11/10/2007 Community Gumbo

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Louisiana Attorney General Sues Insurance Companies

Listen | Michael Homan and Therese Fitzpatrick, Mid City

Listen | Lisa Palumbo, Uptown

Louisiana Attorney General Charles Foti filed suit against State Farm and Allstate, along with several other insurance companies alleging that they were "reaping huge profits from the misfortunes of persons whom they pledged to protect from the risk of loss." The suit alleges that insurance companies engaged in rigging the value of policyholder claims, coercing policyholders to settle their claims of damages for less than their value by editing engineering reports, by delaying payment, and by forcing policyholders to litigate claims to receive full value. Attorney General Foti, who lost his re-election bid on October 20th, said that the activities of the named companies amounted to illegal collusion, price fixing and antitrust violations which resulted in "unjust enrichment of themselves to the detriment of the state, policyholders and commerce in Louisiana."

A comprehensive two-part feature on WWL TV News this past week reported that Allstate significantly increased its profits even as it was supposed to be paying out claims for the worst hurricane disaster in U.S. history. According to WWL, Allstate averaged profits of $82 million per year from 1986 to 1995, but from 1996 to 2005, the company increased it profits to an average of $2.2 billion per year.

In August 2006, on the eve of the one-year deadline for homeowners to file lawsuits against their insurance companies for unpaid claims, Community Gumbo broadcast a pair of stories in which homeowners described their experiences with their insurance companies. In those stories is illustrated the manner in which insurance companies were allegedly acting to pass losses onto their policyholders at the same time that those companies were raising premiums and reporting record profits.

After fighting with her insurance company to win a full claim of wind damages, Lisa Palumbo hired an attorney. Rather than sue State Farm, Palumbo's attorney had a construction consultant go through her house to itemize damages, proving that the insurance company had underpaid the claim. Palumbo is still in limbo, living with her mother while her house remains gutted. She's still hoping to get help from the Road Home program to help make up the tens of thousands of dollars in additional funds she'll need to make her house livable again.

Allstate finally settled the claim made by Michael and Therese Homan rather than go into costly litigation, offering an award in the amount of the mortgage. Unfortunately, a general contractor estimated that repairs to the house would cost $100,000 more than the mortgage. The Homans carefully crafted a financial plan joining the insurance settlement to a Road Home award, savings, and an inheritance, to rebuild, but are worried that they'll have just enough money to make ends meet, and "can't screw it up." Despite the challenge, Michael Homan said he's "happy to have work started on the house, and that it's no longer just sitting there." They hope to be back in their house by June or July of 2008.

Here again on Community Gumbo are the stories of Mid-City residents Michael and Therese Homan, and Carrollton resident Lisa Palumbo. The original Community Gumbo post contains photos and additional links.

Related:

Community Gumbo, "Sue your insurance company now!," 8/12/06.

Mike Hoss, "La. Attorney General sues insurers, alleges price-fixing" (video), WWLTV.com.

Dennis Woltering, "4 Investigates: Did Allstate reduce claims to boost profits? - Part 2" (video), WWLTV.com.



Rebecca Mowbray, "Foti sues insurers over storm payouts," The Times-Picayune, 11/08/07.

Rebecca Mowbray, "Leaning on Insurers," The Times-Picayune, 7/15/07.

People Get Ready, "Hold on to your wallet," 4/19/06.

Music Played:

Fred Hersch & Michael Moore, "Canzona," Jazz at the Concertgebouw, Radio Nederland, 2007.

Christian Scott, "Litany Against Fear," Concord, 2007.