Insurance Journal’s Most Noteworthy Topics of 2020: South Central Region

Article

Hurricanes, Hurricanes and Tropical Storms

It can’t come as any surprise that hurricanes and tropical storms topped the list of the most read subjects of interest in Insurance Journal’s South Central region. In a North Atlantic hurricane season for the record books there were 30 named storms, of which 12 made landfall in the U.S., five of them in Louisiana alone.

While the total insurance price tag for the U.S. storms was $20 billion, the amount was moderate compared to the record seasons of 2005 and 2017, according to Swiss Re. Damage was still done, as Louisiana residents who are still in recovery mode from the seemingly unending spate of storms can attest.

For Louisiana, the season began with Tropical Storm Cristobal in June and finally ended with Hurricane Zeta on Oct. 28, with Laura, Marco and Delta sandwiched in between the two.

Some of the storm headlines that captured IJ readers’ interest include:

COVID-19 Lawsuits

Just as in the rest of the nation and the world, the COVID-19 pandemic had a major impact on the South Central region in 2020. Not only have vast numbers of people suffered and died from the disease, millions lost their jobs or were furloughed as a result of the business closures mandated by local and state officials in an attempt to slow the spread of COVID-19.

Many businesses attempted without success to access their commercial insurance policies to recover revenues lost due to the forced closures. As a result, numerous lawsuits have been filed over insurers’ across-the-board denials of business interruption claims from policyholders. Most lawsuits have been dismissed by judges that recognized there generally is no coverage for pandemic-related business income losses under most commercial insurance policies. However, the first lawsuit to go to trial over an insurers’ denial of business interruption claims related to pandemic closures began in New Orleans in mid-December. The city’s Oceana Grill had asked a state judge for a declaratory judgment that its business interruption policy covers damages caused by civil authority-forced closures due to the coronavirus. Filed in March 2020, the lawsuit went to trial in mid-December. Judge Paulette R. Irons had previously ruled against a motion for summary judgment filed by Lloyd’s of London seeking to dismiss the suit.

Other lawsuits have attempted to fault agents in addition to insurers for business interruption claim denials, and errors and omissions insurance experts warned agencies to be aware that creative litigation attorneys may target them.

Workplace Fires and Explosions

A fiery, explosive year in the South Central region began with a huge blast at a Houston warehouse in January that killed two workers and injured 20 others. That event and others that resulted in workplace injuries, deaths and closures caught the interest of readers in 2020.

The explosion early on Jan. 24, 2020, at a Grinding and Manufacturing building damaged at least 450 structures, mostly homes. The company produces valves and thermal-spray coatings for equipment in various industries. The Watson Grinding and Manufacturing later filed for bankruptcy and CEO John Watson was forced to backtrack on a promise to repair all the homes damaged in the blast at the insistence of the company’s insurers.

Workers also were killed in other explosive workplace events in Texas and Louisiana this year, and while fortunately no one was injured in a pre-Thanksgiving fire and blast at Greenberg Smoked Turkey Inc. in Tyler, Texas, the company was forced to shut down for the rest of the year. Greenberg Smoked Turkey, which sells about 200,000 smoked turkeys every holiday season, halted production after a fire and at least two explosions destroyed part of the facility in early November.

Nonstandard Auto

Developments in the nonstandard auto insurance business caught the eye readers of South Central region news in 2020.

State Farm’s announcement in September that it would buy Texas-based GAINSCO attracted not only readers but commenters who pondered what was behind the company’s choice of a nonstandard auto insurer as its first-ever acquisition of another insurance company. Of the $400 million transaction, in a media release Michael Tipsord, State Farm president, chairman and CEO, said State Farm believes “this acquisition positions both our company and GAINSCO well for future growth.” He added that the acquisition “will help us further toward our goal of serving more customers in more ways.”

GAINSCO, founded in 1978, specializes in minimum-limits personal auto coverage and actively distributes its nonstandard personal auto products through independent retail agents in Arizona, Florida, Georgia, New Mexico, Oklahoma, South Carolina, Tennessee, Texas, Utah, Virginia, Ohio and Alabama. Its insurance operations are conducted through its subsidiary, MGA Insurance Company Inc., a Texas corporation.

The demise of another Texas-based nonstandard auto insurer was of great interest to South Central readers, as well. Houston-based ACCC Insurance was placed into receivership in late October at the request of the Texas Department of Insurance. In addition to Texas, the privately held company offered its insurance products in Alabama, Georgia, Mississippi, New Mexico and South Carolina, and was licensed in 20 states. The placing of new business ceased when the company was put into receivership. After a determination that the company was effectively insolvent, a request for liquidation was filed in late November by the TDI-appointed Special Deputy Receiver (SDR) for ACCC, Prime Tempus Inc. In mid-December, Embark General, headquartered in Atlanta, Ga., said it would assume ACCC’s Alabama and Texas nonstandard auto business upon court approval.

Commercial Auto Insurance Fraud

While creative fraudsters continue to develop a seemingly endless variety of scams to unlawfully bilk auto insurers out of sums of money to which they are not entitled, the staged auto accident scheme is one that remains eternally popular.

In the South Central region, at least 33 people have been so far indicted in a federal probe into the staging of motor vehicle accidents with tractor-trailers and commercial vehicles in the metropolitan New Orleans area. Eleven of the 33 indicted defendants have pleaded guilty in federal court.

In November, a New Orleans personal injury attorney, Danny Patrick Keating, Jr., age 51, was charged with conspiring to defraud insurance companies, commercial carriers and trucking companies in the ongoing investigation of the massive staged accident scheme.

In Keatings’ case, U.S. attorneys allege that he paid others for 31 staged accidents, represented 77 plaintiffs involved in the 31 accidents and settled 17 of them. The indictment charges that Keating and his 77 clients received approximately $1.5 million in settlements and that Keating kept approximately $358,000 in attorney’s fees.