i don’t live in florida so pardon me for asking whose this alex and why is he/she saying such stupid things? it seems to be demonstrative of enormous naivete.
I think Bob has hit the nail on the head. Watch and see if his projection is correct. Farmers Insurance did the same thing to their agents in Texas some time back. An 11th hour agreement was struck, coincidently right after the gubenatorial(sp) election and Farmers Insurance stayed in Tx.
Interesting. Sink says: “Your loyal insurance consumers deserve the opportunity to keep their relationship with their State Farm agent and be placed with the property insurance company that best meets their insurance needs”. Then why not let SF have their rate increase and let the “loyal insurance consumers” decide if they’ll pay it?
Isn’t this the only advantage us independents have? Not totally dependent on one carrier to prevent this kind of problem. Leave it up to the state to try to save the poor old State Farm agents. Amazing this state can function at all with the incompetency we have in our state leaders.
Great irony in her statement when you factor in her refusal for a rate increase.
“Given State Farm Florida’s
projected insolvency within the next two years and intended wihdrawal, I find it inappropriate to limit your agents’ ability to help your customers find the best possible property insurance coverage”…
SWFL Agent: You are 100% correct. I am an independent agent and a SF customer. All my family’s properties are insured with SF, residential as well as commercial. The option to pay a 47% rate increase should be ours as consumers, and not the State’s. The Governor and OIR claim there is plenty of capacity at low rates elsewhere in Florida, then why not let the consumers of Florida pay the 47% increase or go elsewhere? Just wait till the wind blows, it is going to be a mess!
We make purchasing decisions on the right side of our brain, which indicates that relationship building and nurturing has a lot to do with the success of any agent – from that initial sale to developing a loyal customer. Now these State Farm customers are being forced to make a change and form new relationships with other agents.
SF agents will be lucky to get $.50 on the dollar for their failing franchises. What a shame.
Each time a Florida lawmaker opens their mouth, they look less capable than they did the last time they opened their mouth. Free market? Rate adequate? Choice? If it weren’t so sad, no alarming, it would be funny. Idiots like Sink don’t even stop to consider that SF clients can choose for themselves, as long as SF is viable. When that stops, no more choice.
Sink didn’t refuse the SF request for the rate increase; “…not her job…”. Check with McCarty over (i.e., probably down the hall) at Office if Insurance Regulation. Nevertheless, a prime example of the “Tallahassee two-step”, various factions dancing around 200 Gaines Street. But, can the rate-payers or tax payers afford to sponsor the music.
you have all missed what is really going on. SF doesn’t want to let their agents place the business elsewhere, because a deal will be struck shortly to allow SF to remain in business in Florida. They really aren’t going to leave – something will be worked out and both sides will claim victory. it will probably be a smaller rate increase, and everybody will think they won.
The real point is that State Farm is a National Company and not a regional Florida only company. They have a business need to be consistent in all 50 states. If they give a special deal to Florida, all the non-Florida agents will want the same ability to write with other carriers.
As for the State Farm agents, I too feel for them but they have had it real good in the past, and it was their choice to join a captive agency arrangement. The OIR should grant the rate increase and let free commerce reign.
Once again, see earlier comments from the Tallahassee two-stepper. It’s all “… dancing around 200 Gaines Street…” But even for a frolicking “Square-Dance”, quite expensive.
Chris Neal with State Farm says in one breath that State Farm Florida agents brokering is not an option and in the nezt sentence says that agents will still have the opportunity to sell other State Farm products including home. Obviously State Farm missed the memo that Citizens (the only carrier left with unlimited ability to pay claims) is a carrier of last resort, it does not want to exist, it is fast being depopulated by small new carriers and having this JUA company be the “home policy” State Farm agents offer is hypocritical and poor citizenship on State Farms part.
State Farm Agents cannot sell their business. They don’t own it. They are paid a servicing commission. When State Farm tanks in Fl– 12000 employees, claim reps, underwriters, support personnel, agents and agents staffs will be affected. This recession gets better every day.
Attn pj: sf is not “talking out of both sides of their mouth”. what they say is true….sell the other sf products and as fl officials want offer citizens. agent and sf have contractual relationship. wheres the hypocrisy? i am beginning to see a florida policyholder mentality: entitlement
Do you suppose that Alex is wakeing up to the fact that all of the additional SF policies being written in Citizens (a bankrupt co)will lead to the bankruptcy of the State of Florida? The only people who will have any money are the Native Americans, who are the owners of the Gambling Casinos, they loan the money to the state, the state files bankruptcy, then they will own Florida again. Full circle.
Only a start up company would want to appoint agents whose only apps would be stamped “HO business rejected by State Farm” Years ago, as a new marketing rep, I appointed a few Farmers agents who were given the go ahead to take independent contracts for HO business – worst mistake I ever made – low production & marginal risks.
Bob’s comments are true in his case but not in this one. State Farm is leaving the HO market in Florida. The clients they leave behind are not bad “rejects” in the sense that the Farmers policies you were getting. Those Farmers agents were giving you there seconds. These are top tier clients who are losing their insurer. However, State Farm agents in Florida are out of luck on HO. They won’t give in anytime soon.
