Insurance Transparency Project

I-Pals,

The last Insurance Notes! ™ dealt with a report by Louisiana Legislative Auditor Steve Theriot who probed the loose operations of Louisiana Citizen’s Property Corp. and found policyholder premiums spent on quail hunts, LSU games, family members’ cheerleader fund-raising drives and unauthorized events whose stated purpose included “bonding.”

Citizens, the state-owned insurer was run under a contract by a third party administrator, the Property Insurance Association of Louisiana, created in 1888 and reorganized in 1960 to set fire insurance rates. All insurers in Louisiana are required to join PIAL, which also administers Louisiana Auto Insurance Co., the auto-insurer of last resort for Louisiana drunks and others.
PIAL hired Terry Lisotta to run both Citizens and LAIC and he comes under the brunt of the report’s criticism. Lisotta chose not to respond to the report.
The Theriot report and attachments make great reading and can be found on ITP’s key document page, first item under “Government Documents.” I recommend it highly. A highlight is a letter from Ernest L. O’Bannon, name partner at Bienvenue, Foster, Ryan & O’Bannon, of New Orleans, hired without a contract as PIAL’s general counsel. A participant in a PIAL-expensed golf tourney, he explains with a quiet dignity:

With respect to the charity golf outing, what I know of it is this. I was invited to play by Mr. Lisotta, I accepted, and I played.

Like the LAIC expense report that called $45,000 spent for “bonding, socializing and strategizing,” these words resonate up here at ITP HQ. When we are invited to something, we accept. And when we accept, we play. That’s just how we do business up here.

Levity aside, I went too far in calling “unconscionable” a decision by Audubon Insurance which was handling claims for Citizens, to pull out half its staff before Katrina hit, in anticipation of Audubon’s contract ending Sept. 15.

That decision was unwise, but not unconscionable, a word that should be reserved for tampering with and shredding engineering reports, firing engineering firms for stating the possibility that wind damaged houses and deciding beforehand to deny wind claims, as has been alleged of State Farm, Allstate and other major carriers, in the Shows complaint.

Worse, probably, was any unintended association of Audubon with corruption at Citizens. There is no evidence of that Audubon had anything to do with it. Indeed, the Theriot report doesn’t not mention Audubon.

So, apologies to American International Group Inc., Audubon’s parent. ITP hopes and expects, however, that its Citizens’ experience be evaluated for possible improvements to service during a natural disaster, which, by many first-hand accounts, was poor, even given the conditions and efforts to restore staffing to levels agreed to under the contract.