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US: Louisiana Charges Price Fixing by Insurers

New York Times
November 7th, 2007

The Louisiana attorney general, Charles C. Foti Jr., is suing the state’s largest property insurance companies, accusing them of conspiring to limit payments to policyholders after Hurricanes Katrina and Rita and engaging in an elaborate price-fixing scheme.

Mr. Foti’s wide-ranging lawsuit, filed on Wednesday in a state court in New Orleans, claims that Allstate, State Farm Fire and Casualty and other insurers worked together to manipulate damage estimates and offer reduced claims payments after the 2005 hurricanes.

The lawsuit claims the companies coerced policyholders into settling damage claims for less than their actual value by editing engineering reports, delaying payments and forcing policyholders to go to court to challenge the estimates.

In Mississippi, Judge Michael T. Parker of Federal District Court extended on Wednesday a restraining order that prevents that state’s attorney general, Jim Hood, from continuing a criminal investigation into State Farm’s handling of Hurricane Katrina claims, a company spokesman said.

State Farm sued Mr. Hood in September to keep him from reopening a criminal case or continuing grand jury hearings over charges that the company fraudulently handled policyholders’ claims after Katrina.

In addition to State Farm and Allstate, the Louisiana lawsuit names Lafayette Insurance, USAA Casualty Insurance, Farmers Insurance Exchange, Standard Fire Insurance and several companies that worked with the insurers on handling claims after Katrina and Rita.

A State Farm spokesman, Phil Supple, said he had not seen the lawsuit and could not comment on Mr. Foti’s accusations, but he defended the company’s handling of Katrina claims.

“At State Farm, each claim is handled individually, and we pay what we owe based on our contract with our policyholders,” Mr. Supple said.

An Allstate spokesman, Michael Siemienas, also said he had not seen the lawsuit and would have no immediate comment.

Robert Hartwig, president of the industry-financed Insurance Information Institute in New York, called it “ludicrous” to accuse companies of engaging in any kind of conspiracy.

“Insurers operate independently from one another,” he said. “They do not act in concert with each other under any circumstances.”

The Louisiana insurance commissioner, Jim Donelon, who was briefed on the lawsuit by an aide, said Mr. Foti was obligated to sue if he found evidence of collusion between the companies.





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