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Last Post 11/21/2007 10:41 AM by  Adjusterman
MSB and Xact - Now this is interesting reading...
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11/08/2007 2:48 PM


    What will this do the the cat claim industry?



    Founding Member

    11/08/2007 4:19 PM


    You are quite right about the interesting reading.

    The question you pose is an altogether different scenario. Unless and until, every estimating software firm and every insurance company can agree to a NATIONAL PRICING STANDARD, this debate will continue forever.

    We all realize that the software suppliers are dictated to by the carriers, and have no choice but to accede to their demands if they wish to keep the account.

    We also know that the carriers are led by the "bean counters" that can control pricing of the items, thereby increasing profits, by lowering our commissions on the loss and in general increasing the profit to the stock or shareholders.

    It is no secret in the annals of the industry that one very large carrier, increased the net profit of the company by refusing to settle claims against them by inundating the claimants with more lawyer generated documentation that any reasonable person could expect. And, as a result of that the president made a substantial profit, because his golden parachute was dictated by the price increase of the stock. As a Wharton school grad, he chose his compatriots wisely and increased the stock by 300 +/- %.

    Why would anyone of sound mind and body expect that success story to NOT be duplicated by others? It is all a money game, the word SERVICE along with all the leading acronyms should be banned from use. They are misleading and create more problems than the war overseas.

    As for what impact this will have on the CAT industry, (which at the present time is almost a walking corpse) it is hard to tell. Our interest in the industry is to be a helpful, honest and as accommodating as possible. However, when you are forced to bring a knife to a gunfight, you have already lost. Being creative is even opening yourself to litigation.

    The long and short is that the carriers dictate pricing to their best interests, with little or limited regard for doing the "right thing" which we, as cat adjusters, ascribe to wholeheartedly.

    The topic is so difficult to address, as each soft wear supplier uses a different data base, and the data bases differ substantially. The carriers are misled by some purveyors who state that the use of their system will save the carrier money. Of course they will listen, with no forethought to the end result of the claimant. Let's just make money.........................................

    In the present catastrophe conditions with no significant occurrences of Mother Nature, in the past 2 years, and with only about 5% of all independent adjusters working, it sure is doubtful that we can have a say in the matter.

    The only suggestion that pops into the old mind is to have a joint meting of every soft wear provider and a representative of the insurance industry like ISO (opp’s, that may not work, as they own Xactware) and have a real discussion about pricing, and customer service.

    Every soft wear supplier could use a standardized data base and every carrier could ascribe to it. ) And maybe one day pig’s will fly?
    Did not mean to tirade, but this strikes at the very core of our professionalism and our Industry.  

    "Anyone who has never made a mistake has never tried anything new... Albert Einstein"
    Ray Hall
    Senior Member
    Senior Member

    11/08/2007 8:34 PM

    "The software program used does not dictate the price of reconstruction in ever city and hamlet in the US at any given date"  You are only given three choices to answer if you are a claim manager for a large insurance company. A. True

                                                                                                                                                                       B. False

                                                                                                                                                                        C. A & B are correct.

    Thats because A, B, and C are correct for this manager working regular insurance losses, fire, water, wind, other perils. Let's try to explain. In a city like Houston all the restoration contractors will accept the unit price from ALL programs if the 10 & 10 is added to the bottom of the estimate. They will give the carriers a contract price for the insurance proceeds plus the deductible.

    The contractors who do not do insurance work will accept 90% of the adjusters estimates without question and the 10% will use this as the negotiation floor and it will be settled. This is the B answer.

    The 3rd group of restoration contractors will run their own estimate, using the "insurance standard software" and hold out for that price, or move down slightly.  All insured losses , without coverage problems are settled in about 97% of the cases I have ever worked in a matter of weeks.

    Catastrophe losses with an increase in labor and material , travel time, living quarters, backlog of work, changes the whole picture and this is were the plaintiff prevails on these cases. These type of files need the most senior adjusters the carriers can find to follow up in due course.


    11/09/2007 9:30 AM

    I, too, would like to see some "standardized" pricing for the common items such as drywall, paint, roofing, etc. and let the market dictate the rest.  The common items are the most market driven and should be "standardized" if all software vendors, carriers, public adjusters and contractors can agree.  I know, fat chance, but this lawsuit may move the industry in that direction.

    There is a fine line between "standardized pricing" and "price fixing" in the minds of the general public and consumer advocates.  Standard pricing is good for cars, boats, planes but doesn't work in structures.  There are just too many variables that simply don't exist in the other lines of property.

    Founding Member

    11/09/2007 10:13 AM


    In the event you have some extra time on your hands, the following will provide you with the information alluded to in John's opening of this tread.

    It is so ludicrous and mind boggling that one finds it difficult to believe. However the AG of the State of LA has filed suit and IF the State were to prevail, "KATIE BAR THE DOOR".

    Attached you will find the date stamped petition filed by the Louisiana Attorney General against Allstate, Lafayette, Xactware, Marshall & Swift/Boeckh ("MSB", USAA, Farmers, Insurance Services Office ("ISO", State Farm, Standard Fire Ins., and McKinsey & Co.
    The attached 29 page petition details how the above defendants set out to collectively defraud policyholders using an intricate plan to delay, deny and, in particular, lowball legitimate claims.

    Somehow the ability to cut and paste the link has failed so here it is, Lock, stock and barrel"


