The Texas Department of Insurance said it has commenced market conduct exams of several carriers after a barrage of consumer complaints that insurers were treating their Hurricane Rita claims improperly.
Its announcement of the inquiries came in a bulletin to all property-casualty insurers writing coverage in Texas, warning them to deal fairly with customers.
Betty Patterson, the senior associate commissioner for the department's financial division, said at this point the number of exams underway amounts to "a handful," but the number of complaints was "way beyond that [amount]."
Later Jerry Hagins, spokesperson, said "were looking at all companies."
John Robinson, director of information assistance with the department said 132 complaints had come in to the agency's consumer protection unit. Mr. Hagins said "the vast majority" were against Allstate.
Mr. Robinson noted that on Friday at the request of the department the Texas Attorney General's Office had obtained a temporary restraining order against Allstate to keep the insurer from refusing to pay reasonable additional living expenses for some homeowners displaced by Hurricane Rita.
The Insurance Department, argued Allstate was guilty of unfair settlement practice by refusing to pay for loss of use when displaced homeowners were unable to reoccupy their homes because they were inaccessible or unlivable.
Allstate argued that Texas homeowners policies do not cover for loss of use claims caused by Rita unless the insurer can reasonable establish the property is physically damaged.
The parties are due back in court Oct. 20 before State District Judge Darlene Byrne in Austin.
Insurance Commissioner Mike Geeslin's notice concerning claims settlement practices said the department had found "certain carriers are not responding to policyholders' claims resulting from losses caused by Hurricane Rita."
The bulletin said policyholders complained they had been told there are gray areas in coverage and they must travel to various areas of the state to pick up settlement checks.
According to the department, policyholders said they were also told that insurance claims handling areas (temporary or permanent) are closed for the evening "when policyholders are waiting for relief."
Carriers, policyholders told the department, were also telling them that property could not be inspected even though there are means available to carriers to find out the actual condition of the property, such as satellite pictures and contact with civil authorities.
The department said the issue of inspections had been raised in situations where condition of the property is not relevant to the propriety of payment of the claim.
Mr. Geeslin's bulletin said while the department recognized "the toll of the hurricane on both policyholders and carriers, TDI must remind carriers of their duties to their policyholders."
It reminded insurers that the new Texas Insurance Code "has specific provisions concerning claims settlement practices which carriers must follow. Further, under both statutory and common law, carriers have a duty to deal fairly and in good faith with their policyholders."
In addition to the market conduct exams already underway, the department said it would be monitoring carriers for compliance with claims-handling requirements, including determinations regarding the reasonableness of paying claims appropriately and in good faith, including utilizing the new procedures for market conduct examinations as established by the state's Insurance Market Conduct Surveillance Act.
Hurricane Rita hit the Texas Gulf Coast on Sept. 24, with its center carrying winds close to 120 mph. Its landfall came just west of the border with Louisiana. Rita brushed Houston, which authorities had ordered evacuated, but caused widespread flooding in Beaumont and Port Arthur, Texas.
A total of 22 counties in the eastern portion of the state were declared disaster areas. In addition to causing eight deaths, the storm ripped off roofs, blew out windows and downed utility poles and trees.
Ms. Patterson said the hurricane had been "choosy" in the damage it did, skipping some areas and impacting others nearby. She said at this point the department is still trying to capture information on the extent of the loss to various insurers.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.