On September 7, 2012, Bloomberg Businessweek published an article regarding an investigation by Texas District Attorney Gregg Cox into State Farm Lloyds alleged misconduct in purposely underpaying and wrongfully denying policyholders’ Hurricane Ike claims:
Cox, whose office has state-wide jurisdiction, would not confirm the substance of the investigation or say whether it is related to claims in about 300 individual lawsuits, as well as a class-action suit, filed in Houston and Galveston over State Farm Lloyd’s handing of claims to repair "lifted shingle" damage after Hurricane Ike.
“Lifted shingle" damage occurs when high winds break the watertight seal on roof shingles and tear them partially — but not fully — away from the roof.
Stat Farm Lloyds did not provide a surprising response,
State Farm Lloyds said it "strongly disputes the lawsuit accusations and is cooperating fully with the Travis County District Attorney."
"We are proud of our response to Hurricane Ike," the company said in a statement. "To date, we have paid our policyholders more than $1.5 billion, much of which went to repair or replace roofs."
State Farm Lloyds added that it is continuing to "work to resolve our policyholders’ claims, including those that are in litigation."
According to the article, Mr. Cox is investigating over 300 claims that were allegedly not adjusted properly. The news gets even worse for policyholders in Texas. State Farm Lloyds recently announced that it submitted a rate filing to the Texas Department of Insurance; its customers may pay twenty percent more for their homeowners insurance.
State Farm Lloyds claims the rate increase is due to the rising cost of claims and rising roof prices.
The good news for Texas policyholders is that Texas Statute §541.003 provides that “a person may not engage in this state in a trade practice that is defined in this chapter as or determined under this chapter to be an unfair method of competition or an unfair or deceptive act or practice in the business of insurance.”
Chapter 541 prohibits the following conduct:
- §541.051. Misrepresentation Regarding Policy or Insurer;
- §541.052. False Information and Advertising;
- §541.053. Defamation of Insurer;
- §541.054. Boycott, Coercion, or Intimidation;
- §541.055. False Financial Statement;
- §541.059. Deceptive Name, Word, Symbol, Device, or Slogan;
- §541.060. Unfair Settlement Practices;
- §541.061. Misrepresentation of Insurance Policy.
The accusations against State Farm Lloyds, if true, are clearly in violation of chapter 541. It is great to see Mr. Cox protect policyholders and hold Texas insurance carriers accountable.