Texas Probes Possible Hurricane Rita Misdeeds

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, a department spokesperson, said: "We're looking at all companies."

John Robinson, director of information assistance with the department, said 132 complaints had come into the agency's consumer protection unit. Mr. Hagins said "the vast majority" were against Allstate.

According to data available from National Underwriter Insurance Data Services, Allstate is the second largest writer of homeowners insurance in Texas (based on 2004 direct written premiums) with a 16 percent share of the market.

Mr. Robinson noted that on Oct. 7, 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 displaced homeowners. The department said Allstate was guilty of unfair settlement practices 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 reasonably establish the property is physically damaged.

The parties are due back in court on 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."

Mr. Geeslin's bulletin said while he recognized "the toll of the hurricane on both policyholders and carriers," his department "must remind carriers of their duties to their policyholders."

The department also 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 monitor carriers for compliance with claims-handling requirements, including determinations regarding the reasonableness of paying claims appropriately and in good faith. The department said it would use new procedures for market conduct examinations established by the state's Insurance Market Conduct Surveillance Act.

Infographic:

Flag: What's The Beef?

Head: Rita Claims Complaints Mount

Among the beefs raised by consumers on Hurricane Rita claims cited in a Texas Insurance Department bulletin:

o Policyholders said they were told there are gray areas in coverage and they must travel to various areas of the state to pick up settlement checks.

o Policyholders said they were told insurance claims-handling areas (temporary or permanent) were closed for the evening they were "waiting for relief."

o Policyholders were told damaged property could not be inspected, although there are means available to carriers to find out the condition of the property–satellite pictures and contact with civil authorities.