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Political curmudgeon C.B. Forgotston sounds off on Mike Edmonson ‘Immaculate Conception’ pension amendment

Posted in Attorney General, Ethics, House, Senate, Lawsuits, Legislature, Legislators, State Police on July 17, 2014| 20 Comments »

 

Pick your cliché:

Collective amnesia.

Circling the wagons.

Covering your backside.

Plausible deniability.

We’re all in this together.

Lying through your teeth.

The six members of the Legislative Conference Committee to a man have disavowed any knowledge as to which of them it was who introduced the amendment to Senate Bill 294 that gave State Police Superintendent Mike Edmonson that $30,000 per year retirement increase that experts say may have been unconstitutional on six separate fronts.

Short version? Someone’s lying.

Remember the Seven Dwarfs of Big Tobacco? They’re the executives of the seven different tobacco companies who figurative locked arms as they formed a united front behind Philip Morris USA President and CEO William Campbell when he told a congressional committee back in 1994, “I believe nicotine is not addictive.”

Now you have the Six Mental Midgets (and yes, we are fully aware that is not politically correct) of the Louisiana House and Senate who individually, have each denied to C.B. Forgotston any culpability in adding the amendment to Sen. Jean-Paul Morrell’s bill that was intended to address disciplinary procedures against police officers under investigation and, Morrell says, was in no way intended to address pensions.

Forgotston refers to the amendment as the “bastard amendment” because “nobody claims to be the father. Some have suggested that the amendment came about through artificial insemination (while) others said Immaculate Conception,” he said. (We choose not to print Forgotston’s notion, though we have to admit he may well be closer to the truth than any of the other theory.)

State Treasurer John Kennedy, following a meeting of the Louisiana State Police Retirement System (LSPRS) on Wednesday, said simply, “This amendment didn’t just fall from heaven.”

But if you accept the word of Sens. Morrell, Neil Riser (R-Columbia) and Mike Walsworth (R-West Monroe), and Reps. Jeff Arnold (D-New Orleans), Walt Leger, III (D-New Orleans) and Bryan Adams (R-Gretna) at face value, you are left with few alternative explanations other than Forgotston’s R-rated suggestion.

The amendment, which Gov. Jindal quickly signed into law as Act 859, allows Edmonson to revoke his “irrevocable” decision made when he was a captain to enter the state’s Deferred Retirement Option Plan (DROP) which allowed him to take more in salary but froze his retirement at the captain’s pay scale rate. By revoking that decision, he would allow his retirement benefits to be calculated at the higher rank of his current colonel’s pay, plus he would be allowed to add years of service and longevity pay. With 34 years of service, he would be qualified to retired at 100 percent of his $134,000 salary, an increase of $30,000 per year.

While each of the six Conference Committee members denies having offered up the amendment, Arnold would appear to be a prime suspect. It was he who spent all of 15 seconds explaining the amendment to the full House before its final passage. To hear his award-winning performance, click here: www.auctioneer-la.org/edmondson.mp3

But let’s not rule out the possibility that this amendment came straight from the Fourth Floor of the State Capitol. If Jindal wanted this (and it’s looking more and more as if that might be the case), it would be a simple matter of having one of his subordinates to insert the necessary language into the amendment for the governor, who can nevertheless maintain that “plausible deniability” as he scoots back to Iowa or D.C. (Think of the old TV thriller Mission Impossible and agent Phelps receiving his assignment on the self-destructing tape with his assignment ending with the disclaimer that the I.M. team will “disavow any knowledge” of his existence if he is captured.)

And let’s not forget Edmonson’s creative explanation. First, he says the amendment simply allows him to receive benefits to which he is fully entitled and then he denies asking for the special treatment. Ol’ Earl Long had a term for that kind doublespeak: “Catfish Mouth,” for the ability to “speak outta both sides of his mouth and whistle in the middle.”

First of all, we fail to comprehend how he feels he is “entitled” to the benefits considering the indisputable fact that he made the decision as a captain to enter DROP. There are scores of retired state troopers and thousands of retired state employees who would line up at the Capitol steps for the opportunity to change their minds on their DROP decisions of years ago. In fact, there have been several in recent years to attempt just that. Each one was rejected by the House and Senate retirement committees but that does make them one scintilla less deserving than Jindal’s shadow and former bodyguard for the LSU football coach.