    NUMBER: 074 q 5% DIVISION: /-- (D
    The State of Louisiana through its Attorney General, Charles C. Foti, Jr. and undersigned
    counsel, bring this parens patriae action to enforce the laws of this state, more specifically, the
    Louisiana Monopolies Act, and to redress the wrongs committed by defendants against this state and
    its citizens. This action seeks forfeiture of illegal profits, treble damages and injunctive relief.
    Defendants formed a combination for the illegal purposes of suppressing competition in the
    insurance and related industries, and to obtain greater illegal wealth for themselves than was possible
    if acting individually.
    Defendants' combination and conspiracy operated throughout, and in all parts of, the State of
    Louisiana and continues to operate to manipulate commerce and to restrain trade in this state. The
    acts of this combination have seriously impeded the economic growth and disaster recovery of this
    State and its citizens and effectuated an on-going fraud on commerce in this state. The combination
    and conspiracy between and among Defendants has adversely affected competition and trade within
    both the construction and homeowners' insurance industries in Louisiana.
    In a scheme to thwart policyholder indemnity and in direct violation of their fiduciary duties,
    insurer defendants and others continuously manipulated Louisiana commerce by rigging the value of
    policyholder claims and raiding the premiums held in trust by their companies for the benefit of
    policy holders to cover their losses as taught by McKinsey Company. Insurers coerced and
    intimidated their employees into compliance with the McKinsey principle. Insurers coerced their
    policy holders into settling their claims of damages for less than their value by editing engineering
    reports, delaying payment and forcing policy holders to litigate claims to receive full value. All
    defendants, ai-~do ther unnamed competing insurance companies, conspired, at all material times
    herein, to horizontally fix andlor manipulate prices of repair services utilized in calculating the
    amount(s) to be paid under the terms of Louisiana insureds' insurance contracts with Insurers for
    covered damage to immovable property.
    Defendants, with the explicit approval of insurer management, deliberately designed a means
    to reduce claim payments, commonly referred to as deny, delay and defend. Louisiana's insureds
    were forced to buy property insurance (commercial or homeowners) which likely would never
    provide full coverage for a loss.
    By using the same or substantially similar damage-estimating software, defendants signal
    their acquiescence to low balling claim payouts. Those insurers who failed to participate in this
    conspiracy were economically coerced into compliance by the competitive advantage gained in
    having excessive profits to leverage against their competitors. By the time Hurricanes Katrina and
    Rita struck Louisiana in 2005, virtually all of the property damage insurers were setting premiums
    and adjusting claims under this arrangement.
    This continuous arrangement gave insurers an unjust advantage over policy holders, which
    they took advantage of before, during and after the greatest disaster this country has ever suffered, by
    reaping huge profits from the misfortunes of persons whom they pledged to protect from risk of loss.
    They raised insurmountable odds against policy holders' abilities to recover.
    The schemes operated under cover of secrecy and were perpetrated despite the fact of
    numerous past law suits against insurers.
    This Court has subject matter jurisdiction under Louisiana Revised Statutes $5 1 : 121, et seq.
    as this action brought is entirely and exclusively under Louisiana state law and is not intended,
    directly or implicitly, to invoke or assert any federal causes of action.
    This Court has personal jurisdiction over the Defendants because the Defendants are
    authorized by the Louisiana Department of Insurance to transact, and regularly do transact business
    in the State of Louisiana, because Defendants contract to provide insurance and insurance services
    within the State of Louisiana, and because Defendants' unlawful conduct has caused and will
    continue to cause injury throughout the State of Louisiana.
    This action is brought by the Attorney General to restrain and enjoin and to seek other relief and
    damages for Defendants' violations of Louisiana Revised Statutes 8 5 1 : 121, et seq. Venue in this
    court is proper pursuant to 8 5 1 : 13 1 because Defendant Lafayette Insurance Company's domicile is
    Orleans Parish, and the other Defendants carried out activities that gave rise to the claims for relief in
    Orleans Parish and elsewhere in this State.
    Pursuant to Revised Statute $5 1 : 138, the Attorney General, Charles C. Foti, Jr., is authorized
    to enforce all suits arising under the Monopolies Act. Pursuant to Art. IV, § 8 of the Louisiana
    Constitution, the Louisiana Attorney General is mandated to institute, prosecute, or intervene in any
    civil action or proceeding as necessary for the assertion or protection of any state right, and further,
    pursuant to 5 13:5036, he is authorized to bring any suit he deems necessary for the protection of any
    state right.
    The following are presently named defendants in the above captioned matter:
    - 3 -
    a. ALLSTATE INSURANCE COMPANY, (hereinafter "Allstate" is a foreign insurer,
    domiciled in Illinois, doing business in the State of Louisiana and which issued polices of insurance
    in this State. At all material times, Defendant Allstate was a subsidiary and/or member company of
    the Allstate Insurance Group and all allegations contained herein were at the direction and/or
    implementation of Allstate Insurance Group.
    b. LAFAYETTE INSURANCE COMPANY, (hereinafter "Lafayette" is a domestic
    corporation licensed to issue insurance policies and in fact issuing insurance policies in the State of
    Louisiana. At all material times, Defendant Lafayette was a subsidiary and/or member company of
    United Fire Group and all allegations contained herein were at the direction and/or implementation of
    United Fire Group.
    c. XACTWARE, INC., (hereinafter "Xactware" is a foreign corporation, domiciled in
    Utah, with its principal place of business in Utah, not authorized to do business in Louisiana but
    having sufficient minimum contacts through repeated electronic communications with various
    insurers in this state during the claims handling process following Hurricanes Katrina and Rita.
    After August 2006, Defendant Xactware was a subsidiary and/or member company of Insurance
    Services Office, Inc. (ISO) and all allegations contained herein were at the direction gnd/or
    implementation of ISO.
    d. MARSHALL & SWIFT/BOECKH, LLC, (hereinafter "MSB" is a foreign limited
    liability company, domiciled in Wisconsin, not authorized to do business in Louisiana but having
    sufficient minimum contacts through repeated electronic communications with various insurers in
    this state during the claims handling process following Hurricanes Katrina and Rita.
    e. INSURANCE SERVICES OFFICE, INC., ("hereinafter ISO" is a foreign
    corporation, domiciled in New Jersey, not authorized to do business in Louisiana, but having
    sufficient minimum contacts, including hosting ISOTECH conference at the end of October, 2007 in
    New Orleans, as well as repeated electronic communications with various insurers in this state
    during the claims handling process following Hurricanes Katrina and Rita. After August of 2006,
    Xactware was a wholly owned subsidiary and/or member company of IS0 and all allegations after
    August of 2006, contained herein, were at the direction and/or implementation of ISO.
    f. STATE FARM FIRE AND CASUALTY COMPANY, ("State Farm" is a foreign
    insurer, domiciled in Illinois, authorized and doing business in the State of Louisiana and which
    issued policies of insurance to the Plaintiffs/Insureds, and other persons that are similarly situated,
    that insured against various risks of loss to immovable property. At all material times, Defendant
    State Farm was a subsidiary and/or member company of the State Farm Group and all allegations
    contained herein were at the direction and/or implementation of the State Farm Group.
    g. USAA CASUALTY INSURANCE COMPANY (hereinafter "USAA" is a foreign
    insurer, domiciled in Texas, authorized and doing business in the State of Louisiana and which issued
    policies of insurance to Louisiana citizens that insured against various risks of loss to immovable
    property. At all material times, Defendant USAA was a subsidiary and/or member company of
    USAA Group and all allegations contained herein were at the direction and/or implementation of
    USAA Group.
    h. FARMERS INSURANCE EXCHANGE (hereinafter "Farmers" is a
    foreign insurer, domiciled in California, authorized and doing business in the State of Louisiana and
    which issued policies of insurance to Louisiana citizens that insured against various risks of loss to
    immovable property. At all material times, Defendant Farmers was a subsidiary andlor member
    company of The Farmers Group and all allegations contained herein were at the direction and/or
    implementation of The Farmers Group.
    1. STANDARD FIRE INSURANCE COMPANY, (hereinafter "Travelers" is a foreign
    insurer, domiciled in Connecticut, authorized and doing business in the State of Louisiana and which
    issued policies of insurance to Louisiana citizens that insured against various risks of loss to
    immovable property, including but not limited to, loss and damage caused by wind. At all material
    times, Defendant The Standard Fire Insurance Company was a subsidiary andfor member company of
    St. Paul Travelers Companies and all allegations contained herein were at the direction and/or
    implementation of St. Paul Travelers Companies.
    j. MCKINSEY & COMPANY (hereinafter "McKinsey & Co." or "McKinsey" is a
    foreign company, domiciled in New York, not authorized to do, but doing business in Louisiana, and
    having sufficient minimum contacts with this State, in particular consulting with The Louisiana
    Recovery Authority and Chairman Don Powell.
    Allstate, Lafayette, State Farm, USAA, Farmers, and Travelers (hereinafter "Defendant
    Insurers" or "Insurers" write policies of insurance covering immovable property, commercial and
    residential, in the State of Louisiana. Xactware and MSB write software programs utilized by Insurers
    to value covered immovable property damage, commercial and residential, in the State of Louisiana.
    McKinsey, known as "The Firm" was founded in 1926 and is one of the world's most
    powerful corporate advisers. Its client base is huge and encompasses 213s (two-thirds) of the Fortune
    1000. It is the chief advisor and key architect of strategic thinking for 147 of the world's 200 largest
    corporations, including 80 of the top 120 financial services firms, 9 of the 11 largest chemical
