La. Antitrust Lawsuit Against Insurers Dismissed

A federal judge in New Orleans has dismissed a lawsuit filed after plaintiff's lawyers in Louisiana complained in 2007 that insurers facing lawsuits filed in the wake of Hurricanes Katrina and Rita were behaving like a "cartel," working together to underpay legitimate claims.

The suit was filed by the former Louisiana attorney general, Charles Foti, against property insurance companies and their vendors for lack of evidence.

The case was dismissed Wednesday by U.S. District Court Judge Jay Zainey in response to a motion by insurers to dismiss the case.

"I just don't feel that there were any facts sufficient to support this," Judge Zainey said.

The case cited Allstate Insurance Co., Lafayette Insurance Co., State Farm Fire and Casualty Co., USAA Casualty Insurance Co., Farmers Insurance Exchange and Standard Fire Insurance Co., a unit of Travelers.

Non-insurers involved in the case included software companies Xactware Solutions Inc. and Marshall & Swift/Boeckh, LLC; data aggregator and Xactware owner Insurance Services Office, Inc.; and consultant McKinsey & Company, Inc.

The case was argued on behalf of the defendants by Wayne Lee, an antitrust lawyer with Stone Pigman Walther Wittmann L.L.C. He represented State Farm.

Arguing that the case should continue, Alex Watkins, a New Orleans attorney who is working with the attorney general's office, told the court that the suit should be allowed to continue because it addresses "the formulation of a hard-core cartel" and "the way the insurance industry is run."

Mr. Lee, argued, however, that adjusting software is necessary to make sure that claims-handling isn't arbitrary.

The estimates that the programs produced are starting points, he said, noting that homeowners are free to request supplemental payments if they find that the amount of money they receive from their insurers is insufficient to repair their houses.

"The complaint that you've alleged is 'you underpaid us on claims.' That's a plain and simple breach of contract," Lee said. "There is no price-fixing. There is no antitrust conspiracy."

Jeff McCollum, a spokesman for State Farm, cautioned that the current Louisiana attorney general, Buddy Caldwell, could still decide to appeal the case, although spokespeople for Mr. Caldwell indicated otherwise.

As for the decision, Mr. McCollum said, "In terms of former attorney general Foti's allegations, we felt the accusations and allegations were completely unfounded from the outset, and we are very pleased that the court agreed with our position."