State Farm standoff with regulators heads to court
By Jeff Harrington, Times Staff Writer
In Print: Thursday, April 30, 2009
Florida Insurance Commissioner Kevin McCarty has reached a standoff with State Farm over how the insurer should orchestrate its massive pullout from Florida’s property insurance market.
So he’s turning to the courts.
In a letter Thursday, McCarty referred the State Farm dispute to the chief judge of the state Division of Administrative Hearings, Robert S. Cohen.
State Farm, the biggest property insurer in Florida, signaled plans to pull out of the state’s property insurance market and several other lines of business in late January, citing rising losses and the risk of heavy hurricane claims. All told, State Farm wants to drop about 1.2 million policies over the next two years, 700,000 of them covering homeowners.
McCarty’s office gave conditional approval to the withdrawal, calling for State Farm to give up its certification as an insurer, a move the company said could hamper its ability to buy reinsurance. McCarty also wants State Farm to allow its agents to sell other companies’ policies, a sticking point because State Farm has exclusive contracts with its agents.
The state-imposed conditions "actually increase the risk to State Farm Florida’s policyholders and the public," State Farm said in appealing McCarty’s order.
State Farm offered to allow agents to sell state-run Citizens Property Insurance Corp. policies, but that doesn’t achieve the state’s goal of shifting State Farm’s dropped policies to myriad private insurers.
Regulators want to guard against a flood of State Farm policies going into Citizens, putting taxpayers at greater risk of shouldering the tab from a major hurricane. Under state law, all insurance policyholders can be assessed to help Citizens pay claims if the insurer is unable to meet its obligations.