How about the CFO banning this illegal bogus multiline discount as an incentive to write the auto and bury the state with their wannabe crappy products.
I think that we should look at this from an insurance carriers/ consumers standpoint. It is simular in a respect to the National Tarp/ Stiumlus Plan. Fast approaching 2 Trillion Dollar.
The start up carriers make you feel good knowing that you can find insurance, Sell your home and they will be able to get insurance they can afford. This is a temporary “feel good” solution. The actuarial evidence of what would happen after a storm is not so good for the state or the consumers, especially if Florida gets an 04 year again. If this happens, visualize this, the state is bankrupt, No insurance will be available at all, even through Citizens. Carriers leaving without purchasing the bonds and the state fighting carriers in courts to get them to pay the assessments from FIGA. Your clients suing you and your carriers to pay their claims. FIGA will be broke and claim forms sitting on desks in Tallahassee.
Florida needs another solution, even Lousiana figured it out better than Florida. The State Governement needs to stop playing politics with this issue.
Brad:
Risks can also be marginal because they are underpriced. Obviously these risks, losing 20 million a month as a group, are marginal risks. Are these other FL HO companies charging the rate level State Farm requested? If not, and these companies are making a profit at lower than State Farm rates, then there is something amiss with the State Farm book. Or these companies could be looking to write underpriced State Farm business as a result of short term profit outlook or naive capital – incompetence or stupidity. I stand by my assessment that it would not make good business sense to appoint State Farm agents to write cast off business, which it appears in this case is their entire Florida HO book.
Hello, did you even read the article??? It’s in the first line of the article…
“Florida Chief Financial Officer Alex Sink is urging State Farm Florida to “immediately” let its agents do business with other insurance companies for their more than one million policyholders now …”
On 9/11/01, SF’s portfolio was so bad, they lost 5 billion dollars.
At least in VA, the SF agents were forbidden in 2002 to write new HO or auto while SF corporate frantically struggled to get appropriate rate increases approved. The agents were told, until the new rates were approved, to make up for the lost new home and new auto writings by selling LTC.
When it comes to State Farm, not only should the buyers, but their agent/contractors should beware.
Brad, when FIG quit writting home policies in Texas I wrote both standard and preferred risks with my other carriers. I’ve been a FIG agent for 27 years and have always had the contractual right to place business elsewhere if FIG didn’t want it. This has required me to keep contracts with other carriers.
Jerry, you are correct. I have inside info that told me the deal with the Texas DofI and FIG was actually made on 10/23/02 but, wasn’t announced until 11/11/02. Rick Perry didn’t want to look soft on insurance carriers to the voters so the announcement of the deal was delayed until the day after the election. However, we couldn’t write new policies for months. The 11th hour agreement only keep FIG from cancelling their policies. Texas had a problem in that there was simply not enough capacity in the market to pick up the FIG policies if allowed to cancel. The then commissioner of insurance panicked and allowed C rated carriers with questionable financial statements to write in Texas and most of them tanked in about four years. I doublt if the capacity exist in Florida for the SF home polcies.
A problem for Florida SF agents: Will SF demand they rewrite home policies back to SF if they reenter the market? Texas FIG agents have this problem. The United Farmers Agents Association currently has court proceeding in a California court to determine if FIG can force Texas agents to rewrite the non-FIG policies back to FIG. The problem we face is that many of the non-FIG policies are renewing with lower premiums and broader coverage than offered by FIG. No customer is going to go back to FIG and pay more money for a policy with less coverage. Agents simply lose their home policies and their remaining policies soon thereafter. SF agents in Florida could face this same problem.
To insurance guy.
As you stated, Louisiana talked to people that know insurance, and came up with a solution to keepin markets open.
But even earlier the State of Hawaii came up with a plan, after they talked to the Insurance carriers about a solution to the same problem.
(The carriers were leaving due to the wind exposure (HURRICANES). The carriers are back, doing what they do best, writing HO’s, excluding wind. The companies collect the wind premium and remit to the State. The carriers would service and provide claims personel. The State administers the fund and pays claims from the fund after the deductible.
No politics, only Government and the insurance industry, working together for the people. Of course this would not be popular with the bureaucracy that Crist has built with Citizens.
Yes, Jerry I was very tempted quit FIG and go independent. However, the mold losses had devasted my loss ratio. I spoke with a number of carriers and although I had a large enough agency, my three year loss ratio was simply too bad. I’ve been very profitable the last three years and going independent is very tempting again.
Could not have said it any better than you did. We certainly need Insurance experts along with economist to determine what solutions would work best. Politicians and consumer groups looking to play to their constituents is not the proper way to solve the current insurance market problems.
Former State Farm Agents Win $12M Settlement
September 2, 2002
A three-and-a-half year lawsuit pitting two former State Farm agents against State Farm Automobile Insurance Company has come to an end, with the jury’s verdict ruling for the agents.
