the insurer to excessive fines and sanctions, according to the complaint filed in federal court in Chicago.

"Allstate has been and will continue to be exposed to significant losses due to the wrongdoing," plaintiff shareholder Raul Fojas of Queens, New York, said in the complaint.

Bloomberg News

[Last modified January 19, 2008, 00:40:40]