Texas Attorney General Takes on State Farm Non-Renewal Plans

By | May 4, 2012

Texas Attorney General Greg Abbott is taking issue with one of the nation’s largest homeowners insurer’s plan to non-renew thousands of policies for properties along the Gulf Coast.

Abbott said his office is conducting an investigation into State Farm Insurance Co.’s proposal to deny renewed coverage on more than 11,000 policies of Gulf Coast Texans.

“The largest issuer of homeowners insurance in Texas has filed a lawsuit in an attempt to prevent the Attorney General’s Office from investigating its non-renewal of thousands of residential property insurance policies along the Gulf Coast,” Attorney General Abbott said in an announcement released by his office. “Given the number of Texans that are affected, we want to ensure that State Farm complies with the law. If State Farm has not done anything wrong, it’s certainly curious that they would go to court just to avoid the State’s subpoenas.”

In mid-April the Attorney General’s Office sent civil investigative demands — a type of civil subpoena — to State Farm Lloyds of Texas seeking information about the company’s decision not to renew the coastal policies.

State Farm subsequently filed a lawsuit against the AG’s office in an attempt to modify or set aside the AG’s request for information. In the filing, State Farm indicated Abbot had demanded 22 “separate categories of information, involving potentially thousands of pages of documents” to be produced in a week’s time.

While the AG’s office asserted that State Farm’s lawsuit was an “effort to avoid its obligation to provide the information requested by the State,” the company countered that its filing was an effort to “preserve its rights.”

State Farm indicated that it notified the AG’s office before filing the lawsuit, and that the company intended to cooperate and would not go forward with the lawsuit “unless and until it becomes necessary.”

State Farm public affairs representative Patti Kelly confirmed that the non-renewal of around 11,000 Texas coastal policies began on May 1

As to the attorney general’s actions, Kelly said the company could not comment as the matter is in litigation. “However, we have filed suit in an effort to protect our legal rights,” Kelly told Insurance Journal.

Kelly said the company is cooperating with TDI on its market conduct exam of State Farm’s non-renewal activity on the coast.

“The impacted counties are Galveston, Brazoria, Jefferson, Orange and Chambers,” she said. “Even with these changes, State Farm has more policies in coastal counties than any other private insurer. In fact, we serve more customers throughout all parts of Texas than any other insurance provider — showing a commitment to the state that no other carrier can match.”

In the lawsuit filed against the AG’s office, State Farm stated that in December 2011, it provided TDI with “underwriting guidelines for property insurance that modified the eligibility requirements for new business along the Coast.”

State regulators were also “provided additional requested information – prior to implementation,” Kelly said

TDI ultimately “determined the guidelines complied with state law,” State Farm’s lawsuit states.

However, when the company informed regulators in 2012 that it intended to non-renew some 11,300 customers — both residential and commercial — along the coast “consistent with the eligibility requirements for new business” contained in the previously filed underwriting guidelines, TDI opened an investigation.

That investigation is ongoing, according to the company’s lawsuit.

Kelly said that while the company is committed to protecting its Texas homeowners customers, “we must find the appropriate balance between exposure, the resources available to maintain a quality level of service, and our ability to meet our financial obligations. We use detailed models to ensure we have the resources in place to meet all the promises we make to policyholders in Texas.”