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La. insurance regulators probe Allstate’s policy cancellations

Louisiana insurance regulators are investigating whether Allstate Insurance Co. is canceling policies without properly inspecting homes to see if they are occupied or under construction after hurricanes Katrina and Rita.

The Louisiana Department of Insurance has received 386 complaints from homeowners who were notified by Allstate that their policies will not be renewed this year, said Insurance Commissioner Jim Donelon.

Allstate, the state’s second largest residential insurer, says it inspected about 40,500 Louisiana homes after the 2005 storms and sent cancellation notices to roughly 4,500 policyholders whose homes appear to be abandoned.

However, Donelon doubts the company actually inspected many of those homes. “Whether it’s them or a subcontractor of theirs who misrepresented the alleged inspections, I can’t say at this time,” he said on Mar. 1.

Allstate spokeswoman April Eaton said the Northbrook, Ill.-based company didn’t send cancellation notices to policyholders without inspecting their property. “That took us quite some time, but it is a commitment we wanted to make,” she said.

Amy Bach, executive director of the United Policyholders consumer advocacy group, accused Allstate of trying to skirt a Louisiana law that, with limited exceptions, bars insurers from canceling policies that have been in effect for three years or longer.

Many policyholders are baffled by Allstate’s cancellations.

Robyn Halvorsen, whose home in the Bywater neighborhood of New Orleans didn’t flood, moved back in less than a month after Katrina hit. Allstate concluded her home was abandoned even though she says the house is completely renovated, with a garbage can and garden in front.

“There is no way anybody could think this house is abandoned,” said Halvorsen, whose policy was set to be dropped Mar. 6. She wondered if Allstate added her to its list of cancellations simply because Bywater shares an ZIP code with devastated neighborhoods like the Lower 9th Ward.

Donelon’s office selected a sample of 18 complaints and requested proof from Allstate that those properties were inspected. The company responded with reports that were “lacking in specificity,'” missing dates of inspections, names of inspectors or a detailed description of the premises, Donelon said.

Insurance department inspectors were to examine the condition of the 18 homes, in Orleans, Jefferson and St. Bernard parishes. Donelon promised “strong action,” including possible fines, if he finds that Allstate misrepresented its inspection program.

Eaton said the company is cooperating with Donelon’s office. Allstate’s 4,500 cancellations in Louisiana include 1,400 policyholders who voluntarily gave up their coverage, according to Eaton. The rest are policyholders who failed to provide adequate documentation, such as a building permit or contracts with contractors, to show they are returning to storm-damaged homes.

Donelon said Allstate has agreed to reinstate coverage for 76 of the 386 homeowners who filed complaints with the department.

After Katrina and Rita hit, the LDI imposed an emergency rule that temporarily barred insurers from canceling policies. After the rule expired on Dec. 31, 2006, insurers had 60 days to notify homeowners of a policy’s cancellation. That notification period ended Mar. 1.

Donelon said Allstate appears to be the only insurer that is performing “bulk cancellations” of policies in Louisiana.

After Katrina and Rita, Donelon’s office fielded hundreds of complaints about Allstate’s adjustment and payment of claims. However, the insurance department issued a report that said Allstate’s delays in adjusting claims were justified considering “severe problems, impediments, roadblocks and hindrances” created by the storms.

Donelon said he is surprised Allstate earned a “clean bill of health” for its claims handling practices, but he promised to probe the company’s recent policy cancellations.