And none of them—nay, not one—resides in a luxurious home with cooks, butlers and housekeepers—all provided at taxpayer expense.

“As someone who once worked for the legislature,” says Forgotston, “I find this entire episode very sad. It’s especially pathetic since the current legislators consider themselves as ‘reformers.’ If they want to see why Louisiana has a reputation for corruption, they should look into the mirror.”

He said all six members of the Conference Committee “claimed to be waiting on someone else to do something about the rip-off. The fact that none of the conferees claim the amendment serves to further destroy the integrity of the legislative process.  If the legislators want to attempt to mitigate the damage to the legislative process, there needs to be an internal investigation to determine how an amendment can get into legislation without any legislator offering it.”

He said that Arnold wrote him in an email that both he and Morrell had requested an attorney general’s opinion on the constitutionality of the amendment.

“I told Arnold the AG cannot render an opinion on the constitutionality of any legislation. The reason (is because) the AG is required by the Constitution to defend all acts of the legislature, regardless of constitutionality or how dumb the legislation is,” Forgotston said. “Therefore, it is a conflict of interest for (the attorney general) to rule on a matter in which he may be called on to defend in court.”

He said the retirement system’s board has a fiduciary obligation to protect its assets. “It’s time for them to do so,” he said.

“The only way to make sure this rip-off doesn’t go forward is for the (LSPRS) board to litigate the constitutionality of Act 859 of the 2014 Regular Session,” Forgotston said. “A first-year law student could win the case. Maybe the AG will hire Jimmy Faircloth to defend the state. That would make it the closest thing to sure winner as it gets in the courts.

“If you know any State Troopers please forward this information to them; they are obviously better at getting people to confess than I am. That said, I have to admit getting that the truth from legislators is no job for rookies.”

No wonder James Gill calls Forgotston the “King of the Subversive Bloggers.”

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The new spirit of insurance industry’s claims management encapsulated in single Livingston Parish vandalism claim

Posted in Attorney General, Campaign Contributions, Fraud on July 10, 2014| 7 Comments »

“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.

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Need more evidence of money’s influence on legislation? We break down contributions between ayes and nays on SB 469

Posted in Attorney General, Boards, Campaign Contributions, Coastal Erosion, Ethics, Governor's Office, House, Senate, Lawsuits, Legislature, Legislators, Louisiana Purchase, Politicians on June 24, 2014| 9 Comments »

Gov. Bobby Jindal, with the signing of House Bill 799, has continued his assault on the Southeast Louisiana Flood Protection Authority-East (SLFPA-E), underscoring the importance and power of special interest money over the welfare of the state.

HB 799, authored by Rep. Stuart J. Bishop (R-Lafayette), bars the Louisiana attorney general from hiring plaintiff attorneys on a contingency-fee basis to pursue litigation against corporations like Chinese dry wall manufacturers responsible for millions of dollars in damages to new homes in Louisiana, pharmaceutical companies accused of price fraud at the wholesale level and of selling pharmaceutical products not approved by the federal government, companies found to be improperly handling underground storage tanks, or tobacco companies whose seven top executives (to evermore be known as the “seven dwarves”) lied under oath to Congress in saying nicotine was not addictive.

Bishop cited fees of $51.4 million paid state-contracted attorneys in a case against the pharmaceutical industry that resulted in a $285 million verdict. That computes to a fee of about 18 percent as compared to the 30 percent norm usually charged by attorneys hired on contingency.

A $235.7 million settlement of another pharmaceutical case resulted in attorney fees of $46.6 million, or 19.7 percent. The Coalition for Common Sense, a group describing itself as committed to a fair legal climate said another portion of that settlement went to repay two-thirds of the state’s Medicaid expenses. The coalition said that bumped the legal fees up to 34.2 percent, but without further clarification, it seems difficult to equate Medicaid fees to legal fees. That would seem to come under the purview of Jindal’s continued mismanagement of the state’s Medicaid program.

In yet another case, attorneys, including Attorney General Buddy Caldwell’s campaign treasurer and other contributors, received $4 million in fees, or 9.4 percent, of a $42.5 million case.

