TALLAHASSE (CN) – Allstate Insurance persuaded the Florida Legislature to pass a law allowing insurers to buy discounted reinsurance from the state, then had the brass to ask for a 42 percent rate hike, using “falsely skewed hurricane models … in a wrongful attempt to claim that [it] did not realize any savings,” homeowners say in a class action.
Lead plaintiffs David and Theresa Sapuppo claim that “following a number of hurricane events that occurred in 2004 and 2005 in Florida, the Allstate Companies, including the defendant [Allstate Floridian Insurance Company], and other insurance company interests used their marketing strategies and their sizeable legal and lobbying resources to lobby the Florida Legislature in 2007 to consider and pass a law known as ‘House Bill 1-A.’
“Among other things, House Bill 1-A allowed the Allstate Companies to purchase ‘re-insurance’ from the State at a much lower price than it could be purchased in the private market. The State of Florida assumed risk for certain amounts of storm damage that previously had been assumed by the private marketplace. This risk assumption resulted in lower risk and a reduction in costs to defendant.”
According to the complaint in Leon County Court: “The Allstate Companies represented to the Legislature that House Bill 1-A would save the insurance companies a substantial amount of money, and that this savings would be passed on to Florida policyholders in the form of lower premiums. Thus, when enacting House Bill 1-A … the Legislature required the defendant to make a rate filing which reflected the savings or reduction in loss exposure to the insurer,” so the savings could be passed on to consumers as quickly as possible.
However, the class of policyholders claims that “despite the Allstate Companies recording rising profits … the defendant made a rate filing … to increase the premiums it charged plaintiff, in direct contradiction of the law and the representations the Allstate Companies made to the Florida legislature.” (Emphasis in complaint.)
The class claims: “The Florida Legislature and the Governor of Florida enacted the legislation to bolster Florida’s economy by having the State of Florida assume billions of dollars of risk that otherwise would have been a cost of business paid by defendants and the insurance industry. In exchange, defendant and the insurance industry represented that they would pass the savings along to Florida policyholders in lower premiums, rather than increase their own profits and seek additional rate increases.
“The named defendant knowingly used lobbyists, public relations firms and other personnel to have the legislation adopted that would allow them to obtain state-subsidized reinsurance, creating billions of dollars in risk for Florida, without lowering property and casualty insurance premiums for the plaintiff and those similarly situated to the extent and within the timeframe called for by the legislation.”
The complaint states: “The Allstate Companies made misrepresentations that induced their procurement of state-subsidized, low-cost reinsurance;
“The Allstate Companies retained the benefit conferred upon them by the reinsurance cost savings and failed to timely pass along the savings resulting from their purchase of state-subsidized reinsurance to their ratepayers … in the form of lower premiums, despite being legally required to do so;
“Upon information and belief, the Allstate Companies have attempted to avoid their obligations to reduce premiums by using inaccurate and misleading data, including falsely skewed hurricane models and unjustifiable hurricane risk loads, in a wrongful attempt to claim that they did not realize any savings to pass along to the people of Florida in the form of lower premiums.”
Most notably, “While most insurance companies timely submitted filings which reflected a decrease in premium rates following ‘presumed factor’ filings, the defendants submitted a filing which sought a 41.9 percent increase in rates. Only after being sued by the Office of Insurance Regulation did the defendant agree, more than a year later, to a further reduction of 5.4 percent in residential property insurance premiums for plaintiff and other similarly situated policyholders.”
The policyholders seek recovery of the 5.4 percent premium hike they paid before September 2008, and damages for unjust enrichment and breach of contract.
They are represented by Jon Moyle Jr.