    companies and 15 of the top 22 health-care and pharmaceutical companies. McKinsey became the
    "standard setter" and thus, the agent of the combination formed to regulate the insurance industry,
    which greatly impacts Louisiana commerce.
    McKinsey, since the 1980s, has been and is the architect of changing the insurance industry
    fiom one guided by the indemnity and fiduciary principles which it advertises, to an industry that
    raids the insurance premiums claims trust funds and diverts the premiums payments to management
    andlor shareholders, while underpaying claims and victimizing policyholders. The premium trust
    fund is affected with the public interest.
    Known McKinsey clients pertinent to this matter include, but are not limited to Allstate, State
    Farm, and USAA. During the course of this matter, the Louisiana Attorney General will uncover more
    of McKinsey clients and participants in the combination to privately regulate the insurance industry.
    McKinsey & Company ("McKinsey" initially advised insurers to stop "premium leakage"
    by undervaluing claims using the tactics of deny, delay, and defend. The entire combination is
    dedicated to preventing "premium leakage" to the detriment of the insureds. The first insurers to
    adopt the principles invited others to adopt them as well. Many, if not most, agreed. Those who
    - 6 -
    adopt the principles adopt a system to raid the premium claims trust that insurers are required to
    maintain. By undervaluing the value of the claims, insurers are free to raid the claims trust for the
    benefit of management and/or stockholders.
    McKinsey obtains clients "by word of mouth;" as knowing that a competitor has hired
    McKinsey has historically been a strong impetus for companies to seek McKinsey's assistance
    McKinsey's clients pay handsomely for management advice to increase profitability.
    McKinsey protects from public scrutiny the results of its involvements with clients.
    Insurance Services Office ("ISO" is a leading provider of statistical, actuarial, and
    underwriting information for the propertylcasualty insurance and risk management industries. It
    provides products and services that help measure, manage, and reduce risk. It provides data,
    analytics, and decision-support solutions to professionals in the insurance industry. The company
    gathers premium, claim and loss data that it files with state regulators; the data is used to evaluate the
    price of insurpnce in each state. Its clients use ISO's databases and services to classify and evaluate a
    variety of risks and detect potential fraud. It is also an agent of the combination.
    In the past, IS0 published suggested combined premium rates for specific lines of business in
    specific geographical areas that were inclusive of all loss costs, expenses, premium taxes,
    contingencies, and profit margins until this practice was challenged as a violation of antitrust laws.
    Currently, IS0 publishes pure loss costs leaving the "loading" of expenses and profit margins
    on top of loss costs for the individual member companies to supply in calculating final premium
    rates. It is difficult to discern a difference in ISO's current practices and those which were
    condemned under federal antitrust laws in the past.
    Insurance Services Office, Inc. ("ISO) facilitates the operations of the combination by
    providing a database and other computer programs which insurers tap into for standardization of
    claims regardless of the individual value of the claims. IS0 also provides standard policy forms and
    actuarial data on which premiums are based. IS0 is the agent of the combination while
    simultaneously setting standards upon which insurance regulators rely.
    Many property and casualty insurers use the IS0 and National Council on Compensatory
    Insurance ("NCCI" for rate-making purposes. These agencies receive information about premiums
    and losses by class code, state and territory to establish loss-cost figures. Individual insurance
    companies then file loss-cost 'multipliers,' expense factors for each company, that are multiplied by
    the loss costs for each business line to determine rates.
    IS0 publishes on its website, inter alia, that any business will get "measurable savings from
    unifling your rating system on a single platform while eliminating redundant, resource-intensive rate
    validations and testing."
    Insurers accomplish the illegal diversion of claims funds, in part, by using damage estimate
    computer programs such as Xactimate (manufactured by Xactware) and IntergriClairn (manufactured
    by MSB) that are manipulated to reduce the value of claims.
    IS0 also gathers combined financial results for the entire insurance industry. It contributes to
    the abilities of insurers to operate in a shroud of secrecy. The data provided by IS0 is tainted by
    collusion and self-interest to the detriment of the insureds.
    Farmers Insurance Group produced a video in 1999, with its CEO Marty Feinstein explaining
    that Farmers 'was granted entree to the methods of the combination, implicating Fireman's Fund,
    Royal, USF &G, Amica, Progressive, State Farm, Allstate, American Family, Safeco, USAA, and
    Hartford. In particular, Farmers was shown, by the above named companies, the technologies
    (software produced by Xactware and MSB) used in the claims handling scheme. Farmers adopted the
    use of the Xactimate program as a direct result of those consultations.
    The combination has grown with rapid strides. It threatens the welfare and liberties of
    - 8 -
    consumers because it preys on policyholders at the time of their greatest need and helplessness, and
    leverages the incredible economic and legal power of the insurance industry. As such, it runs afoul
    of the Louisiana Monopolies Act.
    Using these tools, insurers have combined to accumulate vast wealth for themselves by
    violating the indemnity principle upon which the industry was founded and by violating their
    fiduciary duties to their insureds. This combination has greatly impeded the ability of the entire
    state to recover from the devastating effects of Hurricanes Katrina and Rita.
    The power and control of this insurance combination is explained in the paragraphs that
    follow. The combination has interfered with and manipulated the natural flow of commerce in
    Louisiana, extracted monopoly rents from victims and inflicted huge economic damage to this state
    and its citizens. The alteration of the claims handling process implemented by this combination
    lowered the claims payment ratio (known as the payout to premium ratio) from a historic average of
    approximately seventy cents ($0.70) per premium dollar to approximately fifty cents ($0.50) per
    premium dollar, allowing these insurers to suffer the worst catastrophe in history while still earning
    sizable profits, as shown in the paragraphs below.
    Insurance industry shows increased profits despite Hurricanes Katrina and Rita
    ISO's website publishes "consolidated financial results" for the insurance industry. In 2005,
    it published that "net income and surplus both increased in 2005 even though catastrophe losses rose
    to a record high on a direct basis before reinsurance recoveries." (Insured property losses doubled
    from the previous year.)
    ISO's industry statistics after Hurricanes Katrina and Rita demonstrate the vast wealth
    accumulation by members of the combination. IS0 released a statement on December 27,2005, that
    "(t)he industry's net income and surplus increased despite record catastrophe losses. Including losses
    from Hurricanes Dennis, Katrina, Ophelia and Rita, direct insured property losses due to catastrophes
    through nine-months 2005 totaled $47.6 billion-nearly double the $27 billion in direct insured
    property losses due to catastrophes through nine-months 2004, according to ISO's Property Claim
    Services (PCS) .... These figures are consolidated estimates for all private propertylcasualty insurers
    based on reports accounting for about 96 percent of all business written by private U.S.
    property/casualty insurers."
    "Given the massive catastrophe losses absorbed by insurers in nine-months 2005, the increase
    in income and surplus during the first three quarters of the year is a testament to the underlying
    'financial health' of the industry."
    Even more revealing is ISO's statement on profits or rate of return of the industry, enjoyed
    while Louisiana suffered. "Excluding $3.3 billion in special dividends one insurer received fiom an
    investment sybsidiary, the industry's annualized return through nine-months 2005 was 8.5 percent-
    0.2 percentage points less than average annualized return through nine months from the start of
    ISO's quarterly records in 1986-2004."
    "Combining realized capital gains and net investment income, net investment gains rose $5.4
    billion, or 15.3 percent, to $40.7 billion in the first nine months of 2005 fiom $35.3 billion in the
    first nine months of 2004."
    "The net loss on underwriting in nine-months 2005 amounts to 0.9 percent of the $309.9
    billion in premiums earned during the period. The net gain on underwriting through nine-months
    2004 amounted to 1.1 percent of the $309 billion in premiums earned during the period."
    "The combined ratio for nine-months 2005 was the second best combined ratio through ninemonths
    since the start of ISO's quarterly records in 1986, surpassed only by the combined ratio
    through nine-months 2004."
    "The $20.4 billion increase in the industry's consolidated surplus in nine-months 2005
    compares with a $22.3 billion increase in nine-months 2004. The increase in surplus in nine-months
    2005 consisted of $28.8 billion in net income after taxes and $6.3 billion in new funds paid in, less
    - 10-
    $0.4 billion in unrealized capital losses on investments, $9.6 billion in dividends to stockholders and
    $4.7 billion in miscellaneous charges against surplus."
    ISO's website describes its services as follows: "IS0 Rating Service is the only system of its
    kind to provide these key features: Content supported by automated updates to loss costs, rules, and
    policy forms through ISOnet, inheritance-based technology, component-based, XML-driven design
    that facilitates interface with quote, submission, and policy-administration systems, rate-management
    tools that facilitate company maintenance, ongoing interpretation of the rating rules by IS0 line
    experts and actuaries, and analysis of IS0 updates."
    The unification of power and control was the inevitable result of the insurance industry's use
    of McKinsey advice and IS0 tools of industry-wide claims standardization. These acts of enhanced
    power present a prima facie presumption of intent to restrain Louisiana commerce and to bring about
    monopolization of the industry. The power of the combination is actually greater than that of a
    monopoly. It is more akin to the power of a trust.
    According to Bloomberg Markets Magazine, companies have sharpened the use of
    technology in the past 20 years to help tighten claims payouts. Insurers, following McKinseyYs
