La. Commissioner Orders Allstate to Reinstate Policyholders

March 6, 2007

Louisiana Commissioner of Insurance Jim Donelon has ordered Allstate to scrap its property inspection process that led to the cancellation of more than 4,700 homeowners policies and reinstate coverage on those homeowners who got a notice of cancellation as a result of those inspections, the Louisiana Department of Insurance announced.

This action comes after the received hundreds of complaints from homeowners, many of whom were living in their Hurricane Katrina-damaged homes at the time they received a letter from Allstate saying their homeowners insurance was being cancelled because the home was abandoned.

The department has received 486 complaints from Allstate policyholders who got a cancellation letter.

Recently, Commissioner Donelon sent staff from the Department of Insurance to interview 18 homeowners who received the Allstate cancellation letter. In all 18 instances, the Department found that the Allstate inspectors should have been able to tell that the homeowners were either living in a FEMA trailer on their property, making repairs to their hurricane-damaged homes or living in the fully or partially repaired home and thus should not have had their insurance cancelled.

Commissioner Donelon met with Allstate officials Mar. 5 to discuss how the inspections were done and to reveal the results of his own investigation into the 18 properties. Donelon was told by Allstate that around 40,000 inspections were done in Jefferson, Orleans, Plaquemines and St. Bernard Parishes. From those inspections, 8,853 homeowners were sent a preliminary letter asking for proof that the home was occupied: 1,354 voluntarily terminated their homeowners policies; 2,727 homeowners mailed in acceptable documentation to Allstate and were not cancelled; and 4,772 homeowners received a cancellation letter.

The inspection process, cited by Allstate as an industry standard, involves a team of two inspectors driving by each property and noting whether the home is vacant, under repair or accepted as fully repaired. No supporting documentation for the finding is given.

Commissioner Donelon is requiring that the new inspection process include dated and signed documentation for each finding, including notes by each inspector with express reasons given why a property is deemed vacant.

The Department of Insurance will continue to investigate all complaints as they are received and as part of the investigative process, Department staff will continue to visit the homes of policyholders who received a cancellation letter from Allstate.

Source: Louisiana Department of Insurance

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