Granted, it doesn’t look good for Caldwell’s campaign treasurer to receive a contract but the obvious question is how is that any different than Jindal’s former executive counsel Jimmy Faircloth getting contracts to represent the state in one losing case after another—at fees which now exceed $1 million?

Jindal’s penchant for protecting the oil companies, who have contributed more than $1 million to his various campaigns, is by now well-known. His largesse has even extended to BP which may have negated pending claims against the company for the 2010 Deepwater Horizon spill that killed 11 men and pumped 4.9 million barrels of oil into the Gulf.

The fact that the governor’s brother works for BP, of course, had nothing to do with Jindal’s decision to sign Senate Bill 469 by Sen. Bret Allain (R-Franklin) which killed the SLFPA-E lawsuit against 97 oil, gas and pipeline companies for damages inflicted to Louisiana’s coastline and marshlands. SB 469 also made the prohibition against such lawsuits retroactive to ensure that the SLPFA-E effort was nipped in the bud.

(Allain, by the way, was the one who slipped that $2 million appropriation into the 2013 Capital Outlay Bill to renovate the third floor of an old elementary school in Franklin for conversion to a museum to house the archives of former Gov. Mike Foster who will now become the only governor in Louisiana history to have his archives housed in something other than a university library.)

Jindal, in signing SB 469 into law, said the law would stop “unnecessary frivolous lawsuits.”

Allain, also invoking the “frivolous lawsuit” catch phrase, also said if allowed to stand, it would “hurt jobs.”

Sen. Robert Adley (R-Benton), who lobbied for the bill and who has been the beneficiary of more than $600,000 in oil and gas campaign contributions, said, “This bill keeps a rogue agency from misrepresenting this state and trying to raise money through illegal actions.”

Perhaps Sen. Adley should take a long inward look at misrepresenting the state and raising campaign money through legal but questionable means.

Louisiana Oil and Gas Association President Don Briggs called Jindal’s signing of the bill “a huge victory for the oil and gas industry.”

You think?

What all three men seem to have overlooked is that when companies that traditionally reap billions in quarterly profits each year walk away from their responsibilities to repair damage they inflict on the environment in their non-stop quest for even more profits, then sometimes those “greedy lawyers” need to step up and hold these companies accountable.

And of course there was SB 667 which neutered the so-called “legacy lawsuits” over environmental damage from oil and gas companies’ tendency to walk away from well sites on private property without bothering to restore the property to its original condition.

And let’s never forget that a priority of the American Legislative Exchange Council (ALEC) is to oppose environmental protections, be they EPA’s regulation of greenhouse gases or legacy lawsuits. At the top of ALEC’s membership list in leading the fight against environmental laws, and the rights to hold corporations legally accountable are such familiar corporations as Exxon/Mobil, BP, Chevron, Shell and, of course, Koch Industries.

At least two of those legacy lawsuits succeeded before SB 667 was signed into law by Jindal.

  • The first, a $76 million award, was litigated by Lake Charles attorney J. Michael Veron on behalf of family members whose property was heavily polluted—and subsequently abandoned—by Shell Oil. Veron authored a book entitled Shell Game about the litigation. In the book, he describes in detail how he was called into then-Gov. Foster’s office and lectured to like a misbehaving schoolboy. Despite the heavy pressure from Foster, Veron persisted and eventually won.

Foster, of course, is the one responsible for our present predicament: he discovered Jindal—“the smartest man I ever met,” he said—and appointed him head of the Department of Health and Hospitals at the tender age of 24.

  • The second case was that of Bill Doré, retired chairman of Global Industries of Sulphur. Doré made a fortune from the Southwest Louisiana oil patch but when he purchased Cameron Meadows in Cameron Parish with the intent of constructing a hunting lodge, he discovered the land had been polluted by oil companies to such an extent that alligator, fish and other wildlife populations had dwindled significantly and that wherever he stepped on the property, oil and brine would ooze to the surface. He sued Exxon/Mobil whose executives promptly summoned him to Houston for a come to Jesus meeting at which they informed him that if he continued on his quixotic quest, he would lose valuable Exxon/Mobil business. He more or less told the Exxon/Mobil suits what they could do with their business, which amounted to some $37 million over the years. He reminded them that because Exxon, the richest company on earth, insisted on such rigid contract firms by forcing vendors to accept smaller margins as the cost of doing volume business with them, Global had actually lost $7 million on its Exxon/Mobil business. Represented by New Orleans attorney Gladstone Jones, the same attorney representing SLPFA-E, Doré won a $57 million judgment against the giant oil company.