    advice on claims processing, have adopted computer programs with names such as Xactimate and
    IntregriClaim (used to value and underpay property damage claims). Insurers, as a part of the
    scheme, manipulate these programs to pay out as little as possible. They are designed to
    systematically underpay policyholders' claims.
    On April 1 1,2007, Mr. J. Robert Hunter, Director of the Consumer Federation of America
    testified before the U.S. Senate Committee on Commerce, Science and Transportation that the
    Senate should investigate the collusive practices in the insurance industry and claims systems.
    He further testified that appalling abuses of consumers occurred in the wake of Hurricane
    Katrina. He stated that the revelations and settlements by New York Attorney General Eliot Spitzer
    - 11 -
    show that even the most sophisticated consumers of insurance can be duped into paying too much for
    insurance through bid-rigging, steering, undisclosed kickback commissions to brokers and agents
    and through other anti-competitive acts.
    He pointed out a startling blog from the President of the Association of Property/Casualty
    Claims Professionals, James Greer, posted on the web site of the Editor of the National Underwriter,
    that on the Mississippi Gulf Coast and in New Orleans, the insurance carriers "behaved as one," in
    taking a total hands off approach to indemnity.
    Mr. Greer further wrote that the animosity and litigation is about the failure of the insurance
    industry to keep its promise of indemnity.
    Mr. Hunter further testified that "Insurers have reduced their payouts and maximized their
    profits by turning their claims operations into 'profit centers' by using computer programs and other
    techniques designed to routinely underpay policyholder claims."
    According to its website publicity release, "Insurance Services Company, ("ISO" acquired
    the assets of Xactware, Inc., the leading provider of estimation software and services for the property
    insurance, remodeling and restoration industries for an undisclosed amount. Xactware's customers
    now include 16 of the top 20 property insurers and approximately 80 percent of insurance repair
    contractors and service providers. During the record-breaking hurricane seasons of 2004-2005,
    Xactware's products were used to settle more claims than all of its competitors combined."
    "Founded in 1986, Xactware (www.xactware.com) is a technology services company
    specializing in the property insurance and restoration industries. Xactware's technology tools
    include software estimating solutions as well as powerful systems for replacement cost calculations,
    estimate tracking and real-time data trending."
    "IS0 is a leading provider of products and services that help measure, manage and reduce
    risk. IS0 provides data, analytics and decision-support solutions to professionals in many fields,
    including insurance, finance, real estate, health services, government and human resources. Clients
    use ISO' s databases and services to classify and evaluate a variety of risks and detect potential fiaud.
    In the United States and around the world, ISO's services help customers protect people, property
    and financial [assets. For more information, visit www.iso.com."
    XactValue (very similar to IS0 Homevalue), one of Xactware's products, advertises that it is
    "built on the Xactimate data engine-the industry leader in claims estimation." It builds an ITV
    (insurance-to-value) calculator on top of the component-level system of Xactimate, which means that
    XactValue utilizes the same pricing methodology that Xactimate uses, and is also automatically
    updated with new price lists each quarter.
    5 1
    Xactware further advertises "efficient" workflow solutions for underwriting such as:
    "Automatic recalculate valuations in the future-as prices change over time, you can recalculate upon
    renewal with a click of a button and automate the process for your entire book of business."
    Xactware advertises "convenient integration with other Xactware products: XactNet-utilize
    North America's largest claims assignment network to send and receive XactValue assignments.
    Now the same network available to claims professionals is available to underwriting professionals."
    XactAnalysis is advertised to allow network users to "view industry trends, track valuation
    volumes, manage training needs, and even view geographical mapping of valuation locations with
    the management reporting tool."
    XactAnalysis allows access to "a list of major third-party service providers already connected
    to the system and ready to receive assignments, line item auditing of estimates for identification of
    common scoping issues, graphical and text management reporting with automated alerts, quarterly
    industry trends for claims averages, key materials pricing, and labor rates, and real-time workflow
    management and reviewing tools." (Emphasis added).
    XactAnalysis has an integrated "management tool" for "service providers, such as repair
    contractors, cleaning specialists and independent adjusters." It comes with the same Industry Trend
    Reports that assignment senders (e.g. insurance carriers and underwriters) have access to within
    XactAnalysis. Service providers can view the same details. It includes industry reports, customer
    surveys, and labor rate calculators, assignment tracking, with automatic notifications, action items,
    and geocodes and XactNet pricing.
    "XactAnalysis Quality Review is designed specifically for reinspection workflows and works
    in real time. It can be customized to meet your specific needs and data can be separated from other
    claims management programs.
    With the XactAnalysis Quality Review program you can automatically assign reinspections,
    document finkings, track progress, follow-up on recommended actions, and report on discovered
    Xactware's website boasts XactAnalysis provides "powerful" Industry Trend Reports to its
    customers "at the click of a mouse." "Being the clear market leader for online property claims
    management puts Xactware in the unique position of providing essential reports that represent
    pricing trends for the entire industry. We can provide these reports because of the massive amount
    of claims data sent through our systems. That means you can have historical trends at your fingertips
    for the components that most affect your claims."
    "The Industry Trend Reports will show you at-a-glance how prices have changed for key
    industry indicators such as lumber, drywall, and floor coverings over the past 10 quarters. You can
    track labor prices for individual trades, see how any pricing area compares to the rest of the country,
    or even compare what a small bathroom loss costs today versus last quarter or last year."
    "Both XactAnalysis and XactAnalysis for Service Providers users have access to these
    Industry Trend reports, which are updated each quarter. Along with publishing these reports,
    qualified statisticians provide insight to these trends and identify the leading reasons for any increase
    or decrease. "
    "You can view Industry Trend reports for the entire country (USA or Canada) or drill down to
    a specific state, province or city. Some of the reports available include: composite reports for such
    items as carpet, drywall, lumber and roofing; retail labor reports; average estimate value reports; and
    basket of goods reports. You can also view newly added price list items and other quarterly
    enhancements made to our pricing database. When you are connected to XactAnalysis, you are
    connected to the entire industry!"
    On January 9,2007, IS0 announced "a major milestone today as its IS0 ClaimSearch allclaims
    database surpassed 500 million industry claims. The IS0 ClaimSearch system is the
    property/casualty insurance industry's first resource for evaluating claims histories and detecting
    claims fraud."
    Richard Boehning, senior vice president at IS0 has stated, "IS0 has worked hand-in-hand
    with the industry to build and enhance the all claims fraud-fighting resource over the past few
    years.. ..We're pleased to have reached this milestone in the size of the database-which is just one
    measure of the improvement in the quality of the data we provide the industry for claims handling
    and fraud detection.. . .Insurers representing nearly 95 percent of the industry in premium volume use
    IS0 ClaimSearch for day-to-day claims handling and evaluation. Hundreds of thousands of claims
    and claim updates are processed daily. And each day, tens of thousands of queries are run against the
    database by insurers' investigators, law enforcement personnel, National Insurance Crime Bureau
    investigators and state fraud bureaus. The system now receives more than 48 million claims
    Vincent Cialdella, vice president of IS0 ClaimSearch has stated, "We're pleased that the
    industry has supported the data-expansion and enhancement program so enthusiastically by
    converting to our enhanced data-reporting format and submitting larger volumes of claims.. . ."
    ". . ..In addition to expanding the database, IS0 has also enhanced the system's processing and
    claims-handling resource by integrating fraud-detection capabilities, such as claim scoring and data
    analysis and visualization. IS0 has also added an integrated, web-based case-management function."
    "IS0 ClaimSearch serves thousands of insurers, 24 state workers compensation insurance
    - 1 5 -
    funds, 650 public and private self-insured organizations and 480 third-party administrators
    (TPAs) ..."
    Frank J. Coyne, Chairman, President and Chief Executive Officer of IS0 said, "Spurred by
    intensifying competition, breakthroughs in analytics are transforming dynamics in insurance markets.
    Sophisticated insurers able to harness large volumes of high-quality data to drive decision making
    all along the value creation chain can look forward to a long and prosperous future. But insurers
    unable to keep up in the intellectual and technological arms race face a grim prognosis, according to
    an industry leader.
    In just a decade and a half, approximately a third of the insurers serving the United States
    vanished as escalating competition ate into top-line revenue growth and bottom-line profitability.
    But it isn't just the intensity of competition that's changing,. . .The nature of competition is changing
    too, as advances in predictive modeling and other analytical techniques enable leading insurers of all
    sizes to target their marketing, underwriting and pricing as never before."
    Coyne also noted the application of predictive modeling and other advanced analytics to
    Main Street commercial lines business. Coyne states, "With premiums for business owner's policies
    or BOP business averaging approximately $1,500, spending significant sums on painstaking
    underwriting is out of the question .... But, with the right technology, it only takes a junior
