“Japs need not apply.”
That was the remark Japanese-American Rodger Asai overheard on the telephone during a call to a representative of Imperial Fire & Casualty of Opelousas while trying unsuccessfully to resolve a dispute with his insurer after tenants destroyed his rent home in Livingston Parish.
Asai, whose father and two uncles were among those recognized with the Congressional Gold Medal for their military service during World War II even as his father’s own parents and other family members were being held in internment camps, has been fighting Imperial for more than a year now over damages inflicted by unauthorized individuals who had taken occupancy of the home from the original tenants unbeknownst to Asai.
The original tenants had moved from the home because they were unable to afford the $1500 per month rent, Asai was told when he came to Louisiana from his home in Oregon to check on the house because the original tenant had fallen behind on his rent.
Asai was forced to obtain a court-ordered eviction notice to get the previously unknown occupant, Michael Wayne Keller, to leave the property.
Among other things, Keller, a man who served 19 years in the Louisiana State Penitentiary at Angola for manslaughter and felony theft, apparently kept a pit bulldog in a room where it was forced to relieve itself on the floor. Elsewhere in the house, flooring was ripped up, holes torn or punched in walls, ceiling fans ripped down, coolant drained from the central air conditioning unit until the unit’s motor seized up, cabinet doors ripped off their hinges, and electrical wiring cut—all part of normal wear and tear, according to Imperial’s claims adjuster.
Imperial’s adjuster refused to acknowledge the damage was caused by vandalism, describing it instead as “wear and tear” and inept remodeling efforts.
That “wear and tear” cost Asai $45,680 to repair—with him doing much of the work himself—and his mortgage and other bills for the past year added another $60,000 to the tab, he says.
Imperial originally set the rebuild cost of the house at $270,000 but after the vandalism claim was filed, downgraded the rebuild cost to $150,000 and ended up paying Asai only $4,672.01, which included the $3,000 policy limit for stolen equipment. Net payment by Imperial for property damage? $1,672.01.
Even more insulting, the insurance company initially paid only $672.06—and even that payment came with 46 cents postage due.
And the Louisiana Department of Insurance, which likes to boast that it serves the public, has been all but invisible.
http://ldi.louisiana.gov/consumers/miscellaneous_pubs.html
Click to access HowToFileAnInsuranceComplaint.pdf
But then Imperial did make a point of spreading around more than $50,000 in campaign contributions to several politicians, including Insurance Commissioner Jim Donelon, Gov. Bobby Jindal and key legislators.
The trend in insurance companies’ tactic to delay and deny claims has its roots in a 1992 decision by Allstate Insurance to retain the services of McKenzie and Co. to revamp its business model that tilted the scales from favoring the policy holder to favoring the stockholder. From 1996, the year the McKenzie plan was fully implemented, until 2006, Allstate’s operating income jumped from $820 million to $27.4 billion, a 3,335 percent increase.
In 2004, the casualty insurance industry as a whole had total assets of $412.6 billion. In 2007, two years after Hurricanes Katrina and Rita, when claims should have held down profits, the industry’s total assets totaled $1.18 trillion, or more than a third of the entire federal budget for that year.
What does Asai’s fight with Imperial have to do with Allstate and McKenzie?
Plenty.
When other insurance companies, beginning with State Farm, Liberty Mutual, Farm Bureau, etc., saw the results to Allstate’s bottom line after implementation of the McKenzie plan, they all joined in lock step to adopt the same methods of dealing with claims: delay, deny, litigate.
The plan was revealed in a single slide (among some 12,500 slides obtained by New Mexico attorney David Berardinelli) developed by McKenzie which, among other things, listed “redefinition of claims benefits and payment approach” as its criteria to boosting insurance companies’ profits.
The next step was the development of a software program that could be tweaked by insurance managers to reflect the desired percentage reduction in claim payments in order to keep the bottom line healthy.
Former Louisiana Attorney General Charles Foti filed lawsuits against Allstate, State Farm, Allstate, and three other companies in 2007, claiming the insurers were skewing home repair estimates with programs like Xactimate and IntegriClaim, in order to boost profits. Insurers, he said, use the programs to deliberate underestimate building and rebuilding claims.
http://blog.nola.com/times-picayune/2007/11/attorney_general_files_lawsuit.html
http://www.farmersinsurancegroupsucks.com/lawsuit/louisiana_state_v_farmers_insurance.pdf
The lawsuit was dismissed the following year.
http://www.insurancejournal.com/magazines/features/2009/01/11/157520.htm
The business plan originated by McKenzie reaped huge rewards in the aftermath of Katrina and Rita as unpaid or underpaid homeowners claims left entire neighborhoods ravaged and rotting.
If, for example, an Allstate adjuster found that wind caused damage, Allstate would have to pay the claim. If, however, the adjuster could attribute the damage to flooding, then the National Flood Insurance Program (NFIP), underwritten by American taxpayers, would have to foot the bill.
