Louisiana's insurance regulator has ordered Northbrook, Ill.-based insurer Allstate to reinstate homeowners policies for more than 4,000 customers with hurricane-damaged homes because the company failed to sufficiently inspect the properties.

Insurance Commissioner Jim Donelon has told the company to scrap its cancellation notices to 4,700 policyholders and reinstate coverage.

As of today, the department said it received 486 complaints from policyholders saying they had not abandoned their homes and were improperly canceled by the company.

The action comes after the commissioner lifted a ban on insurers canceling policies in the wake of the 2005 hurricane season that devastated New Orleans.

Last week, Mr. Donelon requested information from the insurer and sent inspectors out to 18 homes of canceled customers to determine if Allstate made a reasonable effort to inspect the homes and determine if they were inhabited or being repaired, and if policies should be continued.

In all 18 cases the policyholders were living in FEMA trailers next to the homes, Mr. Donelon said. The commissioner said the Allstate inspectors should have realized the individuals intended to reoccupy the homes.

Mr. Donelon said he found the company's inspection process consisted of two company inspectors driving past a home and determining if it was vacant, under repair or repaired.

The inspections were made of 40,000 homes in four counties--Jefferson, Orleans, Plaquemines, and St. Bernard Parishes. The inspections resulted in 8,853 requests for additional proof of occupancy from Allstate to its policyholders.

Of that number, 1,354 customers voluntarily canceled coverage, while 2,727 mailed in acceptable documentation and were not cancelled. A remaining 4,772 received cancellation notices.

In a statement, the commissioner said he was displeased that Allstate had no documentation on its decisions.

In addition to reinstating the policies, the commissioner also ordered a new inspection process with dated and signed documentation of the finding that the homes were abandoned. The documents must also include inspectors' notes indicating their determination.

The department added it would continue to investigate complaints from homeowners who receive cancellation notices.

Allstate said it planned to issue a statement later in reaction to the order.

Special Reports /

La. Tells Allstate To Reinstate Policies

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