    underwriter seconds to enter a few facts from a policy application and get a score that indicates
    whether the risk should be underwritten."
    Additionally, Coyne stated, "Predictive modeling and intelligent database matching now
    enable insurers to spot flawed information and stop premium leakage;" i.e., the McKinsey principle
    at work. ,
    IS0 coordinates virtually every aspect of insurance industry business, from risk assessment
    - 16-
    and underwriting, to policy form creation and administration, to every aspect of claims handling.
    IS0 individually, and through its subsidiary Xactware, Inc., employed numerous uniform
    programs and databases to achieve the conspiracy, including but not limited to PushPin, HomeValue
    and Xactnet.
    IS0 Pushpin contains specific and detailed data on key building features for more that 50
    million residential properties in the United States. Agents, underwriters, and inspectors can enter
    additional prdperty information into IS0 HomeValue. By employing IS0 HomeValue to gather and
    maintain property data, insurers were able to manipulate estimates of an individual property's
    catastrophe loss potential, in addition to its replacement cost.
    ISO's HomeValue is a property replacement valuation system that enables insurers and their
    agents to make estimates of the replacement cost of residential properties in the event of total loss.
    By providing a means to justify a full replacement value for property policies, IS0 HomeValue
    enabled the manipulation of the amount of replacement coverage on a home, thereby underwriting
    profitability. The web-based interface streamlines the uniform manipulation of the replacement cost
    estimation process. It was integrated with in-house and third-party applications, as well as with a
    wealth of data sources from ISO.
    As another example, XactNet is used by insurance carriers and other professionals to send
    requests for estimates and services to adjusters, contractors and service providers. Once a request is
    received, estimates are returned over the same network. Estimates sent over XactNet can contain
    line items, photos, notes, audio files and floor plans. XactNet is also used to assign and receive
    valuation estimates for underwriters.
    After Hurricanes Katrina and Rita, Defendant Insurers adjusted claims filed by their insureds
    in the State of Louisiana.
    Defendant Insurers, individually and collectively, andlor others acting on its behalf, inspected
    - 17-
    the property and calculated/adjusted the monetary value of the damage or loss to immovable property
    by using computer programs called Xactimate and IntegriClaim.
    Xactimate and IntegriClaim are estimating software programs designed for
    adjustingtestimating damaged property replacement cost (to which a depreciation amount is applied
    if actual cash value is the proper amount to be paid under the contract).
    Xactimate or IntegriClaim is used by the insurance claims adjuster entering in the damaged
    immovable property component parts (e.g. drywall or siding) and the size of the damaged property
    (e.g. square feet or linear feet) and the program applies a pre-determined price for that damaged item
    and calculates that "line item's" replacement cost.
    The "line item" prices purportedly include labor, materials and other necessary items for each
    repair (e.g. nails, caulk, etc.).
    Upon information and belief, claims adjusters are pressured or required by the Defendant
    Insurers to accept the pricing database prices in the estimates, and any supplements, they write.
    Upon information and belief, if the claims adjuster does not use the database price, they risk
    their submission being flagged by the insurance carrier's claim examiner and "kicked back" or
    rejected, thus, delaying the adjuster's payment.
    The line item prices used by the Defendant Insurers are, upon information and belief,
    consistently below the lowest market price.
    An agreement, combination or conspiracy between all defendants, and other unnamed
    competing insurance companies, existed, at all material times herein, to horizontally fix the prices of
    repair services utilized in calculating the amount(s) to be paid under the terms of Louisiana insureds'
    insurance contracts with insurers for covered damage to immovable property.
    The maker of the Xactimate program, Xactware, is a wholly owned subsidiary of Insurance
    Services Office, Inc. (ISO), which also acts as an information repository and exchange for the
    insurance industry including, upon information and belief, Defendant Insurers.
    Defendant Insurers set up Xactimate and/or IntegriClaim as ostensible independent and
    objective benchmark(s) for reasonable replacement cost pricing, which they can rely on for the
    payment of proceeds due under the policy. However, these insurers, through coordination with each
    other and Xactware and/or MSB, intentionally devalue the market price in order to underpay their
    policyholders and/or artificially deflate, or attempt to deflate, construction and repair costs in the
    affected market.
    The repair services market that was the target of the price fixing was the repair/restoration
    services being provided in Louisiana, immediately after Hurricanes Katrina and Rita through to today.
    Upon information and belief, from on or about January 1998 to July 1999, Farmers received
    permission to visit Fireman's Fund, Royal, USF&G, AMICA, State Farm, Allstate, American Family,
    Travelers, USAA, Hartford; a staff of people actually went to these companies, sat down with their
    claims personnel and discussed their strategies, their technologies, and where they were headed. As
    a direct result of those meetings, in December 1999, Farmers mandated the use of the Xactimate
    program for all property damage claim adjustments, where previously they had no mandated
    adjustment process.
    Upon information and belief, the adoption and coordinated use of the Xactimate program
    and/or the IntegriClaim program was a direct result of the collusion between and among the
    State Farm has stated under oath that "Xactware generates and issues the price lists to State
    Farm. However, State Farm invests time and money reviewing and modifving the Xactware Price
    Lists prior to using the lists to adjust claims. Within each region, at least one Pricing Specialist
    - 19-
    contacts and/or surveys suppliers in the region for current pricing issues ... the New Orleans price list
    was updated a number of times per quarter from 2005 through 2007."[emphasis added.]
    However, State Farm's price list LAN05F5D3, active on or about November 15,2005, upon
    information and belief, was identical to Traveler's price list LAN02S52, active on or about
    November 15, 2005; with each price list containing over 10,0000 line items, this is a statistical
    impossibility without collusion.
    State Farm and other insurers submitted settled claim amounts to Xactware which were
    knowingly manipulated to be lower than the market price.
    Allstate and other insurers also manipulated IntegriClaim price lists and software to output
    prices lower than the market price with the full knowledge of MSB.
    Upon information and belief one primary mechanism for the creation of these lower settled
    claims amounts was through the use of preferred contractors.
    Each insurance company uses a different name for their preferred contractor program, some
    examples are: USAA's Property Direct Repair Program (PDRP), Liberty Mutual Insurance Group's
    Contractor Network Referral Program (CNRP), State Farm's "Premier Service" plan, and Allstate's
    Quality Vendor Program (QVP).
    These contractors are provided a higher volume of business referrals from the insurance
    company in exchange for following the mandates of the insurance company.
    For example, one such mandate for preferred contractors with State Farm is that building
    materials can only be sought at selected large home repair retailers, who, upon information and
    belief, have contracts with State Farm for discounts of twenty percent (20%) or more. Upon
    information and belief, State Farm pays directly for these building supplies and the preferred
    contractor never knows the actual building materials cost.
    - 20 -
    The preferred contractors, at a minimal overhead and profit margin dictated by the insurer,
    then complete the repair work for the insurer's estimated cost.
    This allows the insurance company to justifl the below market pricing it submits to Xactware
    or MSB for input into the settled claims amount database.
    Upon information and belief, Xactware and MSB sell their estimatics programs updated with
    pricelists created in part by the taintedlbiased data being submitted by the insurance companies and
    enjoy sizeable profits therefrom.
    Upon information and belief, at all material times, Xactware and MSB had knowledge that
    the tainted data was being submitted by the Defendant Insurers to intentionally deflate the value of
    the damaged property payments owed to Louisiana insureds.
    Despite this knowledge, Xactware and MSB, upon information and belief, conspired with
    Defendant Insurers to include this data for input into the pricing databases, thus skewing the output
    prices to below the actual market.
    . Current "settled claim amounts," and their component prices, are shared by the Defendant
    Insurers through a free program that comes with the Xactimate program: Xactanalysis or
    Xactanalysis for Service Providers (SP).
    Xactanalysis and Xactanalysis SP contain a function called "Industry Trend Reports."
    Defendant Insurers employ the "Industry Trend Reports" to share the current prices being
    submitted by competitors, and thus, coordinate the horizontal price-fixing suppression, or
    attempted suppression, of the overall market in repair services at virtually every geographic level
    and price component.
    Additionally, Defendant Insurers employ Xactanalysis with the ability to "drill down to" and
    monitorlcompare the individual claim adjuster's payout performance, and thus, ensure compliance
    with the pricing levels set by the company.
    The repair services market that was the target of the current price sharing and usage was the
    repairlrestoration services being provided in Louisiana, immediately after Hurricanes Katrina and
    Rita through to today.
    Defendant Insurers' use of the current price sharing through the "Industry Trend Reports"
    creates an anti-competitive means of coordinating horizontal price-fixing which is unreasonable and
    cannot be justified when weighed against the purported informative justification for the "Trend
    Reports" and the minimal pro-competitive impact of allowing comparison of the claims paid out
    versus the overall industry trend.
    The market repairlrestoration prices in Louisiana increased approximately 100% from prestorm
    prices by December 2005, and full rebuilding prices increased by approximately 50%.
    Defendant Insurers' price lists only increased approximately 15-20% from pre-storm prices