In an interesting side bar to the story, a small Cameron café catered the meals for both sides and the jurors during the protracted Doré trial. Attorneys for both sides agreed to split the cost of having meals for both sides. Following the two-week trial and after each side had paid its share of the costs, Doré’s legal team gave the café’s staff a $1,000 tip. The tip from attorneys for Exxon/Mobil was $20—almost as if the café’s staff was responsible for the adverse verdict.

So now, it comes full circle.

The SLPFA-E board, stacked with Jindal appointees after he replaced rebel John Barry, the leading proponent of the litigation, voted 4-4 last week on a motion to withdraw the suit. While a majority was required for passage, it appears to be academic. Jindal’s signing of SB 469 would seem to ring the death knell for any future legal action.

So now, the state is virtually powerless to seek remediation for damages done to our coastline such as that depicted in this video:

https://www.youtube.com/watch?v=HaW1DomWRk4

Greedy lawyers? Frivolous lawsuits?

So, where does all that special interest money we alluded to in the first paragraph come in?

Well, LouisianaVoice has already provided an itemized list of oil and gas industry contributions to each of the state’s 144 legislators that totals more than $5.2 million and we earlier cited contributions to Jindal in excess of $1 million from the same industry.

But how did the contributions break out on the House and Senate votes on the infamous SB 469?

We’re glad you asked. We’ve done the math for you.

In the senate, the 25 senators who voted in favor of the bill killing the SLPFA-E litigation received $1.99 million from oil and gas interests, or an average of $79,664 each.

The 11 who voted against killing the lawsuit combined to receive $591,000, or $53,769 each—a difference of nearly $26,000 each.

Now let’s stroll across the Capitol Rotunda to the House side where vote-buying is a little less expensive, more economical if you will.

The 59 members who voted in favor of SB 469 combined to rake in $1.885 million, or just a tad under $32,000 each while the 39 nay votes took in $889,281 between them, or an average take of $23,402, a difference of about $9,600 each.

Moreover, during debate on SB 469, the State Capitol was swarming with lobbyists from BP, which stood to benefit mightily from passage of the bill.

So, you see, it’s really pretty evident that money—lots of it—tends to flow freely in the Capitol and its influence is completely out of kilter with the intent of a democratic republic. We no longer have a representative government for the people but a representative government for those who can wave the most money under the noses of our elected officials.

As one legislator who, for obvious reasons, shall remain anonymous as to his name, the area of the state he represents and even the chamber in which he sits, said in a recent email to a constituent:

“When a fella has the oil and gas lobbyists, the LABI lobbyists, and the governor’s office all on the same team and wanting you to be on the same team, well, it was a challenging last few days of the session.  I thought then, and I still hold the belief, that this is a bad bill (now a law since Gov. Jindal has now signed it) and sets a horrible precedent.  Again, this administration has assured another legal challenge to a law it supported and I expect a lawsuit to be filed before long.

“I appreciate your taking time to send me your email.  When I was down there surrounded by many who were interested in me only for the vote of the moment, expressions such as yours remind me of my commitment to the good people of the district I serve and confirms that, in the face of all those present in the Capitol during the session, I was sent there to represent those who can’t be there.”

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Insurers’ auto repair tactics only part of problem; Jindal old firm McKinsey Co. coached Katrina on claims delays, denials

Posted in Attorney General, Ethics, Governor's Office, Lawsuits on May 8, 2014| 3 Comments »

The brewing legal battle between Louisiana automobile body shops, represented by the Louisiana Collision Industry Association (LaCIA), and a couple of dozen insurance companies has far reaching implications that go much further than just the current dispute between the LaCIA and the insurance companies, according to information obtained by LouisianaVoice.

