Allstate Cited For Dropping N.Y. Coastal Customers

Liberty Mutual reacted by stating it would begin reinstating 640 downstate policies.

Tie-in business considerations in renewals are a violation of the anti-rebating and anti-discrimination provisions of the state's insurance law, the department said.

The citation directs Allstate to appear Sept. 19 at an administrative hearing at the Insurance Department headquarters in Manhattan to show cause why a formal order should not be entered requiring the company to:

o Stop conditioning homeowners insurance renewals on the existence of other insurance business.

o Reinstate policies that were improperly non-renewed.

o Pay civil penalties for violating the insurance law.

Allstate, in a statement, said it had responded to the department in writing and also attempted to make contact with Superintendent Eric R. Dinallo directly following the events of last week.

The company said it believed its letter addressed the concerns raised by the department, but Friday it received notice of the hearing and, "We are reviewing the document and will respond accordingly."

Allstate went on to say: "We respect our longstanding relationship with the [state insurance department], and remain committed to working with them regarding our continued compliance with the law as we continue our catastrophe management program. We are committed to being in a strong position for our New York customers, prudently managing our exposure to catastrophic risk, and continuing our industry-leading presence in the state of New York."

The issue of coverage for New York homeowners has recently become intensely political, with both of New York's U.S. Senators raising the issue.

Last month, Sen. Hillary Rodham Clinton, D-N.Y., called on Allstate to reconsider its decision to cut back on coverage it provides on Long Island. She also asked Allstate Chief Executive Thomas Wilson for a detailed explanation on the decision to limit its business there.

Two weeks ago, Sen. Charles Shumer, D-N.Y., announced he wants Congress to act promptly on legislation creating a commission to examine the insurance marketplace, "with the goal of increasing availability and affordability of insurance in communities like Long Island," because "they are being targeted by insurance companies for reductions of coverage."

Mr. Dinallo's tough stance on tie-in nonrenewals is apparently a new direction for the department, which he took over this year as part of the Democratic administration of Gov. Eliot Spitzer.

Glenn Greenberg, a Liberty spokesman, said the criteria it was using to cut coastal exposure had been presented to Mr. Dinallo's Republican predecessor, Howard Mills, in 2006, and that he gave the company no direction to change that plan.

In its citation notice, the department took note of Allstate's nonrenewal letter to policyholders telling them that among reasons they were being dropped was "the frame construction of your property is more susceptible to hurricane losses and is close to the Atlantic coast, where anticipated hurricane damages are highest.

"In addition, Allstate is basing its renewal offers in your area in part on whether customers had certain auto or life policies with us prior to the start of our current hurricane exposure reduction efforts on Oct. 7, 2005. You did not have such a policy on that date."