    by December 2005. For instance, the Xactimate price list used by Travelers for "R&R drywall,
    hung, taped, floated ready for paint" line item was $1.41/sq. ft. (Price list: LAN02B41, July 21,
    2005), and by November-December 2005 Travelers' price list had increased to $1.69/sq ft.
    (LAN02S52) an increase of only 20%. In January 2006, IntegriClaimYsp rice for removing and
    replacing drywall was less than one dollar ($1.00) per square foot.
    The Defendant Insurers' active collusion with one another and others in using tainted
    pricelists is a co-conspiracy within the meaning of La C.C. art. 2324.
    The reduction in the amount paid out thereby reduced the payout and increased the profits of
    the Defendant Insurers, despite the losses caused by Hurricanes Katrina and Rita.
    Setting the payout amount lower than it would be if market prices were paid out would be
    detrimental to an insurance company's competitiveness if it were not for the combined and
    coordinated use of the same intentionally deflated prices by competitors, because an insured would
    not seek renewal of their policy if other insurers paid more for covered damage than another insurer
    with substantially the same rate.
    Additionally, Defendant Insurers have actively coordinated andlor conspired their actions
    through various organizations and associations, with regular conferences and summits, including, but
    not limited to: Xactware's Annual Industry Summit, Property Loss Research Bureau's (PLRB)
    Claims Conference & Insurance Services Expo, Regional Adjuster Conferences, and Large Loss
    Conference; The Insurance Summit (only senior executives are invited); The National Underwriter
    Company's annual America's Claims Event (ACE): Property Insurance Report National Conference;
    the annual ACCORD Conference; The Property Casualty Insurers Association of America's
    Executive Roundtable Seminar, ACIC General Counsel Seminar, Information Technology
    Conference, and their Annual Meeting; The American Insurance Association; Insurance Information
    Institute; ISOTECH conference; and Insurance Services Office, Inc. (ISO) which until 1994 was
    under the direct control of a partnership of insurers and in August 2006 purchased Xactware, Inc.
    Upon information and belief, all of the above referenced insurance companies and others
    consulted with McKinsey & Co. between 1988 and the present, intentionally implementing the
    scheme described herein to their claims handling process.
    Upon information and belief, McKinsey & Co. consulted with these companies and was the
    driving force to alter the paradigm of the insurance industry from one in which the claims handling
    process was a quasi-fiduciary function to an adversarial one meant to limit claims payouts in order to
    increase profits.
    Upon information and belief, this new way of conducting claims processing resulted in
    -23 -
    substantial increases in profits for those companies.
    11 1.
    Upon information and belief, one of the principal directives of McKinsey & Co. was the use
    of computer software to standardize and control claim payments.
    I 112.
    Upon information and belief, McKinsey & Co., as agent consultants for these companies,
    promoted the industry-wide adoption of the estimatics programs Xactimate and/or IntegriClaim with
    the intended goal of holding down claim payouts through horizontal price-fixing, thus increasing the
    profits of each company involved.
    The purpose of the combination and conspiracy was to depress the amount paid out under the
    terms of the insurance contracts to below market prices and deprive Louisiana insureds of the actual
    cash value and/or replacement value of the damaged property.
    Petitioner repeats and realleges all preceding paragraphs.
    Defendants' intentional collusion in suppressing payments to Louisiana insureds for damages
    caused to their property over many years, including, but not limited to, property damaged fiom
    Hurricanes Katrina and Rita, violates La. Rev. Stat. 5 1 : 12 1, et seq.
    The payment of actual cash value, replacement value, andlor market value for repair services
    within the State of Louisiana is commerce within the meaning of La. Rev. Stat. 5 1 : 12 1.
    Defendants' intentional acts to depress the payments of the actual cash value, replacement
    value, and/or market value through the use of the estimatics programs Xactimate and/or IntegriClaim
    is a conspiracy within the meaning of La. Rev. Stat. 5 1 : 122(A).
    Defendants' intentional acts to depress the payments of the actual cash value, replacement
    value, andlol; market value through the use of estimatics programs substantially lessens competition
    within the meaning of La. Rev. Stat. 5 1 : 122. In particular, the Insurers, by, through and with their
    partners and co-conspirators, ISO, McKinsey, Xactware, and MSB, set up Xactiinate, IntegriClaim
    andor other similar IS0 programs as an ostensible "independent" and "objective" benchmark for
    reasonable replacement cost pricing, which they can rely on for the payment of proceeds due under
    the policy. In truth, however, these Insurers, (together with ISO, McKinsey, Xactware and MSB),
    through Xactimate andlor IntegriClaim, intentionally devalue the "market price" in order to underpay
    their policyholders andlor artificially deflate construction and repair costs in the affected market.
    Plaintiffs further show that:
    A. The Insurers directly negotiate with and provide for the payment of contractors and others,
    and, in such regard, are effectively the purchasers of replacement, repair, andlor construction
    goods and services, and are attempting to, and succeeding in, artificially setting the market
    for sdch goods and services too low.
    B. In the alternative, and to the extent that the Insurers are considered the sellers of insurance
    coverages: In the traditional price-fixing case, the defendants collude to set a price for fairly
    identical goods or services. The purchasers are forced to pay too much for that good or
    service. Here, the collusion is to decrease the value of the good or service. But the effect is
    the same: The purchaser pays too much for the good or service (i.e. the coverage afforded
    under the policy). While, in the short term, minimizing the pay-out on a claim would seem to
    be in the insurers' interest, from a competitive point of view, it is not in the insurers' interest,
    because people won't purchase or renew policies if they can get more goods or services (i. e.
    coverage) for their money somewhere else.
    C. While it could be argued that insurers only "compete" for premium dollars at the time a
    policy is initially purchased, the Insurers have admitted that there is competition on the
    claims 1 pay-out end as well, by taking the position in legal proceedings that claims manuals
    and other policies are proprietary trade secrets which must be protected by court order, to
    prevent competitive injury.
    D. Additionally, Insurers actively coordinated their actions through various companies,
    organizations and associations.
    The State of Louisiana and its citizens were substantially injured, both financially and
    emotionally, by having to pay their own monies the repair costs that should have been paid by their
    insurers and/or the delays in rebuildinglrepairing and/or the necessary litigation in securing the
    amounts owed under the contracts with defendant insurers.
    There is a factual connection between the defendants' actions and the injuries of the State of
    Louisiana and its citizens.
    The policies of the antitrust laws and their system of protection extend to the State of
    Louisiana and its citizens. Those policies include the court's plain duty to enforce the law, ever
    mindful of the wrong inflicted on the public resulting from crushing out individual rights using
    methods of enhanced power that flows from combinations, and the legislative intent to prevent such
    unreasonable restraints of trade and formation of monopolies, using application of the statutes to the
    facts using the reasonable man standard of appraisal found in tort law. The statutes were intended to
    be interpreted in an unbalkanized manner, so that in no way or by no means could public policy be
    evaded. La. R.S. 122 forbids all means of monopolizing trade and R.S. 5 1 : 123 forbids all restraints
    of trade by any attempt to monopolize evaluated in light of R.S. 5 1 : 122. When any part of trade
    becomes affected by a restrain, a monopoly has occurred or is in developing stages.
    Under applicable law, insurers are held to the indemnity and fiduciary duty standards, both of
    which they breached.
    The State of Louisiana and its citizens are entitled to the relief of disgorgement of illegal
    profits, treble damages and injunctive relief.
    The State of Louisiana prays for a jury to decide all issues raised herein.
    WHEREFORE, the Louisiana Attorney General prays that:
    A. Summons be issued to Defendants to appear and timely give an answer;
    - 26 -
    B. After due delays and legal proceedings, judgment be rendered in favor of the State of
    Louisiana and against Defendants for all damages asserted and proved, including, but not limited to,
    treble damages, reasonable attorneys' fees, and costs;
    C. Injunctive relief;
    D. Any and all equitable, declaratory, and general relief as this Court deems fit.
    Respectfully Submitted: /I
    CHXRLES C. FOTI, Jd, La. B& 05784
    Attorney General ~ t a f oef Louisiana
    Louisiana Department of Justice
    1885 ~ . 3S'tre~et
    Baton Rouge, LA70802
    Telephone: (225) 326-6467
    Facsimile: (225) 326-6499
    . Bar No. 10027
    W c ~ e r n a q / @ wF irm
    87 10 ~effekonH ighway
    Baton Rouge, LA70809
    Telephone: (225) 926-1234
    AN, La. Bar No. 68 19
    S T E ~JN. HE RMAN, La. Bar No. 23 129
    BRIAN D. KATZ, La. Bar No. 24137
    SOREN E. GISLESON, La. Bar No. 26302
    JOSEPH E. CAIN, La. Bar No. 29785
    Herman, Herman, Katz & Cotlar
    820 O'Keefe Ave.
    New Orleans, LA 701 13
    Telephone: (504) 58 1-4892
    Facsimile: (504) 561 -6024
    T. CAREY WICKER, 111, La. Bar No. 13450
    Capitelli & Wicker
    NEW ORLEANS, LA70163-2950
    TELEPHONE: (504) 582-2425
    FACSIMILE: (504) 582-2422
    MARK P. GLAGO, La. Bar No. 25395
    Glago Law Firm, LLC
    NEW ORLEANS, LA 70163-2950
    TELEPHONE: (504) 599-8666
    FACSIMILE: (504) 599-8699
    Agent For Service of Process:
    8549 United Plaza Blvd.
    BATON ROUGE , LA 70809
    Through Agent for Service of Process:
    2800 Veterans Blvd., Suite 253
    Metairie , LA 70002
    Agent For Service of Process:
    8549 United Plaza Blvd.
    BATON ROUGE, LA 70809
    Agent For Smice of Process:
    8549 United Plaza Blvd.
    BATON ROUGE, LA 70809
    Agent For Service of Process:
    8549 United Plaza Blvd.
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    Agent For Service of Process:
    8549 United Plaza Blvd.
    BATON ROUGE, LA 70809
    - 28 -
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    "Anyone who has never made a mistake has never tried anything new... Albert Einstein"
    Founding Member

