Allstate Corp. will restore insurance coverage for hundreds of customers and pay $250,000 to resolve disputes over cancellation of south Louisiana homeowner policies after Hurricane Katrina, the company said this week.
The Northbrook, Ill.-based company has clashed with state Insurance Commissioner Jim Donelon over two separate issues that resulted in several thousand policy cancellations at a time when rates had skyrocketed.
“With this settlement, we resolve those issues in favor of the policyholder,” Donelon said.
Allstate said it has agreed to offer wind and hail policies to a “few hundred” customers whose coverage had been canceled, but only if their policies were in effect for at least three years on the same property.
Donelon’s office fielded complaints from Allstate customers who say they lost wind and hail coverage after they switched from one Allstate company to another. Allstate had argued that switching to a different division of the company constituted creation of a new policy – allowing cancellations under Louisiana law.
With limited exceptions, state law bars insurers from canceling policies in effect for three years or longer. But Allstate had claimed the law doesn’t apply to customers who switched.
“This agreement is the result of our desire to find a solution that meets the needs of the customers and the agents who serve them,” Ron Corbin, Allstate field vice president, said in a written statement.
Neither Donelon nor the company knew precisely how many policyholders would be reinstated. Both said the number was in the hundreds.
Michael Scioneaux, 53, said he was an Allstate customer for 31 years before the company canceled his wind and hail coverage last year. Scioneaux, whose home is in the New Orleans suburb of Gretna, said he didn’t know that increasing his policy limits in 2004 would shift him from one Allstate division to another and leave him open to cancellation after Katrina.
Scioneaux, personnel director for Jefferson Parish, said he bought more expensive wind and hail coverage from Louisiana Citizens Property Insurance Corp. _ the state-run insurer of last resort _ after Allstate dropped him.
“If I can save money with Allstate, I’d hold my nose and go back,” he said. “But if I do go back with them, they’re going to have an openly hostile customer on their hands.”
Separately, the company said it will pay $250,000 to the insurance department as part of an agreement on its inspection program.
Donelon threatened to fine Allstate last March after hundreds of complaints from homeowners who said the company canceled their coverage after its inspectors wrongly concluded their properties had been abandoned. Donelon ordered Allstate to reinstate the 4,700 policies after his agency conducted its own investigation and concluded the company was using a flawed, “drive-by” inspection process.
At the time, Allstate questioned whether Donelon overstepped his power and whether he had properly investigated the matter.
Donelon said he decided to fine Allstate “because of the continued pattern of such efforts, on the behalf of the company, to circumvent the homeowners statute that has served us so well in the aftermath of Katrina (and) Rita.”
The company said it agreed to pay the $250,000 “to avoid expenses associated with a hearing on the matter.” Under the settlement, Allstate admitted no wrongdoing.
Allstate is Louisiana’s second-largest insurer, with roughly 22 percent of the homeowner market.
Associated Press Writer Michael Kunzelman in New Orleans contributed to this story.
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