Allstate has agreed that 55,000 New York coastal residents whose policies were not renewed in part because they did not buy other insurance products from the company should be allowed to obtain coverage, the state insurance department announced.

However, those who accept renewed coverage will have to relinquish any legal claims against the carrier over its actions, the department warned.

State Insurance Superintendent Eric Dinallo in a statement reporting the agreement said that its terms will still allow the company to cut back the number of policyholders it has along the coast.

He noted that on Aug. 28 he had issued a directive banning the practice, called “tying,” and three days later had cited Allstate for violations of the insurance law.

The agreement with Allstate is set forth in a stipulation signed today resolving that citation, the announcement said.

“Allstate customers improperly denied the chance to renew their policies now have the right to choose if they want to stay with the company,” Mr. Dinallo said in a statement.

He added, “Consumer protection is a basic principle guiding the department’s actions, and we will be zealous in safeguarding consumers’ rights in any transaction with an insurance company.”

Mr. Dinallo warned, however, that this announcement does not mean Allstate will stop implementing its plan to reduce its concentration of customers in coastal areas, as they are permitted to do under law.

Consistent with its previous announcements, Allstate will continue to reduce its concentration of homeowners insurance policies in coastal areas nationwide, including in New York, by not offering to renew the policies of some customers, he noted.

“Insurance companies must be able to pay their claims when disaster strikes,” Mr. Dinallo said. “They have the right and the obligation to consumers as well as shareholders to act prudently so their solvency is not threatened. But their actions must be in accordance with the law.”

In August, Mr. Dinallo deemed it illegal for Allstate and other insurers to base a decision not to renew homeowners policies on the existence of other business with the company.

His action came after the Insurance Department received complaints from some coastal homeowners that their homeowners insurance policies were not being renewed, in part because they did not have an automobile or life insurance policy with the company or an affiliate as of a specific date. Allstate was identified as engaging in the practice.

Companies engaging in the practice were directed to cease immediately and offer renewal to any homeowner who had received a nonrenewal notice that had not yet taken effect.

“While Allstate has since rescinded any nonrenewals that had not gone into effect, there was still a need for a suitable remedy for those whose policies had already been terminated and who had to find other insurance coverage,” Mr. Dinallo said. “The department believes this agreement provides that remedy.”

Beginning Jan. 10, 2008, Allstate will send notices to the approximately 55,000 affected former policyholders offering them the right to an immediate quote and renewal of their policies for a period of at least three years.

Allstate will contact those policyholders over a 10-week period. Policyholders will have up to 12 months to accept the offer of a new policy.

“Consumers should be aware that by accepting this offer they will be releasing Allstate from any legal claims that they could have brought against the company for the termination of their earlier coverage,” Mr. Dinallo said.

He explained, “It is a legal agreement, and the Insurance Department strongly suggests that consumers be sure they fully understand the terms. The department also suggests consumers shop as carefully as they would at any other time before deciding which insurance company is right for them.”

The announcement noted there were 10 different ranking members of the department which handled the Allstate case.

Allstate companies covered by the agreement were listed as:

o Allstate Insurance Company

o Allstate Indemnity Company

o Encompass Home and Auto Insurance Company

o Encompass Indemnity Company

o Encompass Independent Insurance Company

o Encompass Insurance Company of America

o Encompass Property and Casualty Company