Insurance Companies Cheating

Do people in Weatherford, Aledo, Azle, Springtown, Peaster, Hudson Oaks, Willow Park, Mineral Wells, Poolville, Whitt, or any other place in Texas remember several years ago when Farmers Insurance quit writing homeowners insurance policies in Texas? Remember the uproar and complaints by homeowners to the insurance company and to elected representatives? Do you remember why this was happening?
Here is what this writer has heard mixed with what was on the TV and radio news and in the papers. Farmers was alleging too many lawsuits and too many mold claims were causing costs to rise far beyond what they should and as a result they were forced to raise rates. However, this rate increase was put in place without approval by the state regulatory boards and agencies who oversee these matters. This battle, some could say a public relations battle, went on for months.
The truth was there, but for some reason it was never made real clear and to catch on to what was going on, someone would have to be paying very close attention. Here are a couple of things that were clear:
1) Farmers was in trouble for raising rates without proper authority;
2) Farmers was blaming trial lawyers and mold claims for driving the rate increases;
3) Farmers quit renewing homeowners policies:
4) Farmers ultimately paid some very heavy fines as part of a settlement with the State;
and what happened as part of the settlement which was not mentioned very much is this:
As part of the settlement, the State Attorney General’s office agreed to not criminally prosecute Farmers!!!
That didn’t make sense at first, because there would not be anything criminal about the unauthorized rate increase. That is only a civil penalty.
Well here is what this author heard from people inside Farmers.
Farmers was doing “Enron” accounting. They were using Texas premiums money to pay for California earthquake claims. Then making the books look like the money was being used to pay Texas mold claims to justify a rate increase in Texas. This would have been a criminal act for which upper level Farmers people could go to jail.
Here are a couple of other stories.
The Insurance Journal published a story on March 23, 2011, titled, “Tom Hanks, Rita Wilson File Lawsuit Against Former Insurance Broker.”
This story tells us that actor Tom Hanks and his wife, Rita Wilson, filed a lawsuit seeking unspecified damages from their former insurance broker.
According to celebrity gossip Web site TMZ, which discovered the lawsuit, Hanks and Wilson worked with the J.B. Goldman Insurance Agency for more than 20 years to secure various insurance coverages.
The lawsuit claims that when they switched brokers, the new broker discovered they were insured mulitiple times for the same things, and were being overcharged hundreds of thousands, if not millions, of dollars.
The other story from Bloomberg News, was published on March 21, 2011, and written by David Voreacos. It is titled, “AIG, Three Others Will Pay $27 Million in Antitrust Suit.”
According to the article, American International Group, Inc., is one of four insurance companies that will pay a total of $27 million to resolve a lawsuit claiming they improperly sold excess casualty policies.
AIG, Liberty Mutual Holding Co., Travelers Cos., Inc. and XL Group Plc. agreed to settle the case with buyers of insurance policies sold from 1998 through 2004. Five other insurers agreed to settle a related set of claims over non-excess casualty policies.
The case was inspired by a 2004 regulatory probe by Eliot Spitzer, then the New York attorney general, of a conspiracy by brokers and insurers to stifle competition.
The company used faked quotes to steer clients to favored insurers in exchange for hidden fees according to the lawsuit.
The intent of this article is not to say there is anything wrong with these companies as a whole, but to point out that individuals within these otherwise good companies will break civil and criminal laws when they think they can get away with doing so. These stories also serve as examples why an experienced Insurance Law Attorney should be consulted when someone thinks that something their insurance company is doing, does not seem right.