Efforts by the automobile insurance companies, led by industry giants State Farm, Allstate, Progressive and GEICO, date back to the 1990s and continued through Hurricanes Katrina and Sandy and now the companies have moved into what one LouisianaVoice reader calls managed care for the auto repair business by the insurance industry.

Along the way, the insurance companies received invaluable assistance and coaching from McKinsey and Co., the company for whom Gov. Jindal worked for several months in his only private sector gig before entering public service. The advice provided by McKinsey came at a steep price but in the end, it helped the insurance companies to reap record profits, even in the wake of Katrina, one of the worst hurricanes in terms of dollar cost to ever strike the U.S. mainland—at the expense of thousands of homeowners in New Orleans, New York and New Jersey and the Mississippi coast.

Between 1992 through 1997, Allstate executives and their consultants from McKinsey met at the Allstate’s Northbrook, Ill., campus, to develop a complete overhaul of Allstate’s claims system. What emerged was the now infamous policy of “from good hands to boxing gloves” method of dealing with policy holders/claimants who refused the company’s initial settlement offers, which typically were far below replacement costs.

In 2003, the largest wildfire in California history destroyed 2,232 homes, including Julie Tunnel’s $300,000 home. Her insurance adjuster, from State Farm, offered her $184,000 as a cost of rebuilding. http://www.bloomberg.com/apps/news?pid=nw&pname=mm_0907_story1.html

That “deny, delay, defend” strategy was revealed in its stark nakedness when it was learned that McKinsey was coaching Allstate and State Farm on methods to delay and/or deny claims of homeowners in the New Orleans and north shore areas and along the Mississippi Gulf Coast who suffered devastating property losses during Hurricane Katrina. One of those victimized by the less-than-good-faith-dealings was none other than then U.S. Sen. Trent Lott of Mississippi.

It was in the wake of $4.2 billion in claims stemming from 1989’s Hurricane Hugo which battered the Carolinas that Allstate first sought the services of McKinsey and State Farm quickly followed suit. McKinsey subsequently generated 13,000 pages of documents, including PowerPoint slides in developing the strategy for higher profits which would quickly give the two giants the distinction of ranking among the worst insurance companies in America. Those rankings placed Allstate at the top of the worst list and State Farm fourth. http://www.justice.org/cps/rde/justice/hs.xsl/2323.htm

With Allstate’s CEO proclaiming that the company’s mission was “to earn a return for our shareholders” (as opposed say, to such a radical philosophy as customer service, good faith settlements and claimant satisfaction), Good Hands adjusters worked under strict guidelines to protect the bottom line or risk losing their jobs. http://stlouis.legalexaminer.com/automobile-accidents/allstate-you-are-not-in-good-hands/

So by virtue of its adjusters’ adoption of the fundamental mantra of “Allstate gains—others must lose,” the company reaped $4.6 billion in profits in 2007, even as it was still denying, delaying and defending against record property loss claims from Katrina just two years before and Hurricanes Gustav and Ike in 2006. http://www.huffingtonpost.com/2011/12/13/insurance-claim-delays-industry-profits-allstate-mckinsey-company_n_1139102.html

Almost unperceptively to all but auto repair shops and their customers, the insurance companies also embarked upon a similar ploy to increase profits in the area of auto insurance while at the same time forcing auto body shops into accepting considerably lower profits or to use less desirable after-market, or generic, parts.

New Jersey auto repair shops have sharply criticized State Farm’s cozy relationship with a company called Parts Trader, an online procurement program out of Illinois. Spokesmen for auto repair associations in both New Jersey and Mississippi claim the forced implementation of the Parts Trader program is in direct violation of a 1963 Consent Decree and is State Farm’s way “to get back into the aftermarket parts business and not have their handprint on it.”

