La.’s Donelon forges agreement with Allstate over cancelled policies

Louisiana Commissioner of Insurance Jim Donelon reported on March 19, 2007, that he had reached a settlement with Allstate concerning 4,772 policyholders in four south Louisiana par-ishes whose homeowners insurance was cancelled due to what the Department of Insurance said was a flawed home inspection process. The cancellations resulted in 775 complaints being filed with the department, the announcement said.

On March 6, Donelon ordered Allstate to ditch the faulty inspection process and reinstate coverage on policyholders affected by them. Allstate balked, according to the Associated Press, and appealed the order to an administrative law judge. The company asserted that Donelon had “overstepped his power,” the AP reported.

According to Donelon, the consent agreement grants prompt reinstatement to policyholders affected by the flawed inspection process and adds two provisions: An additional six weeks to qualify for reinstatement and to begin the repair process; and the right for Allstate insureds not ready to repair their homes the option to still obtain new coverage until Dec. 31, 2008.

The terms of the consent agreement include the following:

(1) By March 23, Allstate would mail a “Notice of Right to Reinstatement” to each of the 4,772 homeowners in Jefferson, Orleans, Plaquemines and St. Bernard Parishes who received a cancellation letter due to an alleged substantial change in the risk. This does not include those homeowners who have voluntarily agreed to cancel their coverage or those who have already been reinstated by Allstate.

This notice gives the cancelled policyholder the right to full reinstatement of their original policy without a lapse in coverage if the policyholder provides one of the following to Allstate by April 30:

• Satisfactory evidence that the insured premises is currently inhabited by the policyholder and in insurable condition; or
• Satisfactory evidence that the insured location is currently under active reconstruction.

Satisfactory evidence must include a copy of: A properly issued building permit for the insured premises; a 2007 utility bill for the insured premises; a signed agreement with a contractor for the insured premises; or material receipts showing the policyholder’s intent to reconstruct or repair the insured premises. Homeowners may also have their property reinspected as satisfactory evidence of insurability.

(2) Allstate will reimburse any cancelled policyholder who was forced to retain substitute insurance coverage with another carrier in the interim period between notice of cancellation and reinstatement.

(3) Allstate will maintain a separate database of all policyholders requesting reinstatement but who are unable to establish their right to reinstatement under this consent agreement. Until Dec. 31, 2008, these policyholders have the option of purchasing a new 12-month homeowners insurance policy, which shall include coverage for wind and hail, subject to applicable deductibles in force at that time for policyholders living in the same rating area, once they have reconstructed their home.

(4) Allstate must also advise policyholders of the terms and conditions of the consent agreement through radio commercials and in ads in local newspapers.

(5) In the event of a disagreement as to reinstatement between Allstate and any cancelled policyholder, Donelon may render a final and non-appealable decision in the conflict that would be binding upon Allstate.

(6) Donelon reserved his right to consider monetary sanctions against Allstate.

The properties affected by the settlement are in Jefferson, Orleans, Plaquemines and St. Bernard Parishes.