Judge Compares Hurricane Insurance Decision to Godzilla Attack

By Guy Leonard, The County Times

HOLLYWOOD, Md.—Allstate Insurance Company won its bid in the Court of Appeals to continue the practice of not selling homeowners’ insurance in Southern Maryland and the Eastern Shore because those areas lay in potential paths of extreme magnitude hurricanes.

The court reported its opinion on Jan. 25 in the case brought against Allstate by the state’s People’s Insurance Counsel Division. One of the judges wrote a separate opinion that both concurs with court’s ruling and dissents on several key points.

The plaintiff argued that Allstate’s practice of exclusion of the counties was discriminatory.

The majority opinion of the Court of Appeals affirmed an earlier decision by the Maryland Insurance Commissioner that Allstate was reasonable in its decision to deny new insurance policies, because it produced probability models to show it could not economically sustain the risk of the new policies.

Allstate argued that it used probability models, instead of actual evidence, when deciding to reject new policies because hurricanes in Maryland are a rare event and actual statistics are not in abundance, according to the latest court reports.

Judge Glenn T. Harrell, in his dissenting opinion, likened Allstate’s worries about devastating hurricanes in the Chesapeake Bay area, and the lack of evidence thereof, to fearing the damage Godzilla would wreak upon Japan.

“Although my opening analogy is silly, it is so intentionally to illustrate my view that the [Insurance] Commissioner’s and this court’s approval of Allstate’s discriminatory decision is wrongheaded,” Harrell wrote. “Recorded history on the subject shows, again and again, that a catastrophic hurricane … has not made landfall in Maryland yet.”

Harrell pointed out that Allstate’s computer model predicted such a hurricane would “make landfall in Maryland every 25,000 years,” yet the court still affirmed their business decision.

“The basis for this decision is folly,” Harrell wrote. “The decision contravenes precedent, which requires insurers to justify the withdrawal of a line of insurance in less then the entire state with a statistical basis grounded in probability, not hypotheticals.”

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