A Florida appellate court has lifted a stay and upheld a regulator's order suspending Allstate from writing new insurance business in the state.

The order was issued by Florida Insurance Commissioner Kevin McCarty when the company balked at a subpoena that sought massive amounts of material concerning Allstate's ratemaking process and claims handling.

Steve Parton, general counsel of the Florida Office of Insurance Regulation, said late today that Allstate is apparently complying with the request for documents, having supplied more than 100,000 pages of material. But, he said, the suspension will remain in effect until the company certifies that it has supplied all documents and will continue to supply all documents requested by the OIR.

At the same time, Mr. Parton said Allstate is also subject to parallel proceedings now underway dealing with their failure to comply in the past.

Mr. Parton said that an administrative law judge is hearing the case and has the authority to rule that the company failed to comply. If there is such a finding, he said, monetary penalties could be imposed.

Tom Zutell, deputy communications director for the Florida OIR, noted that the state legislature recently passed legislation allowing the state to triple the former level of fines. He said he did not know dollar amounts.

Mr. Zutell also said the suspension is unprecedented for a company of this size.

According to the OIR, Allstate wrote $1.8 billion in auto insurance in 2007, representing 14.8 percent of the Florida market. It is the third largest auto insurer, behind State Farm and GEICO, and insures 1.7 million cars.

As of March 31, Allstate also held 9.2 percent of the Florida homeowner's market, having written 249,149 policies for $4 billion in premiums.

The suspension ruling affects more than 1,100 captive agencies that write Allstate homeowners' and auto insurance in the state, according to Jim Fish, executive director of the National Association of Professional Allstate Agents Inc., Gulfport, Miss.

In a conference call, Mr. McCarty said he was aware of the problems being faced by Allstate's agents. “I am deeply concerned about this and met with them a month ago.”

The commissioner said he told them, “You should talk to Northbrook” and tell them “they should comply with the law,” referring to Allstate's Illinois headquarters. “Violation of the law is putting their livelihood in peril,” he said.

Amy Moore, a senior communications consultant for Allstate, responded by saying, “We are obviously disappointed with the court's ruling and are looking at all our options going forward.” These included, she said, seeking State Supreme Court review.

“We just received the court's opinion and are in the process of reviewing it. We are determining what options we will pursue moving forward,” she said.

Allstate said it had supplied the certification of compliance to the OIR, “and are working to resolve any remaining issues.In the interim, it said it has taken steps to comply with the order to stop writing new policies. “We are asking our agents to stop binding new policies,” the statement said. “Systems capabilities will be shut down shortly.”

In its ruling on a motion for rehearing filed by the company, the First District Court of Appeals in Tallahassee said that “on the merits, our opinion remains unchanged.”

In its opinion, written by Judge Paul Hawkes, the court said, “In attempting to conduct its investigation, OIR was faced with Allstate's representations that it would decide which documents it would produce, and Allstate's history of incurring millions of dollars in court-ordered fines rather than comply with court-ordered production.”

“The scope of OIR's investigation cannot be limited by Allstate's unilateral actions. Suspension of Allstate's Certificates of Authority was one of OIR's statutorily available options when Allstate refused to cooperate in the investigation,” the court found.

The appeals court had issued a similar ruling on the case April 22 but swiftly withdrew it, citing procedural rules that an opinion required more time than had passed since Allstate filed its motion.

Mr. McCarty said in a statement that the court had “again affirmed the appropriateness of the office's action in issuing the January Immediate Final Order suspending Allstate's licenses to sell new business in Florida; it has denied Allstate's request for a rehearing and has lifted the stay of the suspension. As a result, the suspension now is back in effect.”

According to the opinion, the suspension applies to Allstate Floridian Insurance Co, Allstate Indemnity Co, Allstate Property & Casualty Insurance Co, Allstate Insurance Co, Allstate Floridian Indemnity Co, Allstate Fire and Casualty Insurance Co, Encompass Insurance Co of America, Encompass Indemnity Co, Encompass Floridian Insurance Co and Encompass Floridian Indemnity Co.

In his comments, Mr. Fish voiced particular concern that Allstate and its agents will suffer a risk to their reputation as a result of the court action.

He specifically cited the court's conclusion that “Allstate's willful, indeed potentially criminal failure to comply with its disclosure obligations has prevented OIR from adequately investigating its reasoned belief that Allstate is systematically defrauding its policyholders.”

Mr. Fish said “a lot of innocent people are going to be hurt through this process.”

This article was updated May 15, 9:22 a.m.

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Allstate Suspended In Florida

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