Richard Pyorre of Fort Bragg, Calif. and John Wier of Crescent City, Calif., were awarded $6.35 million and $6.25 million, respectively for emotional distress damages, loss of commissions and punitive damages as the result of a seven- week trial in which State Farm sued the two agents for alleged disclosure of trade secrets and breach of contract.
Pyorre and Weir counter-sued; claiming State Farm wrongfully terminated them and further interfered with their ability to provide insurance to their clients under different carriers.
The lawsuit brought to light mounting concerns over the rights to client information in the captive agency system.
Pyorre’s contract was terminated on Feb. 28, 1999 after serving as a State Farm captive agent for 27 years. According to Pyorre, the company allegedly claimed that he was terminated because he did not attend a “mandatory” ethics class. That claim was debunked when State Farm argued to the IRS in 1991 that their agents were independent contractors under an SS8 filing (determination of employee work status), thus there would be no punitive damages if an agent did not attend a meeting.
Evidence of this was produced at the trial in the form of a letter from Ed Russ, Jr., dated Dec. 23, 1991, referring to the 1991 SS8 filing, stating that State Farm would not compromise the independent contractor’s status of the agent. “That’s one of the things that I felt very strongly about,” said Pyorre. ” I had seen his letter… and I felt I didn’t have to attend a mandatory meeting, because there had never been any in the history of the company at that time.
“To add insult to injury, this ethics class was an LUTC self-study course,” said Pyorre. “[It] really wasn’t an ethics class, it was an initial review of banking products… which I wasn’t interested in doing.”
In another development, State Farm sent Pyorre a letter on March 19 stating that they were not going to pay him termination benefits because Pyorre allegedly disclosed trade secrets by soliciting policyholders to represent under carriers other than State Farm.
State Farm allegedly terminated Wier over a dispute involving a computer agreement. “I was terminated, or discontinued was the word they used, for signing a computer agreement with the words under my signature ‘with full reservation of my main contract rights,'” said Wier.
The new technology agreement allowed State Farm to move policyholder information out of agents’ offices to a central hub in Arizona, requiring the agent to use a password to access the information.
“Obviously they were going to use it to cross market,” said William Tedards, attorney for Pyorre and Wier. “[Wier] was opposed to that, so he refused to sign this agreement that they demanded unless he could put underneath it a line that said he could reserve rights under his main contract.”
Tedards alleged that Pyorre, Wier and other agents were punished when they shied away from State Farm’s structuring changes in the ’90s, which strongly suggested agents turn to the sale of financial service products in order to make extra income. “They basically said ‘We’re going to ride a different train now, and you better get on if you’re coming with us.'”
State Farm introduced a new contract in the mid-’90s allegedly designed to put the agents under control of the company, although agents were still referred to as independent contractors, according to Tedards. “It’s designed to set them up so that they will slow down [personal lines] and they will barrel forward into financial services. The contract gives the company the power to limit their growth.”
While the contract was not mandatory for agents to enter into agreement to, Tedards said agents were nevertheless influenced to sign it. While many new State Farm agents have reportedly signed the contract with little resistance, older agents were more apprehensive. “What they started doing with those people is essentially bludgeoning them,” said Tedards. “They decided that they had enough control over them that they could start either making them do what they want or getting rid of them.”
State Farm claimed to own all policyholder information from terminated agents, claiming it as trade secrets. “The Pyorre and Wier case is the prototype test case challenging that entire course of action,” said Tedards.
“They [Pyorre and Wier] just challenged that head-on,” added Tedards. “They took a full copy of all the policyholder information. They initiated new independent agent-type contracts with a number of companies including Mercury, and then they basically started contacting the policyholders and taking the business. State Farm attacked them for that. Interestingly, State Farm first tried to turn them into the Federal Bureau of Investigations, [trying] to instigate a criminal proceeding under the Economic Espionage Act, and the U.S. Attorney declined to prosecute.”
The jury found that Pyorre and Wier were not guilty of State Farm’s allegations, including disclosure of trade secrets and breach of contract.
They further ruled that State Farm interfered with Pyorre and Wier’s contracts with Mercury Automobile Insurance. “[The] verdict is based on that activity by State Farm-intimidating Mercury, said Tedards. “They found that State Farm did not own the policyholder information. The significance of this is that none of these companies own this.”
Of the total $12.6 million awarded to the pair, $350,000 was awarded to Pyorre, and $250,000 to Wier as the amount of lost commissions due to the interference. Three million each was awarded as emotional distress damages.
Another $3 million each was awarded to the pair as punitive damages
“It’s about time that one of these big bully corporations got taken to task,” said Pyorre. “It’s a $70 billion dollar company and they terminated us, they took our term pay… then they turned around and sued us and wanted more money.”
“It’s a victory,” said Weir. “I’m just very thankful to the jury and the time they put in. I feel my reputation as well as Rich’s has been vindicated.”
As for State Farm, spokes-person Bill Syrolla said, “We regret that an issue like this ever had to end up in court. We are reviewing the case to see what options we might pursue.”
