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State asks court for reversal on Allstate

Regulators argue for a policy ban to be reinstated, saying the insurer broke the law.

By TOM ZUCCO, Times Staff Writer
Published January 24, 2008

Charging that Allstate Corp.'s failure to turn over documents to Florida regulators is a crime, the state's Office of Insurance Regulation filed a brief Wednesday with the First District Court of Appeal seeking to reinstate a suspension of Allstate's license to do business in the state.

Insurance Commissioner Kevin McCarty last Thursday ordered that Allstate's 10 Florida companies be banned from selling any new insurance policies in the state until the Illinois-based insurer produced documents key to a state investigation into the company's underwriting practices.

But a day later, the appellate court stayed the order, allowing Allstate to return to business as usual while the two sides continue their legal battle.

McCarty said he essentially had two choices: impose a one-time fine of up to $25,000 against the multibillion-dollar company or suspend its license. "A slap on the wrist," McCarty said, "or the death penalty."

McCarty chose the latter. For the second time.

In something of a concession, late Wednesday, Allstate turned over the so-called McKinsey documents, so named for the McKinsey consulting firm's suggestions to maximize profits on claims-paying in the auto insurance line. Most of what regulators say they want to see are documents relating to Allstate's rate-setting practices in the homeowners line, specifically the company's compliance with an insurance reform law passed last year, and its relationships with reinsurers, rating agencies, trade associations and hurricane modeling companies.

"Does turning over those McKinsey documents change anything?" asked OIR spokesman Tom Zutell. "Of course not. Allstate was supposed to have all the documents to us by last Tuesday, and we still don't have many of them."

Allstate officials say Wednesday's action "doesn't change the fact our agencies are open for business," said spokesman Adam Shores, adding that handing over the McKinsey documents "is a strong example of our willingness to comply with the subpoenas."

But in its request to reinstate the ban, OIR attorneys argued that Allstate's failure to comply with the subpoenas "is an on-going crime, an on-going violation of Florida law and harmful to Florida consumers." Regulators also argued that Allstate could have asked for more time to comply, but did not.

A ban on new policies, regulators say, could finally get Allstate's attention. The third-largest property insurer and second-largest auto insurer in Florida, Allstate's 1.7-million auto policies represent more than three-quarters of the company's business in Florida. The company sells about 3,500 new auto policies a week statewide. Any ban would not affect renewals of existing policies.

Appellate lawyer Tom Elligett, an adjunct professor at Stetson University College of Law, said regulators "did a pretty good response in terms of making the argument state statute gives them the authority to take this action suspending Allstate's business until they comply."

But how the appellate court will rule, he said, is uncertain.

"When most people make a decision, there's a natural inclination to stick with it," Elligett said. "But the court had only seen Allstate's pleadings. Now it's seen the other side. They might see things differently now."

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

[Last modified January 23, 2008, 23:13:42]