La. insurance regulators order Allstate to reverse cancellations

Louisiana Commissioner of Insurance Jim Donelon on Mar. 6 ordered Allstate to scrap its property inspection process that led to the cancellation of more than 4,700 homeowners policies and reinstate coverage on those homeowners who got a notice of cancellation as a result of those inspections.

The Louisiana Department of Insurance received 386 complaints from homeowners who were notified by Allstate that their policies will not be renewed this year, Donelon said. According to the deparment, many were living in their Hurricane Katrina-damaged homes at the time Allstate told them their insurance was being cancelled because the home was abandoned.

Allstate is the state’s second largest residential insurer.

Insurance department staff interviewed 18 homeowners who received the Allstate cancellation letter. In all 18 instances, the department found that the Allstate inspectors should have been able to tell that the homeowners were either living in a FEMA trailer on their property, making repairs to their hurricane-damaged homes or living in the fully or partially repaired home, and thus should not have had their insurance cancelled.

Allstate spokeswoman April Eaton told the Associated Press that the Northbrook, Ill.-based company didn’t send cancellation notices to policyholders without inspecting their property. “That took us quite some time, but it is a commitment we wanted to make,” she said.

According to an insurance department announcement, Donelon met with Allstate officials Mar. 5 to discuss how the inspections were done and to reveal the results of his own investigation into the 18 properties. Donelon was told by Allstate that around 40,000 inspections were done in Jefferson, Orleans, Plaquemines and St. Bernard Parishes. From those inspections, 8,853 homeowners were sent a preliminary letter asking for proof that the home was occupied: 1,354 voluntarily terminated their homeowners policies; 2,727 homeowners mailed in acceptable documentation to Allstate and were not cancelled; and 4,772 homeowners received a cancellation letter.

The inspection process, cited by Allstate as an industry standard, involves a team of two inspectors driving by each property and noting whether the home is vacant, under repair or accepted as fully repaired. No supporting documentation for the finding is given, according to LDI.

Donelon is requiring that the new inspection process include dated and signed documentation for each finding, including notes by each inspector with express reasons given why a property is deemed vacant.

The department plans to continue investigating all complaints as they are received and as part of the investigative process, and department staff will continue to visit the homes of policyholders who received a cancellation letter from Allstate, LDI’s announcement said.

Many policyholders are baffled by Allstate’s cancellations, the AP reported.

Robyn Halvorsen, whose home in the Bywater neighborhood of New Orleans didn’t flood, moved back in less than a month after Katrina hit. Allstate concluded her home was abandoned even though she says the house is completely renovated, with a garbage can and garden in front.

“There is no way anybody could think this house is abandoned,” said Halvor-sen, whose policy was set to be dropped Mar. 6. She wondered if Allstate added her to its list of cancellations simply because Bywater shares an ZIP code with devastated neighborhoods like the Lower 9th Ward.

Allstate previously agreed to reinstate coverage for 76 of the 386 homeowners who filed complaints with the department, the according to the AP report.

After Katrina and Rita hit, the LDI imposed an emergency rule that temporarily barred insurers from canceling policies. After the rule expired on Dec. 31, 2006, insurers had 60 days to notify homeowners of a policy’s cancellation. Donelon said Allstate appears to be the only insurer that is performing “bulk cancellations” of policies in Louisiana.

Associated Press reports contributed to this story.