:
.Farm has history of not releasing records
By Anita Lee
McClatchy Newspapers
Advertisement
BILOXI, Miss. (MCT) — In some cases, State Farm’s top leadership prefers not to share or even keep records that offer insight into how policyholder claims are handled, according to court records.
Chairman and CEO Edward B. Rust Jr. said in sworn testimony earlier this month that no minutes are kept of quarterly meetings held by the company’s top management, the Chairman’s Council, and that policyholders have no right to information about an investigation State Farm Insurance Cos. has ordered of its relationship with Haag Engineering Co.
State Farm spokesman Phil Supple said the company doesn’t “intend to-;try this-;case in the media.”
“State Farm stands by testimony given by President and Vice Chairman Vince Trosino, who said when asked about these allegations, ‘It’s not part of our system. It’s not part of our core values. It’s not what made us the most successful property and casualty insurer, life insurer, in the country.'”
Juries in two states, Texas and Oklahoma, have found Haag provided biased reports to State Farm to minimize or deny policyholder claims. Mississippi’s attorney general currently is conducting a grand jury investigation to determine whether State Farm and other insurers denied Hurricane Katrina claims through the use of fraudulent engineering reports.
Haag denies bias, but State Farm suspended business with the company in June and ordered an independent investigation after an Oklahoma jury awarded a total of $13 million to a policyholder over tornado damages. Subsequent trials are set to determine damages for 70 other policyholders, all of whom had claims investigated by Haag.
In past court cases, judges have chastised and even fined State Farm for withholding records the company was ordered to produce. Evidence the company destroyed documents has been presented in several cases.
In the Oklahoma case, after State Farm finally turned over to the court a “claims legal research” DVD and other records, Judge Richard G. Van Dyck told company attorneys
“As I was watching these tapes I just want to say this for the record, the hair on the back of my neck did — did stand up because I was seeing things there that early on in this case I was told by (State Farm) defense counsel didn’t exist and couldn’t be produced. So I’m not real happy with that and I want to remind all counsel that their ethical responsibilities as attorneys outweigh the wishes of their clients.”
Gary T. Fye, an expert in the analysis of disputed insurance claims who lives in Nevada, often testifies in insurance cases. Fye, who said he has testified on behalf of policyholders and insurance companies, has provided the courts information on State Farm’s history of destroying and withholding records.
In 1998, Fye wrote in a Florida case
“I have been witnessing document destruction, concealment, and obstruction of discovery by State Farm for many years in connection with my review of internal claim practices documents of the insurer. I have accumulated certain Exhibits which show the company’s goals and objectives for document handling by its employees. The documents show close to 28 years of intentional destruction, concealment and distortion of claim practices records.”
In some cases, company executives did not keep records.
Jeff Marr, the attorney suing State Farm in Oklahoma, took sworn testimony Sept. 6 from Rust. Topics included Rust’s Chairman’s Council, made up of top State Farm executives. The group, which includes the company’s general counsel, meets quarterly.
Marr was fishing for records of those meetings that he could subpoena for his lawsuit.
“Certainly,” Marr asked Rust, “you keep records of the quarterly meetings where the entire Chairman’s Council is present?”
“We have an agenda,” Rust said, “but minutes in that, no.”
“Why not?” Marr asked.
Rust replied, “Never felt a need to.”
Marr later asked, “Are there any written agendas that are available should I choose to request them in the lawsuit?”
“I’m not sure what might be available,” Rust said.
Rust also said policyholders, who essentially own the private mutual company, are not entitled to know what the Chairman’s Council discusses or decides about litigation against State Farm, citing attorney-client privilege.
Marr questioned why the company would withhold information from policyholders, who own State Farm.
“Well, again,” said Rust (who has a law degree), “I’m not an expert in the area, but I think as you find — even if I’m a shareholder in a publicly traded company, there are things that are not — you know, I do not have access to.”
Marr later asked if policyholders have a right to see documents from State Farm’s investigation of Haag.
In past court cases, judges have chastised and even fined State Farm for withholding records the company was ordered to produce. Evidence the company destroyed documents has been presented in several cases. How about ETHICS? Ethic of reciprocity – Wikipedia, encyclopedia
The ethic of reciprocity is a fundamental moral value which “refers to the balance in an interactive system such that each party has both rights and duties, and the subordinate norm of complementarity states that one’s rights are the other’s obligation. ” In essence, it is an ethical code that states one has a right to just treatment, and a responsibility to ensure justice for others
State Farm has THREE good words for their agency force SELL LIFE INSURANCE.
This is all such a soap opera and unfortunately we (in FL) will all lose when, or if, THE BIG ONE hits.
i don’t live in florida so pardon me for asking whose this alex and why is he/she saying such stupid things? it seems to be demonstrative of enormous naivete.
I think Bob has hit the nail on the head. Watch and see if his projection is correct. Farmers Insurance did the same thing to their agents in Texas some time back. An 11th hour agreement was struck, coincidently right after the gubenatorial(sp) election and Farmers Insurance stayed in Tx.
