Court Stays Allstate's Florida Suspension

Allstate today obtained a temporary appeals court stay of Florida Insurance Commissioner Kevin McCarty's order suspending their right to do business in the state.

The First District Court of Appeal in Tallahassee issued a temporary injunction after the Northbrook, Ill.-based insurer filed a motion accusing Mr. McCarty of acting unconstitutionally, abusing his powers and "taking punitive vindictive measures under the guise of a so-called emergency."

Mr. McCarty issued the suspension order yesterday after Allstate failed to deliver reams of material about the insurer's business he had sought with a subpoena, including information about "improper claims handling processes."

Allstate said it is pleased with the ruling that would let its agents go back to work and that it would continue to supply subpoena information.

The commissioner, who has 10 days to respond why the stay should not be made permanent, said in his suspension order that Allstate's refusal to provide the material meant he was "unable to document Allstate's claims handling procedures and protect the public."

Mr. McCarty has been at odds with the company since its Florida outlets sought double-digit rate increases after the state supplied insurers there with discount reinsurance in expectation there would be price reductions for homeowners.

Allstate, in its motion, said that the commissioner's Office of Insurance Regulation (OIR) had "abused its power by issuing an emergency [suspension] order that is intended to function as a punitive stick against the Allstate Companies."

The apparent goal, the insurer charged, is to punish the company and extract better responses to subpoenas, as part of an "investigation of residential property insurance rate practices" that the company is doing its best to respond to.

The OIR belief that Allstate is not responding quickly "does not give rise to an immediate danger," and the OIR's proper course is to go to court if it believes it has a case, the insurer argued.

Mr. McCarty's order, Allstate said in its papers, have set in motion "frenzy and confusion that has instantly damaged Allstate's reputation" and harmed the companies, as well as "jeopardizing the livelihoods of agents and their support staff..." Allstate said it has 1,100 agents serving two million customers.

The insurer's motion said OIR, by taking the power to adjudicate the validity of its subpoenas, "usurps the power vested in the judiciary...a violation of the constitutional separation of powers." The order, Allstate said, had caused it "immediate and irreparable harm."

Mr. McCarty, if he drives Allstate from Florida, will raise the cost of insurance prices in the state by lessening competition, the company said in its motion.

The commissioner, in response, said in a statement that his office is reviewing the motion. "I stand behind the Order I issued Thursday suspending the Allstate companies from writing any new business in Florida until they have fully complied with the subpoenas my office sent them Oct. 16," he said. "This is just another step in the process that enables Allstate to further delay production of the documents we requested."

He said that Allstate's motion is "not unexpected, and it will not stymie my commitment to Florida's consumers to get to the bottom of this issue."

He promised to "do everything within my authority as Florida's insurance commissioner to ensure that the suspension remains in effect and that Allstate produces the documents requested by my office."

Reacting to the ongoing battle, the Florida Association of Insurance and Financial Advisors (FAIFA) called on Mr. McCarty and Allstate "to redouble efforts to settle their much publicized dispute."

The group added that "agents representing numerous companies have called FAIFA's Tallahassee headquarters with concerns that the dispute will result in negative ramifications for Florida's insurance market, that go far beyond just the Allstate insurance companies."