Allstate to reinstate policies
Homeowners will have chance to prove they're making repairs
The Times-Picayune
March 20, 2007 By Rebecca Mowbray Business writer
BATON ROUGE -- Allstate Insurance Co. will temporarily reinstate all 4,772 homeowners policies that were canceled following its controversial inspection process, and give property owners until April 30 to prove that they are rebuilding and should retain their coverage.
The deal, reached with the Louisiana Department of Insurance, ends a dispute that occurred when Allstate defied Insurance Commissioner Jim Donelon's March 6 order to scrap a "flawed" property-inspection process.
Allstate had canceled the policies of thousands of homeowners in the New Orleans region after it conducted inspections of the homes and deemed them uninhabitable and severely damaged. But homeowners, many of whom were living in completely repaired and sometimes never damaged homes, cried foul.
While Louisiana's chief insurance regulator and the state's second-largest residential insurer battled over the order in an administrative law court, people were getting canceled daily throughout March, creating confusion.
"We reached a settlement with Allstate," Donelon said. "I'm pleased to be able to tell you that those 4,000 people will have additional coverage offered to them."
Allstate spokeswoman Kate Hollcraft said her company decided not to continue pursuing the matter in court out of concern for its customers, and will send notices by Friday apprising them of the deal.
"Our customers have had a lot to deal with since Hurricane Katrina. The order from the commissioner created more confusion than we wanted it to, and we wanted that confusion to end for our customers," Hollcraft said.
Insurance companies were allowed to begin canceling coverage March 1 on storm-damaged homes where repairs had not yet begun, after conducting inspections and giving property owners reasonable notice to respond to their findings.
Drive-by inspections
Allstate came under fire after 775 New Orleans-area homeowners complained to the Insurance Department that their coverage was wrongly being canceled after Allstate performed drive-by property inspections late last year that took about a minute.
Two weeks ago, Donelon ordered the Northbrook, Ill., company to throw out its inspection process, reinstate everyone and start over with a new process. But Allstate challenged the order in court, throwing matters into chaos as customers had to continue seeking new coverage while proceedings were unfolding.
Customers will now be reinstated retroactively to the day their coverage was terminated, and Allstate is required to reimburse customers if they were forced to buy other insurance while they were waiting to be reinstated.
Allstate already has reinstated about 800 people who complained to the company or to the Insurance Department, leaving about 4,000 people in limbo.
People who received cancellation notices from Allstate should send to the company by April 30 proof they have fixed or are fixing their homes: building permits, 2007 utility bills, contracts with builders or receipts for building materials.
That means homeowners who may not have been rebuilding when they were canceled can hang on to their insurance coverage if they have since started repairs.
Homeowners also can request that Allstate reinspect property to prove that the home is inhabited and in insurable condition or on its way.
One-year policy option
Anyone who is unable to establish that their coverage should be reinstated will have until Dec. 31, 2008, to buy a one-year insurance policy with wind and hail coverage with Allstate once they fix their homes.
The move will help people stay with private insurance carriers and will give the state's shattered insurance market more time to open up; options are expected to increase later this year as long as Louisiana doesn't get smacked with another hurricane.
If there are any disputes over whether homeowners deserve to retain their insurance coverage, policyholders should contact the Insurance Department before June 1 at (800) 259-5300. Donelon will be the final arbiter of any disputes over whether homeowners continue to qualify for insurance.
Under the terms of the deal, Allstate admits no wrongdoing in the inspection process and Donelon reserves the right to pursue sanctions against the company.
Donelon will tackle the question of whether he will fine or otherwise sanction Allstate after May 15 when he's seen how the reinstatement process goes. "I'm going to withhold that judgment for now," Donelon said.
The inspections that sparked the controversy were in Orleans, Jefferson, St. Bernard and Plaquemines parishes. Allstate is still inspecting homes in other areas. Donelon said he hopes that the company will do a better job following the rules he set out at the end of October.
"I would expect them to comply with that advisory letter," Donelon said. "I would hope that they would not subject themselves to the same criticism."
Hollcraft wouldn't say where inspections might take place outside the New Orleans metropolitan area or whether Allstate's method of inspections would change.
"We're confident in our inspection process. But as in everything we do, we're always looking to improve our customer satisfaction, so if we see the opportunity for changes, we will look at implementing them."