Regardless whether the state and state farm eventually reach a deal, florida state officials seem to be saying stupid things.
Interesting. Sink says: “Your loyal insurance consumers deserve the opportunity to keep their relationship with their State Farm agent and be placed with the property insurance company that best meets their insurance needs”. Then why not let SF have their rate increase and let the “loyal insurance consumers” decide if they’ll pay it?
Isn’t this the only advantage us independents have? Not totally dependent on one carrier to prevent this kind of problem. Leave it up to the state to try to save the poor old State Farm agents. Amazing this state can function at all with the incompetency we have in our state leaders.
Great irony in her statement when you factor in her refusal for a rate increase.
“Given State Farm Florida’s
projected insolvency within the next two years and intended wihdrawal, I find it inappropriate to limit your agents’ ability to help your customers find the best possible property insurance coverage”…
SWFL Agent: You are 100% correct. I am an independent agent and a SF customer. All my family’s properties are insured with SF, residential as well as commercial. The option to pay a 47% rate increase should be ours as consumers, and not the State’s. The Governor and OIR claim there is plenty of capacity at low rates elsewhere in Florida, then why not let the consumers of Florida pay the 47% increase or go elsewhere? Just wait till the wind blows, it is going to be a mess!
We make purchasing decisions on the right side of our brain, which indicates that relationship building and nurturing has a lot to do with the success of any agent – from that initial sale to developing a loyal customer. Now these State Farm customers are being forced to make a change and form new relationships with other agents.
SF agents will be lucky to get $.50 on the dollar for their failing franchises. What a shame.
Today’s online WSJ Editorial Sums it up rather well.
http://online.wsj.com/article/SB123371173559046209.html
In Florida, Republicans are self serving (anything to keep getting re-elected) Socialists
Each time a Florida lawmaker opens their mouth, they look less capable than they did the last time they opened their mouth. Free market? Rate adequate? Choice? If it weren’t so sad, no alarming, it would be funny. Idiots like Sink don’t even stop to consider that SF clients can choose for themselves, as long as SF is viable. When that stops, no more choice.
Sink didn’t refuse the SF request for the rate increase; “…not her job…”. Check with McCarty over (i.e., probably down the hall) at Office if Insurance Regulation. Nevertheless, a prime example of the “Tallahassee two-step”, various factions dancing around 200 Gaines Street. But, can the rate-payers or tax payers afford to sponsor the music.
you have all missed what is really going on. SF doesn’t want to let their agents place the business elsewhere, because a deal will be struck shortly to allow SF to remain in business in Florida. They really aren’t going to leave – something will be worked out and both sides will claim victory. it will probably be a smaller rate increase, and everybody will think they won.
The real point is that State Farm is a National Company and not a regional Florida only company. They have a business need to be consistent in all 50 states. If they give a special deal to Florida, all the non-Florida agents will want the same ability to write with other carriers.
As for the State Farm agents, I too feel for them but they have had it real good in the past, and it was their choice to join a captive agency arrangement. The OIR should grant the rate increase and let free commerce reign.
Once again, see earlier comments from the Tallahassee two-stepper. It’s all “… dancing around 200 Gaines Street…” But even for a frolicking “Square-Dance”, quite expensive.
Chris Neal with State Farm says in one breath that State Farm Florida agents brokering is not an option and in the nezt sentence says that agents will still have the opportunity to sell other State Farm products including home. Obviously State Farm missed the memo that Citizens (the only carrier left with unlimited ability to pay claims) is a carrier of last resort, it does not want to exist, it is fast being depopulated by small new carriers and having this JUA company be the “home policy” State Farm agents offer is hypocritical and poor citizenship on State Farms part.
State Farm Agents cannot sell their business. They don’t own it. They are paid a servicing commission. When State Farm tanks in Fl– 12000 employees, claim reps, underwriters, support personnel, agents and agents staffs will be affected. This recession gets better every day.
Attn pj: sf is not “talking out of both sides of their mouth”. what they say is true….sell the other sf products and as fl officials want offer citizens. agent and sf have contractual relationship. wheres the hypocrisy? i am beginning to see a florida policyholder mentality: entitlement
Do you suppose that Alex is wakeing up to the fact that all of the additional SF policies being written in Citizens (a bankrupt co)will lead to the bankruptcy of the State of Florida? The only people who will have any money are the Native Americans, who are the owners of the Gambling Casinos, they loan the money to the state, the state files bankruptcy, then they will own Florida again. Full circle.
How profound…the Lord works in mysterious ways!
Only a start up company would want to appoint agents whose only apps would be stamped “HO business rejected by State Farm” Years ago, as a new marketing rep, I appointed a few Farmers agents who were given the go ahead to take independent contracts for HO business – worst mistake I ever made – low production & marginal risks.
Bob’s comments are true in his case but not in this one. State Farm is leaving the HO market in Florida. The clients they leave behind are not bad “rejects” in the sense that the Farmers policies you were getting. Those Farmers agents were giving you there seconds. These are top tier clients who are losing their insurer. However, State Farm agents in Florida are out of luck on HO. They won’t give in anytime soon.