    11/09/2007 10:36 AM

      Post deleted, wrong venue, but be sure to investigate, the McKinney information.

    "Anyone who has never made a mistake has never tried anything new... Albert Einstein"

    11/11/2007 1:10 AM
    As to price fixing by the insurance companies via the software companies, as a General Contractor with over 25 years in the Insurance Industry, the estimates generated are only as good as the knowledge of the individual punching in the numbers. That being said, I'd like to point out that most adjusters don't have enough building knowledge to write a decent sheet. That the contractors will accept what is written in order to obtain a steady flow of work is a givin, they, after all are in business. But they are in business to "make a profit". If the estimate is lacking, and the contractor doesn't want to "rock the boat" or "bite the hand that feeds him", he just finds another way to turn that profit. Usually, he shorts the insured in the form of less in materials or uses cheaper labor. By fixing unit prices for any line item, you in effect take the natural competition factor out of the building trade. No more "bids". Just estimates. Now perhaps that is good for some and not so good for others. Either way, it is not what I would term appropriate. Each builder's overhead is different. Each has a different approach to taking care of their business. Better tradesmen or subs or worse. Now, as I'm what I would term a "low overhead" operation, I don't mind. In fact I am more than willing to work for the unit costs of the major software programs out there. But I still want to write my own sheet using that software, so I can clip it for everything that is available. For me, it works. But perhaps, just maybe, the insured would like to use who they want to do the repairs to their home. Perhaps they have more faith in the next contractor or some other reason for wanting ABC Company to repair their home. Shouldn't they, within reason, be able to hire whom they choose to do the repairs to their home, regardless of cost within reason? I think so, and I think that if there is a bit of trouble coming in this law suit, it is with regards to the price fixing that has become prevalent in the industry in the past ten years.

