Update, 5:30 p.m.:
Insurance Commissioner Eleanor Kitzman responded to Sen. Rodney Ellis’ letter on the criminal investigation of State Farm by the Travis County District Attorney’s office in a public letter to the Texas Legislature.
“The District Attorney may have information that was not provided or available to TDI previously,” wrote Kitzman in the letter. “Given the severity of the accusations made by the District Attorney, TDI is carefully considering its options for further regulatory action in this matter.”
The Travis County DA’s office has not publicly specified the type of criminal charges it is investigating. Gregg Cox, the director of the Travis County DA's public integrity unit, told the Tribune that the unit has been conducting an investigation of State Farm and its Texas subsidiary, State Farm Lloyds, for “at least a couple of months” and is working with the company to obtain more information.
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In the letter, Kitzman said the insurance department received four consumer complaints — three of which the department determined were justified — in 2009 alleging that State Farm Lloyds refused to pay for damages to roofs caused by lifted shingles. In two of those cases, State Farm Lloyds paid the homeowner more money, and in the third case, the consumer did not follow up with the department, so it was “assumed the claim had been resolved.”
The TDI continued to monitor State Farm Lloyds, but received no further complaints and closed the investigation in December 2010.
Following news reports that the Travis County district attorney's office has opened a criminal investigation of State Farm over its handling of tens of thousands of insurance claims after Hurricane Ike, a legislator is asking the Texas Department of Insurance to reopen its own investigation of the nation's largest insurer.
“Given that law enforcement is now investigating State Farm for the exact same concerns I raised with you eleven months ago, this problem can no longer be ignored,” state Sen. Rodney Ellis, D-Houston, wrote in a letter to Insurance Commissioner Eleanor Kitzman. “I understand that these are only accusations at this point and that a full investigation is currently underway. But part of your agency's mandate is to protect Texas families that are served by insurance.”
ABC News reported last week that the Travis County DA's office began its investigation after reviewing documents related to an alleged cover-up by State Farm management related to its potential denial of consumer insurance claims for damage to lifted shingles after Ike ravaged the Texas coast in 2008.
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Gregg Cox, the director of the Travis County DA's public integrity unit, told The Texas Tribune that the unit has been conducting an investigation of State Farm and its Texas subsidiary, State Farm Lloyds, for “at least a couple of months” and is working with the company to obtain more information, but he did not disclose details of the investigation.
In October, Ellis asked the department to reopen its investigation on how State Farm responded to homeowners’ claims for the damage to lifted shingles. According to the letter he sent Kitzman on Tuesday, the department responded to his initial request by saying an investigation had already been conducted, no enforcement action had been taken and the investigation was closed. The Tribune sent an email to Kitzman's staff, but did not immediately receive a response.
Asked about the Travis County investigation, State Farm spokesman Phil Supple told the Tribune that "the extent of our comments" are in the ABC News story. That prepared statement said that "State Farm Lloyds is cooperating fully with the Travis County investigation and has successfully settled the majority of civil litigation involving Hurricane Ike claims. To date, we have paid policyholders more than $1.5 billion dollars, much of which went to repair or replace roofs."
Houston lawyer Steve Mostyn has filed a petition for a class-action lawsuit against State Farm related to the shingle claims. His petition, filed in Galveston County, says that the company “set out to short change its customers after Hurricane Ike by intentionally ignoring damage caused to their homes and then lying to them about it.”
In 2010, Mostyn settled a multimillion-dollar class action lawsuit with the Texas Windstorm Insurance Association — which provides wind insurance for coastal residents who cannot find private insurance policies — over mishandling similar claims after Hurricane Ike.
Mostyn alleged that he's received internal documents from the company from a civil lawsuit, which indicate the company may have falsified information provided to state regulators on how State Farm Lloyds responded to homeowners' claims for lifted shingles after Hurricane Ike.
"We have been actively working to resolve questions related to roofing shingle claims," State Farm said in its statement to ABC News. "We will continue these efforts to maintain the trust of Texas homeowners, of which more than one in six has placed their confidence in State Farm Lloyd's to protect their homes."
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