To the State Farm agents here that write in FL. Good luck to you. I’m afraid you’ll probably need all you can get.
How about the CFO banning this illegal bogus multiline discount as an incentive to write the auto and bury the state with their wannabe crappy products.
I think that we should look at this from an insurance carriers/ consumers standpoint. It is simular in a respect to the National Tarp/ Stiumlus Plan. Fast approaching 2 Trillion Dollar.
The start up carriers make you feel good knowing that you can find insurance, Sell your home and they will be able to get insurance they can afford. This is a temporary “feel good” solution. The actuarial evidence of what would happen after a storm is not so good for the state or the consumers, especially if Florida gets an 04 year again. If this happens, visualize this, the state is bankrupt, No insurance will be available at all, even through Citizens. Carriers leaving without purchasing the bonds and the state fighting carriers in courts to get them to pay the assessments from FIGA. Your clients suing you and your carriers to pay their claims. FIGA will be broke and claim forms sitting on desks in Tallahassee.
Florida needs another solution, even Lousiana figured it out better than Florida. The State Governement needs to stop playing politics with this issue.
Brad:
Risks can also be marginal because they are underpriced. Obviously these risks, losing 20 million a month as a group, are marginal risks. Are these other FL HO companies charging the rate level State Farm requested? If not, and these companies are making a profit at lower than State Farm rates, then there is something amiss with the State Farm book. Or these companies could be looking to write underpriced State Farm business as a result of short term profit outlook or naive capital – incompetence or stupidity. I stand by my assessment that it would not make good business sense to appoint State Farm agents to write cast off business, which it appears in this case is their entire Florida HO book.
Hello, did you even read the article??? It’s in the first line of the article…
“Florida Chief Financial Officer Alex Sink is urging State Farm Florida to “immediately” let its agents do business with other insurance companies for their more than one million policyholders now …”
Oh come on – this surprises anyone?
On 9/11/01, SF’s portfolio was so bad, they lost 5 billion dollars.
At least in VA, the SF agents were forbidden in 2002 to write new HO or auto while SF corporate frantically struggled to get appropriate rate increases approved. The agents were told, until the new rates were approved, to make up for the lost new home and new auto writings by selling LTC.
When it comes to State Farm, not only should the buyers, but their agent/contractors should beware.
Brad, when FIG quit writting home policies in Texas I wrote both standard and preferred risks with my other carriers. I’ve been a FIG agent for 27 years and have always had the contractual right to place business elsewhere if FIG didn’t want it. This has required me to keep contracts with other carriers.
Jerry, you are correct. I have inside info that told me the deal with the Texas DofI and FIG was actually made on 10/23/02 but, wasn’t announced until 11/11/02. Rick Perry didn’t want to look soft on insurance carriers to the voters so the announcement of the deal was delayed until the day after the election. However, we couldn’t write new policies for months. The 11th hour agreement only keep FIG from cancelling their policies. Texas had a problem in that there was simply not enough capacity in the market to pick up the FIG policies if allowed to cancel. The then commissioner of insurance panicked and allowed C rated carriers with questionable financial statements to write in Texas and most of them tanked in about four years. I doublt if the capacity exist in Florida for the SF home polcies.
A problem for Florida SF agents: Will SF demand they rewrite home policies back to SF if they reenter the market? Texas FIG agents have this problem. The United Farmers Agents Association currently has court proceeding in a California court to determine if FIG can force Texas agents to rewrite the non-FIG policies back to FIG. The problem we face is that many of the non-FIG policies are renewing with lower premiums and broader coverage than offered by FIG. No customer is going to go back to FIG and pay more money for a policy with less coverage. Agents simply lose their home policies and their remaining policies soon thereafter. SF agents in Florida could face this same problem.
Kent, still a Farmers agent after all these years? Werent you tempted to go independant afer 2002. I know a low of FIG agents left.
To insurance guy.
As you stated, Louisiana talked to people that know insurance, and came up with a solution to keepin markets open.
But even earlier the State of Hawaii came up with a plan, after they talked to the Insurance carriers about a solution to the same problem.
(The carriers were leaving due to the wind exposure (HURRICANES). The carriers are back, doing what they do best, writing HO’s, excluding wind. The companies collect the wind premium and remit to the State. The carriers would service and provide claims personel. The State administers the fund and pays claims from the fund after the deductible.
No politics, only Government and the insurance industry, working together for the people. Of course this would not be popular with the bureaucracy that Crist has built with Citizens.
Yes, Jerry I was very tempted quit FIG and go independent. However, the mold losses had devasted my loss ratio. I spoke with a number of carriers and although I had a large enough agency, my three year loss ratio was simply too bad. I’ve been very profitable the last three years and going independent is very tempting again.
Could not have said it any better than you did. We certainly need Insurance experts along with economist to determine what solutions would work best. Politicians and consumer groups looking to play to their constituents is not the proper way to solve the current insurance market problems.