“The profit we make on our parts goes to offset the insufficient labor rate,” said Jeff McDowell, president of the New Jersey chapter of the Alliance of Automotive Service Providers. “Materials go up, and we don’t get an increase.” http://onlinedigeditions.com/article/Partstrader+In+New+Jersey%3F++Not+Without+A+Fight!+/1519060/0/article.html

In October of 1999, CBS News reported that an Illinois judge awarded $730 million to State Farm policyholders whose vehicles were repaired with after-market parts. It was the second such decision within a week. Just days before, a jury awarded $456 million in another case involving knockoff replacement parts. http://www.cbsnews.com/news/state-farm-loses-big-in-court/

Immediately following the two adverse decisions, State Farm announced it would temporarily suspend the use of the after-market parts in favor of parts made by auto manufacturers—the moral equivalent of a politician’s apologizing for his inexcusable behavior only after being caught in an extra-marital affair.

The generic parts have come under criticism from auto body shops as being cheap, flimsy, imitation parts that don’t fit and which have poor finishes, don’t hold paint, have little, if any, corrosion protection and which lack structural integrity.

But in the interest of their own bottom line, the insurance companies were perfectly willing to foist these parts upon their unsuspecting policyholders who simply grit their teeth and write the checks whenever premiums increase.

But with the filing of lawsuits last August in Mississippi http://partschecklive.files.wordpress.com/2013/10/partstrader-ms.pdf and in Florida here and Indiana here earlier this year by auto repair shops—and the expected filing in Louisiana—the repair shops are teaming up to present a united front against yet another profit-driven tactic by the insurance companies: forcing shops to either reduce their hourly labor charges or risk having business directed to other shops by the insurers.

The Society of Collision Repair Specialists (SCRS) issued a strong statement in opposition to the practice of the insurers last September in which it said the organization “takes exception to business mandates that property and casualty insurers impose upon collision repair businesses. http://www.fenderbender.com/FenderBender/September-2013/SCRS-Releases-Statement-About-State-Farm-PartsTrader-Lawsuit/

Apparently the insurance companies have no problem with the concept that auto repair shops should be prohibited from making a fair profit—especially if benefits their own shareholders.

Complaints to the Louisiana Department of Insurance, meanwhile, have fallen upon deaf ears, according to several shop owners.

Small wonder. As might be expected, Insurance Commissioner Jim Donelon derives the bulk of his campaign contributions from the companies his office regulates. Who else, after all, would be motivated to contribute to the campaign to elect an insurance commissioner?

But even Gov. Bobby Jindal has benefitted from the generosity of the insurance industry to the tune of $119,000 since his initial run for governor in 2003. Of that amount, at least $15,000 came from three companies named as defendants in the Florida and Indiana lawsuits: $5,000 each from State Farm, Allstate, and Zurich American.

Donelon, who would be expected to fair even better from the insurance industry, did. He received $30,000 from defendants in the Indiana and Florida lawsuits—Liberty Mutual ($5,000), Progressive ($6,500), Allstate ($2,500), GEICO ($11,000), State Farm ($2,500), Security National ($1,500), and Travelers ($1,000).

Overall, Donelon has received more than $675,000 from insurance companies just since 2006, the year he took office.

Attorney General investigator Randy Ishee has been looking into the practice, called program agreements, whereby the insurance companies are demanding that repair shops enter into agreements to lower their hourly rates or be faced with blackballing by the insurers. One representative for the repair shops said a State Farm representative became belligerent while making his demands.

Alysia Hanks, executive director of the Louisiana Collision Industry Association (LaCIA), said Ishee’s probe has developed so much information that he found it necessary to recruit a second investigator to assist him.

LouisianaVoice was told that Ishee had communicated in writing with the Department of Insurance on at least two occasions concerning the program agreements but when a public records request for those communications was made of the Insurance Department, we were told the department was in possession of no such documents.

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Unlike a good neighbor, State Farm may be undermining choice of auto repair shops; same for the good hands folks

Posted in Attorney General, Lawsuits, tagged on May 7, 2014| 5 Comments »

Unlike a good neighbor, State Farm Insurance may be trying to undermine policyholders’ choices of who they want to perform their auto repairs.

And those Good Hands may not be so good, either.

Louisiana Attorney General Buddy Caldwell apparently is preparing to join other states, namely Indiana and Florida, in filing an antitrust lawsuit against State Farm and possibly other insurance companies for their attempts to artificially control and depress automotive damage repair labor rates by repair shops, according to information obtained by LouisianaVoice.

