Suing State Farm and Allstate

[Lindaloo]

Prominent Attorney Questions Timing Of Hurricane Deductible

Pascagoula Attorney Richard Scruggs is ready to challenge two insurance companies over the "hurricane deductible. Monday, Scruggs filed court papers to initiate a "class action" lawsuit against Allstate and State Farm insurance companies for adding the hurricane deductible in 1998 right before hurricane season.

Scruggs alleges State Farm and Allstate changed the rules for policy holders just before Hurricane Georges and avoided paying millions of dollars in claims.

Eugene and Kim Arnold considered themselves lucky when Hurricane Georges did little damage to their home. They thought their insurance would pay for all the repairs, then they learned about their two percent hurricane deductible.

"We didn't even know what the two percent meant and it was explained to us as an either/or, a thousand dollar deductible or two percent of your total loss, whichever was greater. I didn't find out until almost a month later that it was the value of your house," Eugene Arnold said.

"Usually if there's something going on, they'll let you know, but we had no warning," Kim Arnold said.

Richard Scruggs says the Arnolds aren't alone. He says more than 13,000 policy holders with State Farm and Allstate Insurance received the same shock when they filed their claims.

"They toyed with the deductible in a very subtle and deceptive way, deceiving the homeowners into thinking that the damages to their homes would be covered in the traditional way, which was usually a fixed deductible," Scruggs said.

In March of 1998, people began learning about rate hikes and the hurricane deductible. Insurance commissioner George Dale told people that without the deductible, some companies would stop writing policies in Mississippi.

In the court papers, Scruggs alleges that threat by State Farm and Allstate was improper. He also says the companies conspired to get the two percent deductible approved.

"The insurance companies shifted the risk just before hurricane season, just a few weeks before the storm, back to the homeowner and avoided paying millions of dollars in justified claims," Scruggs said. "They slipped it by the homeowner just before the hurricane season so it wouldn't be noticed."

But Scruggs says people have noticed and this lawsuit is the only way to make Allstate and State Farm do the right thing - pay homeowners for the damage done by Hurricane Georges.

We called the insurance companies for their comment. In a statement Allstate said: "We are confident we fully complied with Mississippi law in the implementation of the hurricane deductible, and in the manner we notified customers about the policy change."

No one from State Farm has returned our calls.

We also have not received a comment from the state insurance commission about Scruggs allegation that the companies conspired and threatened to pull out of state if the insurance commission didn't grant a 15 percent rate hike and okay the hurricane deductible.

According to the insurance commission, Allstate paid out 10,000 claims from Hurricane Georges, a total of $15 million. State Farm had 23,500 claims, totaling $50 million. Those two companies paid almost 40 percent of all claims from Georges.

So, what does this mean if you had a claim from Hurricane Georges with either of these insurance companies? First the lawsuit must be certified in state court to move forward. If that happens, qualified policy holders would be notified through television and newspaper ads, or by the attorneys handling the lawsuit.
--------------------------------------------------------------------------------------
I worked for Allstate for 12 years as a claims adjuster. I quit in 2000 because of the way they handled this deductible. I am so glad that someone is nailing both those crooks to the wall!!

[Stephanie]

In NJ, we've been losing insurance companies left and right because they don't want to deal with our insurance laws. Our state law mandates that we have car insurance, but the state has become one of the main insurers. I believe it was State Farm that tried to pull a "I'm going to hold my breath until I turn blue" act by saying that they were pulling out of NJ, feeling confident that all of the other major insurers would too just so a certain law wouldn't be passed. That didn't happen and they shot themselves in the foot. This was probably a decade ago. We have been losing insurance companies, though not as quickly as State Farm would've liked. Actually, it was announced recently that a new insurance comapny called Mercury (I think) is supposed to begin writing policies soon here.

You really have to wonder if the problem really does lie with the claims or the companies that are handling them.

[Deenac813]

I am an insurance agent here if Florida (not for state farm or Allstate) and I have to say that we have had 2% hurricane deductibles for almost 10 years now (that is 2% of your building coverage not loss) I can tell you when the companies I work with first implemented this change a letter was sent out to all the policy holders, as well as our agency has that in our annual letter to our clients. I am not sure how State Farm or Allstate handled this but maybe their agents did not even understand the deductible well enough to explain it..

[Lindaloo]

They did things in the same way Deena, BUT... they said 2% of the damage. When people suffered damage, they said it was 2% of the value of the home.

Lourdes of London have also snuck in that back door and dropped their insured's wind and hail coverage. Had those people not looked at their policies closely and they suffered damage from a hurricane, then they are out of luck because they have no "wind and hail" coverage. It was deleted from their policy.

I believe this lawsuit by Scruggs is going to go deeper than this. Scruggs is the same attorney that took on the tobacco companies and won. I believe he is going to beat these insurance companies at their own game. You do not come into a state and blackmail the insurance commissioner like that and expect to get away with it. I worked for them, I KNOW how they operate.

[j]

I hope they get what is coming to them Lin...You know what sickens me about Insurance companies?? It doesn't matter how bad the economy is, show me an Insurance company that has ever lost money? Their greed is only exceeded by their lack of respect for their clients.

Now...that being said...I will claim to have one of the better Agents I have ever had for my Insurance. They go out of their way to find every loophole that State Farm has and pass it along to me. They are the only Agent I have ever had that I feel truly have my best interests at heart.

[Lindaloo]

j... it is not the agents, it is the company. They claimed to have lost money because of Sept. 11th. That is simply not true. In homeowner and commercial policies there is a clause in there that says on "What We Do Not Cover" and that is "Any acts of terrorism" or "Any type of war or nuclear damage" They lost their behinds in the stock market and want us to pay to compensate their losses.

[j]

I understand that Lin...I was just taking a side step to plug my agent, who actually appears to be working in my behalf....something that is hard to find these days

[Lindaloo]

Actually that type of friendship with the agent is not rare. But, I do know one Allstate agent here in Pascagoula that is an absolute joke. My parents were with him for years!! My Dad was in the process of putting a new roof on the house when Allstate did their "ride-by" Allstate then fired off a letter to my Father stating they were non-renewing his policy because of the roof. My Mom went to see the agent who turned his back on her. When the company realized the mistake they personally called my Dad. Too late, my Dad had went with State Farm and he told them what they could do with their apology and their company. lol. When they left Allstate, they took everything with them. Cars, life insurance, and three umbrella policies.

Side note: My parents were with Allstate for 20 years. Never filed a claim before and always paid the premium in full every year. They have been with State Farm since 1985 and has still never filed a claim while still paying the premium in full every year.