So, by changing the engineering reports, Berardinelli said, Allstate was able to deny claims altogether when the policyholder had no flood coverage.
Moreover, Allstate also devised two different formulae for pricing damage repair costs, thanks to an arrangement the company had with NFIP which paid Allstate fees for handling flood claims. That fee depended on the gross amount of the claim.
Ergo, if Allstate wound up on the hook for wind damage, it set the payment under the customer’s homeowner policy for, say, removing and replacing drywall at 76 cents per square foot.
If, however, the damage was attributed to flood waters and the taxpayers picked up the tab, the price was set at $3.31 per square foot. Allstate wins either way—by keeping claims costs down on wind damage and collecting inflated costs on taxpayer-financed flood damage repair.
So, now, we come to the inspection report by Imperial Fire & Casualty’s contract adjuster Paul A. Scull of Alexandria.
Scull, who works for American Delta Insurance (and apparently a second independent adjusting firm, according to records provided by the Secretary of State’s office), and whose previous experience was that of owner of a limousine service in Alexandria, attributed the torn up wooden parquet flooring and carpeting to shoddy remodeling efforts and added, “It is not reasonable to believe that someone intentionally removed or broke one or two ceiling fan blades, or precariously removed the ceiling fans or fixtures with the intent to harm someone or damage or destroy.”
Apparently Scull has never visited rent homes where tenants went on a destructive tear on the way out the door. There was one home in Denham Springs several years ago—what had been a reasonably upscale home—in which the tenants had ripped out all the electrical wiring, torn down all the ceiling fans and light fixtures, destroyed appliances and had thrown it all, along with assorted pieces of furniture, into the backyard swimming pool.
But that was most probably normal wear and tear.
As for the “Japs need not apply” comment overheard by Asai in his call to Imperial claims representative Billy Durel (and to be fair, Asai said he is not sure if the comment was made by Durel or someone in his office), we would most likely attribute that to pure bigotry.
Bigotry and ignorance.
Is anyone surprised by this? Just check out State Farm’s premium increases on homeowners and their increased 5% “hurricane deductible”!
http://www.nola.com/business/baton-rouge/index.ssf/2014/07/state_farms_5_hurricane_deduct.html#incart_river_default
The LA Department of Insurance has long been a corrupt lapdog of the insurance industry. If memory serves three recent department heads of the department have been convicted and served time.
In the mid 1980s I informed them of fraud by the Ducasse Insurance Agency in Metairie and my Agent, Ames LeBlanc, to no avail. I was selling my business and cancelling insurance as of the date of the sale. Instead of receiving a $700 refund prorated from the PREPAID policy, the agency conducted a RETROACTIVE “audit”, informed me they had charged too little and scooped the balance.
Just wait until the rest of the extortion system catches up. Insurance companies are increasing the deductables for wind or water damage. The deductibles are now 5% of the insured value. Banks require you to carry homeowner isurance to protect their investment. A modest $200,000 mortgage would have a $10,000 deductible. So in the case of say wind damage of $50,000 would cost the homeowner $10,000 out of pocket. That is a significate out of pocket expense for the homeowner. At some point the strapped homeowner walks away and leaves the bank holding the bag for a mortgage that might not have the $10,000 dollar equity in it. I see the banking industry then hedging their risks by requiring some sort of gap insurance or separate policies for Wind damage that have lower deductables. Flood insurance is already a requirement for many/boarding on most, Louisiana homeowners.Then comes all the ever changing “fine print” on coverage and dual coverage etc.
Yours is an intelligent, well-considered comment—and unfortunately, all too accurate. I will be writing additional stories about McKenzie and the insurance industry but I will make this point now: even as Allstate, State Farm, et al, were realizing record profits, the savings weren’t being passed on; premiums continued to increase and, as you said, the deductibles soared.
I enjoyed your article, Tom. The conflict of interest between policyholders and stockholders is real. This quote by former Allstate Chief Executive Officer Jerry Choate to a group of stockholders always makes an impression on me: “The leverage is really on the claims side. If you don’t win there, I don’t care what you do on the front end. You’re not going to win.” (http://louisianapropertyinsuranceclaims.com/index.php/5-things-you-can-do-to-resolve-your-insurance-claim/)
I represent policyholders in property insurance disputes and my experience with the Department of Insurance has been positive. My public records requests have always been responded to timely and thoroughly. Although the Department does not have the authority to make the carrier pay a claim, consumer complaints and investigations do get the carrier’s attention. And, if the claim cannot be resolved amicably, the documents generated can serve as good evidence in a bad faith lawsuit.
Nicholas Graphia
[…] article from the Louisiana Voice gives another example of an insurance claim being unfairly denied and underpaid. Unfortunately […]
[…] article from the Louisiana Voice gives another example of an insurance claim being unfairly denied and underpaid. Unfortunately […]