Donelon orders insurance reinstated
The Daily Advertiser
March 12, 2007
It was satisfying to see Insurance Commissioner Jim Donelon stand up to Allstate after the insurance company conducted a grossly inadequate inspection and used it as a basis for canceling nearly 4,800 policies on homes in the storm-battered New Orleans area. Donelon ordered Allstate to immediately reinstate the policies.
Allstate's inspection supposedly revealed whether insured homes were vacant, under repair or fully repaired. The cancellations allegedly were for properties that were vacant. Another look obviously was called for after that initial inspection - which Donelon called "ill-conceived and sloppily implemented."
The Allstate policy cancellations resulted from "drive-by" inspections. A two-person inspection team drove by each property. Each team inspected 300 to 500 homes per day. According to the Times-Picayune, Allstate claimed that up to 12 teams worked for a week to inspect 40,500 pieces of property in five parishes. "Even allowing for a 12-hour workday, the teams would have spent an average of 90 seconds per home," the Picayune said.
Allstate, meanwhile, said the inspections that resulted in cancellation of policies or refusal to renew them were done according to "industry standards." If such is the case, then the industry needs to review its standards.
When Donelon's department launched an investigation of the inspections, hundreds of policyholders reported that their policies had been canceled improperly. Many proved they were living in the homes declared vacant. Others were living in FEMA trailers on the property while repairs were under way.
Donelon has ordered the reinspection of 36,000 homes in Jefferson, Orleans, Plaquemines, St. Bernard and St. Tammany parishes.
Allstate has appealed Donelon's order to reinstate the policies. The company is arguing before an administrative law judge that Donelon overstepped his power. It is questioning whether he properly investigated the matter.
While it will be up to the judge to decide, our opinion is that Donelon properly exercised the power of his office to protect the citizens of his state. The question is whether Allstate's investigation was proper.
We are aware of Allstate's importance to Louisiana, as is Donelon. It is the second-largest insurer in the state. In recent months, strategies have been examined by the Blanco administration for bringing insurance companies to Louisiana and keeping those already operating here. Prior to the company's legal maneuver, the state Department of Insurance said there were two options. Allstate could reinstate the policies or leave Louisiana. The arguments before the administrative law judge may alter the options.
We are hopeful that the matter will be resolved in an amicable fashion, with Allstate reinspecting the properties in question and reinstating policies in cases where the initial inspection produced flawed results.
If the company decides to leave Louisiana, the impact will be widespread. The loss of a major insurer could harm efforts to see that Louisiana residents have adequate property insurance coverage at reasonable rates.