Allstate agrees to restore insurance to settle Katrina dispute
BATON ROUGE, La. -- Allstate Corp. will restore insurance coverage for hundreds of customers and pay $250,000 to the state of Louisiana to resolve a dispute over cancellation of homeowner policies after Hurricane Katrina, the company said Wednesday.
Louisiana Insurance Commissioner Jim Donelon told lawmakers Wednesday the agreement involved the company's home inspection process and cancellation of policies in four parishes hit hardest by the Aug. 29, 2005 storm.
Donelon did not provide details ahead of an afternoon news conference.
Allstate said it has agreed to offer wind and hail policies to a "few hundred" customers whose coverage had been canceled, but only if their policies were in effect for at least three years on the same property. Thousands of Allstate customers have had their policies cancelled after Katrina.
Donelon's office has fielded complaints from Allstate customers who say they lost wind and hail coverage after they switched from one Allstate company to another. Allstate had argued switching to a different division of the company constituted creation of a new policy and that cancellations were permitted under Louisiana law.
With limited exceptions, Louisiana law bars insurers from canceling policies in effect for three years or longer. But Allstate had claimed the law doesn't apply to customers who switched.
"We are pleased to work together with the commissioner and the department to resolve this situation," Ron Corbin, Allstate field vice president, said in a written statement. "This agreement is the result of our desire to find a solution that meets the needs of the customers and the agents who serve them."
The company also said it will pay $250,000 to the state insurance department as part of an agreement on its inspection program.
Donelon threatened to fine Allstate last March after hundreds of complaints from homeowners who said the company canceled their coverage after its inspectors wrongly concluded their properties had been abandoned. Donelon ordered Allstate to reinstate the policies after his agency conducted inspections and concluded the company was using a flawed, "drive-by" inspection process.
At the time, Donelon said he received more than 600 complaints from homeowners who said they were living in their homes but their policies were canceled after Allstate's inspectors deemed the properties abandoned.
The Northbrook, Ill.-based company, at the time, questioned whether Donelon overstepped his power and whether he had properly investigated the matter.
On Wednesday, however, the company said it agreed to pay the $250,000 "to avoid expenses associated with a hearing on this matter."
"We are confident that we properly implemented the reinspection program," Corbin said. "However, we decided it was in the best interest of all parties involved to reach an amicable resolution."