Caldwell’s office has been bombarded with complaints from automotive body shops that State Farm and other companies have attempted to get shops to sign “program agreements” with the insurance companies that would adversely impact profit margins of the repair shops. Those who refuse to sign the program agreements are removed from the insurance companies’ preferred lists, the complaints say, in effect, driving business away from those shops.

Attorneys in Florida and Indiana claim in their lawsuits that the insurance companies, particularly State Farm, have engaged in “an ongoing pattern and practice of coercion and of implied threats” to force lower hourly rates. “Failure to comply results in the insurance companies either “steering” customers away from the plaintiff’s businesses or, failing that, refusing to pay for certain repair procedures and/or charges.

By forcing the program agreements upon the shops, which count on insurance customers for 70 to 95 percent of their business, the shops’ profits are adversely affected but the shops have little choice but to comply.

While State Farm has been identified as the moving force behind the program agreements, other insurers follow State Farm’s lead, the Florida lawsuit claims, “The remaining defendants intentionally and by agreement and/or conscious parallel behavior, specifically advised the plaintiffs they will pay no more than State Farm pays for labor,” the lawsuit says, adding that the insurance companies have conducted no surveys of their own to determine market rates.

The Florida suit also claims that the insurance companies imply that the non-cooperating body shops perform inferior work. “When a repair shop is deemed noncompliant to the direct repair agreement, the insurer will tell its clients ‘a particular chosen shop is not on the preferred provider list,’ advising that quality issues have arisen with that particular ship, that complaints have been received about the shop from other consumers, that the shop charges more than any other shop in the area and these additional costs will have to be paid by the consumers, that repairs at the disfavored shop will take much longer than at other, preferred shops and the consumer will be responsible for rental car fees beyond a certain date, and that the defendant cannot guarantee the work of that shop as it can at other shops,” the Florida petition says.

Trying to control auto repair prices is one thing but doing it by spreading innuendo and outright falsehoods about the reputations of auto body shops and the quality of their work borders on outright libel.

The Florida lawsuit was filed by 20 auto repair shops on Feb. 24 in that state’s Middle District Federal Court in Orlando and names more than 40 companies as defendants. A&E Auto Body, Inc., is the lead plaintiff in the Florida action.

Fourteen Indiana repair shops, led by lead plaintiff the Indiana Autobody Association, followed Florida in filing suit on April 2 in the Southern District of U.S. District Court in Indianapolis and named as defendants 29 insurance companies but also allege similar issues with third-party administrators (TPAs) which handle glass claims for insurers.

“…The concessions demanded by insurers in exchange for remaining on the direct repair program were not balanced by the purported benefits,” the Indiana petition says. “The defendants, particularly State Farm, have utilized these agreements to exert control over the shops in a variety of manners, and well beyond the constraints imposed by an ordinary business agreement.”

The Indiana plaintiffs claim that failure or refusal by a shop “results in either removal from the DRP (direct repair program) agreements, combined with improper ‘steering’ of customers away from the plaintiff’s business, or simply punishment to decrease the number of customers utilizing the plaintiff’s services.”

The suit ways if a repair shop persists in efforts to raise labor rates, “State Farm takes one or more ‘corrective measures.’

“It (State Farm) will go into the individual shop’s survey responses and unilaterally and wrongfully alter the labor rate listed without the knowledge or consent of the shop and use this lowered rate to justify its determination of the ‘market rate.’ It will threaten to remove the shop from the direct repair program to coerce compliance,” the petition said, adding that State Farm will actually remove a shop from the DRP.

Both the Florida and Indiana lawsuits are seeking compensatory damages and Florida is asking the court to order that insurers cease the practice of steering. In Indiana, plaintiffs are seeking compensatory, punitive and treble damages.

Caldwell and Randy Ishee, an investigator for the attorney general’s office, will attend the next meeting of the Louisiana Collision Industry Association (LaCIA), scheduled for May 22 at the Hilton Garden Inn in Monroe at 6:30 p.m.

LaCIA Executive Director Alysia Hanks said the association has been in contact with Ishee, who she said “has knowledge of what our industry is going through. “He isn’t happy with what he has come across so far and last week in informed me that, due to the huge amount of information he is gathering, (the attorney general’s office) has brought in another investigator for our cases.”

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