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Arbitration to settle homeowners rate dispute

By Jeff Ostrowski, Palm Beach Post Staff Writer

Wednesday, August 7, 2002

A three-member panel will settle the dispute between the state's largest

homeowners insurer and Insurance Commissioner Tom Gallagher.

State Farm officially appealed Gallagher's rejection of a proposed 22

percent rate hike, Gallagher spokeswoman Tami said Tuesday.

Blaming the rising costs of toxic mold, water damage, sinkholes and

liability claims, State Farm asked for the hike earlier this year.

The hike would hit homeowners in Palm Beach County and the Treasure Coast

harder than the average Floridian. State Farm sought increases of 55 percent

in County and 30 percent in Palm Beach and St. Lucie counties.

Gallagher in June rejected the rate hike as " beyond reasonable, " and State

Farm responded by saying it no longer would take on new homeowners policies

in the state.

State Farm asked for a three-member arbitration panel to hear the matter;

the insurer also could have asked for an administrative judge to resolve the

dispute.

Consumer advocates such as the Florida Consumer Action Network say

arbitration panels are stacked in favor of insurers, and most arbitration

hearings have resulted in rate increases since the state began using the

panels in 1996.

But it would be inaccurate to call arbitration a rigged system, said,

because not all of the increases represented outright losses for consumers.

In many cases, the arbitration panel approved a rate hike that was smaller

than the insurer had proposed, she said.

Gallagher named Hunter, director of insurance at the Consumer

Federation of America, to represent the state on the arbitration panel,

said.

State Farm, which covers 980,000 homes in Florida, already has begun

collecting the higher premiums and can continue to do so until it exhausts

its appeal.

Gallagher has yet to rule on a proposal by Allstate, Florida's

second-largest insurer, to raise rates by 21 percent. Allstate, of

Northbrook, Ill., covers 750,000 homes statewide.

jeff_ostrowski@...

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