Former State Farm Agents Win $12M Settlement
September 2, 2002
A three-and-a-half year lawsuit pitting two former State Farm agents against State Farm Automobile Insurance Company has come to an end, with the jury’s verdict ruling for the agents.
Richard Pyorre of Fort Bragg, Calif. and John Wier of Crescent City, Calif., were awarded $6.35 million and $6.25 million, respectively for emotional distress damages, loss of commissions and punitive damages as the result of a seven- week trial in which State Farm sued the two agents for alleged disclosure of trade secrets and breach of contract.
Pyorre and Weir counter-sued; claiming State Farm wrongfully terminated them and further interfered with their ability to provide insurance to their clients under different carriers.
The lawsuit brought to light mounting concerns over the rights to client information in the captive agency system.
Pyorre’s contract was terminated on Feb. 28, 1999 after serving as a State Farm captive agent for 27 years. According to Pyorre, the company allegedly claimed that he was terminated because he did not attend a “mandatory” ethics class. That claim was debunked when State Farm argued to the IRS in 1991 that their agents were independent contractors under an SS8 filing (determination of employee work status), thus there would be no punitive damages if an agent did not attend a meeting.
Evidence of this was produced at the trial in the form of a letter from Ed Russ, Jr., dated Dec. 23, 1991, referring to the 1991 SS8 filing, stating that State Farm would not compromise the independent contractor’s status of the agent. “That’s one of the things that I felt very strongly about,” said Pyorre. ” I had seen his letter… and I felt I didn’t have to attend a mandatory meeting, because there had never been any in the history of the company at that time.
“To add insult to injury, this ethics class was an LUTC self-study course,” said Pyorre. “[It] really wasn’t an ethics class, it was an initial review of banking products… which I wasn’t interested in doing.”
In another development, State Farm sent Pyorre a letter on March 19 stating that they were not going to pay him termination benefits because Pyorre allegedly disclosed trade secrets by soliciting policyholders to represent under carriers other than State Farm.
State Farm allegedly terminated Wier over a dispute involving a computer agreement. “I was terminated, or discontinued was the word they used, for signing a computer agreement with the words under my signature ‘with full reservation of my main contract rights,'” said Wier.
The new technology agreement allowed State Farm to move policyholder information out of agents’ offices to a central hub in Arizona, requiring the agent to use a password to access the information.
“Obviously they were going to use it to cross market,” said William Tedards, attorney for Pyorre and Wier. “[Wier] was opposed to that, so he refused to sign this agreement that they demanded unless he could put underneath it a line that said he could reserve rights under his main contract.”
Tedards alleged that Pyorre, Wier and other agents were punished when they shied away from State Farm’s structuring changes in the ’90s, which strongly suggested agents turn to the sale of financial service products in order to make extra income. “They basically said ‘We’re going to ride a different train now, and you better get on if you’re coming with us.'”
State Farm introduced a new contract in the mid-’90s allegedly designed to put the agents under control of the company, although agents were still referred to as independent contractors, according to Tedards. “It’s designed to set them up so that they will slow down [personal lines] and they will barrel forward into financial services. The contract gives the company the power to limit their growth.”
While the contract was not mandatory for agents to enter into agreement to, Tedards said agents were nevertheless influenced to sign it. While many new State Farm agents have reportedly signed the contract with little resistance, older agents were more apprehensive. “What they started doing with those people is essentially bludgeoning them,” said Tedards. “They decided that they had enough control over them that they could start either making them do what they want or getting rid of them.”
State Farm claimed to own all policyholder information from terminated agents, claiming it as trade secrets. “The Pyorre and Wier case is the prototype test case challenging that entire course of action,” said Tedards.
“They [Pyorre and Wier] just challenged that head-on,” added Tedards. “They took a full copy of all the policyholder information. They initiated new independent agent-type contracts with a number of companies including Mercury, and then they basically started contacting the policyholders and taking the business. State Farm attacked them for that. Interestingly, State Farm first tried to turn them into the Federal Bureau of Investigations, [trying] to instigate a criminal proceeding under the Economic Espionage Act, and the U.S. Attorney declined to prosecute.”
The jury found that Pyorre and Wier were not guilty of State Farm’s allegations, including disclosure of trade secrets and breach of contract.
They further ruled that State Farm interfered with Pyorre and Wier’s contracts with Mercury Automobile Insurance. “[The] verdict is based on that activity by State Farm-intimidating Mercury, said Tedards. “They found that State Farm did not own the policyholder information. The significance of this is that none of these companies own this.”
Of the total $12.6 million awarded to the pair, $350,000 was awarded to Pyorre, and $250,000 to Wier as the amount of lost commissions due to the interference. Three million each was awarded as emotional distress damages.
Another $3 million each was awarded to the pair as punitive damages
“It’s about time that one of these big bully corporations got taken to task,” said Pyorre. “It’s a $70 billion dollar company and they terminated us, they took our term pay… then they turned around and sued us and wanted more money.”
“It’s a victory,” said Weir. “I’m just very thankful to the jury and the time they put in. I feel my reputation as well as Rich’s has been vindicated.”
