The Harrell Deposition
I-Fans,
Troubling news from Mississippi: In a deposition in a case called McIntosh v. State Farm (1:06-cv-1080-LTS-RHW) in Gulfport federal court, the deputy state insurance commissioner testified that State Farm was paying his legal bills. That’s here:
The questioner is Zach Scruggs, son of Richard Scruggs, the Oxford tort maven. The “A” is David Lee Harrell, deputy to Commissioner George Dale. “Mr. Streetman” is James P. Streetman III, of Jackson, representing Mississippi DOI.
Q: Who is, to your knowledge, paying the legal bills of Mr. Streetman to represent you here today?
A: Department of Insurance is approving those at the request of the approval of the attorney general pursuant to the statutes of the state of Mississippi. The Commissioner of Insurance is entitled to obtain outside attorneys, outside experts, any outside person they need. And the attorney general’s office approved the retention of Mr. Streetman, and they approved that pursuant to that statute that State Farm as a result of this litigation and result of our examination should have to pay for the outside legal counsel since we could not use the attorney general’s office because they were conflicted.
Q: I’m sorry, if I understood the last part, that State Farm is paying for your counsel?
A: Yes, sir, pursuant to agreement from the attorney general’s office.
Q: How long did you meet with –- I’m sorry. Come on in….
At that point, a second lawyer representing State Farm entered. The whole Deposition of MS. Deputy Insurance Commissioner Harrell
can also be found on the Scruggs site, and on ITP’s key document’s page under “legal documents.”
ITP understands why the attorney general’s office is conflicted, I suppose. It is suing State Farm and investigating it criminally.
But I have no idea how State Farm comes to pay the deputy commissioner’s legal bills. It is not at all clear what “statute” he is referring that says “State Farm as a result of this litigation and result of our examination should have to pay for the outside legal counsel.”
Even if there is statute, how is that a good idea?
Keep in mind, I-Pods, that state DOIs are not funded by the general fund in most states. Their budgets comes from insurance industry assessments. George Dale often remarks with some pride – I heard it myself – that his office is a net contributor to the general fund. Frankly, in ITP’s view, turning a profit from revenue that comes via state law is no particular accomplishment. Frankly, I’d rather they kept the surplus and funded another market-conduct investigator.
Not to make too much of this, but the financial connection between regulator and regulated is part of what I see as a terribly insular culture aggravated by the notorious revolving door between the sides. Often overlooked, I think, is a cultural affinity. Both insurance executive and insurance regulator believe they are in the “insurance business” and as such “understand insurance” in ways that outsiders do not.
Trust me, this is real. I’ve heard even members of the trade press – professional insider-media courtesy forbids from naming names (unless asked) – denigrate the insurance literacy of policyholders. It is a commonplace assumption that unhappy policyholders, if they aren’t venal, don’t understand insurance. M.R .”Hank” Greenberg, to me, the architect of modern insurance, routinely parried analysts and news reporters’ questions with remarks such as, “how long have you worked in insurance?” or “how many insurance companies have you run?” or the like. Again, that attitude is common among insurers, I find.
More later on the 300-page Harrell deposition.
Thanks to Ida.