State Farm Florida Withdrawal Plan May Go To Judge

After months of trying, Florida state officials and State Farm Florida have not been able to agree on the insurer’s plan for withdrawing from the state, so steps have been taken to have an administrative law judge decide.

However, State Farm Florida and state officials say that even though an Oct. 12 date with a law judge with the Division of Administrative Hearings (DAH) has been set, they still hope a deal can be worked out before then.

“We continue to be hopeful we will come to an agreement,” Justin Glover, State Farm spokesperson, told Insurance Journal.

Edward Domansky of the Florida Office of Insurance Regulation (OIR) agreed, adding that the setting of a DAH hearing date puts a timetable on the discussions.

One of the major remaining issues is agreeing on a process for the selection of insurance companies that would pick up the nearly 1 million policies State Farm is dropping.

State Farm is anxious to decide the matter quickly. The company says it is losing about $20 million in surplus a month in Florida.

According to OIR, State Farm Florida may not proceed with its withdrawal until their differences over the plan are settled.

State Farm Florida announced in January that it would begin a two-year withdrawal from the state by non-renewing its nearly 1 million policies, beginning with its highest risk policies. The company said it decided to leave after being denied homeowners insurance rate increases by the state regulator. It also said that State Farm Florida will be insolvent by the end of 2011 if it doesn’t exit.

But Commissioner Kevin McCarty and the OIR have balked at State Farm’s withdrawal plan, terming it “hazardous” to the state and to policyholders, including those insured by the state-backed Citizens Property Insurance Corp.

McCarty ordered the insurer to meet certain conditions as part of its withdrawal. He is seeking to ban State Farm from placing risks in the state-backed Citizens and force the insurer to amend its contracts with its exclusive agents to permit them to place business with other private insurers.

State Farm appealed the stipulations, arguing that allowing its agents to write policies for other insurers except the Citizens would violate their contracts with State Farm Florida.

Meanwhile, a court upheld McCarty’s denial of a 47.1 percent rate hike requested last July by State Farm. The First District Court of Appeal affirmed McCarty’s denial, which the DAH also upheld last December. When it filed for the 47.1 percent increase, the insurer said it really needed a 67 percent hike.