As for State Farm, spokes-person Bill Syrolla said, “We regret that an issue like this ever had to end up in court. We are reviewing the case to see what options we might pursue.”
Kent, not sure how much info to give in this forum. email me @ jkennedy@….. I would like to discuss this a little further. thanks
Jerry, IJ blocked your email address. Try
jkennedyat…..
:
.Farm has history of not releasing records
By Anita Lee
McClatchy Newspapers
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BILOXI, Miss. (MCT) — In some cases, State Farm’s top leadership prefers not to share or even keep records that offer insight into how policyholder claims are handled, according to court records.
Chairman and CEO Edward B. Rust Jr. said in sworn testimony earlier this month that no minutes are kept of quarterly meetings held by the company’s top management, the Chairman’s Council, and that policyholders have no right to information about an investigation State Farm Insurance Cos. has ordered of its relationship with Haag Engineering Co.
State Farm spokesman Phil Supple said the company doesn’t “intend to-;try this-;case in the media.”
“State Farm stands by testimony given by President and Vice Chairman Vince Trosino, who said when asked about these allegations, ‘It’s not part of our system. It’s not part of our core values. It’s not what made us the most successful property and casualty insurer, life insurer, in the country.'”
Juries in two states, Texas and Oklahoma, have found Haag provided biased reports to State Farm to minimize or deny policyholder claims. Mississippi’s attorney general currently is conducting a grand jury investigation to determine whether State Farm and other insurers denied Hurricane Katrina claims through the use of fraudulent engineering reports.
Haag denies bias, but State Farm suspended business with the company in June and ordered an independent investigation after an Oklahoma jury awarded a total of $13 million to a policyholder over tornado damages. Subsequent trials are set to determine damages for 70 other policyholders, all of whom had claims investigated by Haag.
In past court cases, judges have chastised and even fined State Farm for withholding records the company was ordered to produce. Evidence the company destroyed documents has been presented in several cases.
In the Oklahoma case, after State Farm finally turned over to the court a “claims legal research” DVD and other records, Judge Richard G. Van Dyck told company attorneys
“As I was watching these tapes I just want to say this for the record, the hair on the back of my neck did — did stand up because I was seeing things there that early on in this case I was told by (State Farm) defense counsel didn’t exist and couldn’t be produced. So I’m not real happy with that and I want to remind all counsel that their ethical responsibilities as attorneys outweigh the wishes of their clients.”
Gary T. Fye, an expert in the analysis of disputed insurance claims who lives in Nevada, often testifies in insurance cases. Fye, who said he has testified on behalf of policyholders and insurance companies, has provided the courts information on State Farm’s history of destroying and withholding records.
In 1998, Fye wrote in a Florida case
“I have been witnessing document destruction, concealment, and obstruction of discovery by State Farm for many years in connection with my review of internal claim practices documents of the insurer. I have accumulated certain Exhibits which show the company’s goals and objectives for document handling by its employees. The documents show close to 28 years of intentional destruction, concealment and distortion of claim practices records.”
In some cases, company executives did not keep records.
Jeff Marr, the attorney suing State Farm in Oklahoma, took sworn testimony Sept. 6 from Rust. Topics included Rust’s Chairman’s Council, made up of top State Farm executives. The group, which includes the company’s general counsel, meets quarterly.
Marr was fishing for records of those meetings that he could subpoena for his lawsuit.
“Certainly,” Marr asked Rust, “you keep records of the quarterly meetings where the entire Chairman’s Council is present?”
“We have an agenda,” Rust said, “but minutes in that, no.”
“Why not?” Marr asked.
Rust replied, “Never felt a need to.”
Marr later asked, “Are there any written agendas that are available should I choose to request them in the lawsuit?”
“I’m not sure what might be available,” Rust said.
Rust also said policyholders, who essentially own the private mutual company, are not entitled to know what the Chairman’s Council discusses or decides about litigation against State Farm, citing attorney-client privilege.
Marr questioned why the company would withhold information from policyholders, who own State Farm.
“Well, again,” said Rust (who has a law degree), “I’m not an expert in the area, but I think as you find — even if I’m a shareholder in a publicly traded company, there are things that are not — you know, I do not have access to.”
Marr later asked if policyholders have a right to see documents from State Farm’s investigation of Haag.
“No,” Rust said.
“Why not?” Marr asked. “Is it privileged?”
Rust said, “I believe so
In past court cases, judges have chastised and even fined State Farm for withholding records the company was ordered to produce. Evidence the company destroyed documents has been presented in several cases. How about ETHICS? Ethic of reciprocity – Wikipedia, encyclopedia
The ethic of reciprocity is a fundamental moral value which “refers to the balance in an interactive system such that each party has both rights and duties, and the subordinate norm of complementarity states that one’s rights are the other’s obligation. ” In essence, it is an ethical code that states one has a right to just treatment, and a responsibility to ensure justice for others
Kent,
I was just being careful and not putting the whole address in. use “jkennedy@……
the rest is the same as your’s.