La. AG Alleges Price-Fixing, Conspiracy

Outgoing Louisiana Attorney General Charles C. Foti, Jr. has filed suit against property insurers in his state alleging price-fixing and conspiracy to lower claims payments stemming from 2005 Hurricanes Katrina and Rita through artificial means.

Named in the lawsuit alleging violations of the Louisiana Monopolies Act were Allstate Insurance Company, Lafayette Insurance Company, Xactware Inc., Marshall & Swift/Boeckh LLC, Insurance Services Office, Inc., State Farm Fire and Casualty Company, USAA Casualty Insurance Company, Farmers Insurance Exchange, Standard Fire Insurance Company and McKinsey & Company.

The petition was filed in New Orleans Civil District Court and accuses the companies of participating in a scheme to rig the value of property damage claims paid to their insureds. They allegedly used damage-estimating software programs to engage in horizontal price-fixing as well. The suit claims this combination artificially held down property damage claim payouts with the intended goal of increasing the profits of each company involved. When Hurricanes Katrina and Rita struck Louisiana in 2005, virtually all of the property damage insurers were setting premiums and adjusting claims under the alleged scheme, the AG says.

“This alleged scheme gave insurers an unjust advantage over policy holders, which they used before, during and after one of the greatest disasters this country has ever suffered, by reaping huge profits from the misfortunes of persons whom they pledged to protect from the risk of loss,” stated Foti. “But to be clear, these abuses were not new to the recent hurricanes,” he added.

Robert Hartwig, president of the Insurance Information Institute, told the Associated Press it is “ludicrous” to accuse companies of engaging in any kind of conspiracy. “Insurers operate independently from one another,” he said. “They do not act in concert with each other.”