No.1 Coast insurer selected for review

State Insurance Commissioner George Dale announced Tuesday that his office is probing how a major insurer handled policyholders' claims after Hurricane Katrina destroyed tens of thousands of Gulf Coast homes.

Dale said his department picked State Farm Insurance Co. for its first of several post-Katrina "market conduct exams" because the Bloomington, Ill.-based company has written more policies on Mississippi's Gulf Coast than any other insurer.

Dale said the insurance department's reviews of State Farm and other insurers are designed to detect any "inappropriate practices" and gauge whether companies broke any insurance laws or met their "contractual obligations" to policyholders following last year's storm.

"We want to gather all the facts to see if these companies are treating policyholders properly," Dale said. "Who knows what we'll find? I really don't want to be presumptuous either way."

State Farm spokesman Phil Supple said the review, which started about three weeks ago, "was not unexpected" in the wake of a disaster as destructive as Katrina. Dale's office also conducted market conduct exams of insurance companies after Hurricane Georges hit the coast in 1998.

"We welcome the opportunity to work with (Dale's office) and show him the job that we're proud we have done," Supple said, adding that State Farm has paid more than $1.2 billion in claims since the storm.

Hundreds of homeowners have filed lawsuits challenging State Farm and other insurers for refusing to cover billions of dollars in damage from Katrina's rising water. The companies say their policies cover damage from wind but not from flood water, including wind-driven storm surge.

For months, Mississippi Attorney General Jim Hood's office has been investigating whether State Farm and other insurers fraudulently denied claims after Katrina. Lawyers for insurers and policyholders say U.S. Attorney Dunn Lampton's office is conducting a similar criminal investigation.

Dale said the market conduct exams are more thorough than the financial exams that his office is required to conduct every three years for any insurance company licensed by the state.

"We go in and interview people, look at files and look at anything else to be sure that insurance companies have treated people properly," he said.

Dale said at the end of the probe, his office will take "whatever corrective actions are deemed necessary." He couldn't say how long the review will last.

After Katrina, Dale's office set up a mediation program for homeowners who haven't sued their insurers. As of mid-October, 82 percent of 3,372 mediation cases have resulted in settlements, according to the insurance department.