    I know this is a forum for cat adjusters. I also know that many of the adjusters that work the storms are more than able to write a good sheet. I intend to use my years of hands on restoration experience to do so myself. But the fact is, that when State Farm and All State and the other majors send in the clowns to these storms, and rotate them out every six weeks, the estimates being written are not up to a professional standard. They don't want them to be. They figure a large percentage of the people will take what they are given and those files that have to be re-opened won't cost them as much as if they had a qualified estimate written the first time. An adjuster with two years experience, 18 months of which has been in the office, and was taught how to use his estimating program, doesn't qualify as much more than a waist of time. Yet, the bulk of the adjusters you see on these major cats are just that.

    Just my two cents
    Tom Toll
    Moderator & Life Member
    Senior Member
    Senior Member

    11/11/2007 10:51 AM

    Kit, as much as I don't want to, I am going to have to agree with you. When you lock a computer estimating database and will not allow any alterations to it, you are doing a disservice for many. Some companies will not allow a good adjuster to modify items or even add items that are not in the program. I find most of the estimating programs to be very lacking. I think John Postava is the bravest of all and serves his adjusters will with his Simsol program. I loved DDS when it came out, but since being sold several times and becoming married to certain companies, they have destroyed an exellent product.

    Success is not final, failure is not fatal: it is the courage to continue that counts.
    Veteran Member
    Veteran Member

    11/11/2007 11:41 AM
    Posted By Kit Shay on 11/11/2007 1:10 AM

    ...the estimates generated are only as good as the knowledge of the individual punching in the numbers.

    Yep. A thorough and accurate scope is the first step to getting an agreed price where the file remains closed - they can actually get the work done for the price.

    But the fact is, that when State Farm and All State and the other majors send in the clowns to these storms, and rotate them out every six weeks, the estimates being written are not up to a professional standard. They don't want them to be.

    Speaking from working at State Farm Cat sites, I disagree with the last point.  We were told to pay what we owe.

    I never had a file returned because the estimate was too detailed, or too accurate. The manager may tell you to document the file better to justify your scope, but I never received any comment or hint of trying to keep prices down. To the contrary, one of the State Farm managers had a favorite expression "don't be intimidated by the damage". And I think it was a good statement to the table of adjusters. Some of us had decades of experience, but the newer ones can feel awkward writing big dollar estimates.

    Posted By Tom Toll on 11/11/2007 10:51 AM

    Some companies will not allow a good adjuster to modify items or even add items that are not in the program.
    ...I loved DDS when it came out, but since being sold several times and becoming married to certain companies, they have destroyed an excellent product.

    Recently I had a client request MSB and I started using it for the first time. Once I found how to get the part of the database for labor charges I could write a decent estimate. I know you have been using MSB for many years - I hadn't used it since the DDS days. I even called tech support to ask how to add labor hours and the person said it couldn't be done...  but she didn't know about the "advanced search" where the minumum charges are located, and labor by the hour.   I have no idea why they don't put those labor items in with the trade  - so you could add some carpentry hours for "temp bracing" or whatever along with the framing repair.

    This client insures only mobile homes, and as you know water always finds it's way down to the insulation below the floor, and trapped in the moisture barrier. If I toss in a few hours labor to "perform the above mentioned insulation replacement in tight working conditions" and a couple hours to tie in the belly paper membrane with surrounding area, it will work out OK to yank out an area 12' x 12'. Or if I am replacing ALL insulation, and ALL moisture barrier, then the unit costs can start to compensate the job.

    This is one of the most common errors I see new adjusters make - not realizing that a contractor won't get out of bed to replace 8 Lf of baseboard at $2.80 per foot.

    Some wisdom has to exist when there are multiple trades with small tasks, most carriers frown on multiple minimum charges.  You have to use common sense, don't give away the farm - but be aware when some part of the estimate needs to be adjusted for bad access, very small area of replacement, etc.

    Bob H

    11/11/2007 12:31 PM

    Heck of a great topic for my first post here!

    Where is the "Claims Industry" going?

    I agree with John Postava, the lawsuit will help move the industry toward a "common set of items"...however, I think the "Claim Industry"  should and will move toward a common set of items that track what stuff costs.  If I owned an insurance company I would want to know what stuff cost, not what stuff "sells for"...

    The mentally has always seem to be "we are buying"..meaning...since we already feel as if we own your house, and, can dictate the pricing of a claim..then...we may as well be the one's fixing it or buying the replacement items!

    I think the industry needs an "independent, secure, open but private, web based infrastructure" that helps close out the entire claim and reconstruction project, and, not just the "claim estimate". 

    "A victim of a fire, earthquake, tornado, or hurricane is not made whole until he is living back in his home and focusing on the life he had before the "Catastrophe".  

    It sounds as if that is the message "Farmers Insurance" is talking about..."Farmers Helppoint"...listen to their marketing and you will hear it.... 

    I think this can be accomplished using the current "Catastrophe Claim Industry" model of adjusting company and independent adjuster.  However, I think the independent adjuster needs to be taken off the hook for "fiduciary" responsibility...and, put on the hook for "project management."  I really don't know what to suggest for a "Fee Schedule", however, it will be something similar to what the "Reconstruction Contractors" currently pay their sales and project managers, and, this is very good money.  This model will not increase the cost of anything, it will actually lower the cost of claims.  

    So...having been a "lurker" around here off and on since 2000, I know comments and suggestions like the above are always met by serious "gun slinging" rhetoric...so...let me have it...I have plenty of ammunition!







    Veteran Member
    Veteran Member

    11/11/2007 12:48 PM
    I think the independent adjuster needs to be taken off the hook for "fiduciary" responsibility...and, put on the hook for "project management."

    The thing is, most insurance companies do not want to be involved with being responsible for "project management" on the reconstruction, if that's what you mean.

    There have been exceptions, with "preferred vendor" programs. And it seems to work OK with cars, getting it repaired at an approved shop so there is no price haggling that the policy-holder gets involved with, it's just between the shop and the insurance company.

    But it doesn't work that well with houses.  Every one of those programs I have seen, the contractor starts out doing good work, then either gets buried in jobs assigned to him or cuts corners.  I had a co-worker who's house caught fire years ago, and the "preferred vendor" did everything as cheap as he could.  And the homeowner did not pick the contractor, so it gets very awkward.

     The insurance company has a financial obligation. That is what the contract says. It doesn't say they are going to send a contractor out to fix the house, or that they will make sure any contractor selected by the property owner does a good job. No, they basically pay what they owe.   And they name the lender - who also owns the house.

    And if people don't agree, an arbitrator helps them to meet in the middle, and again it is ultimately an exchange of funds that will get them put back in their pre-loss condition.

    We have talked about some green adjusters, but there are also some contractors I will refer to as "Johnny 6-Pack". When the Insurance company issues their settlement, the next chapter is between the property owner and the contractor, and that is a separate contract from the insuring agreement.

    The contractor should have his own liability insurance - but even that policy will have exclusions for his "work product".  The homeowners insurance does not want to take on any responsibility other than paying what they owe, and that is a fiduciary responsibility.

    Bob H
    Ray Hall
    Senior Member
    Senior Member

    11/11/2007 5:01 PM

    The long post about Allstate is all automobile liability claims and does not have ANY thing to do with first party property claims. By the way the program is just a guide line. Auto liability claims and for that matter all type BI claims have subjective finding by the doctors doing the examination's in ever case I have ever seen.

    I would not let a contractor that I did not select to do a MAJOR job on my residence. I would expect the insurance company adjuster to write an estimate that I would except, reject in whole or in part. If I rejected the scope and amount then I would file my estimate with a proof of loss form and a payment demand. I have never seen ANY insurance company who would use a contractor of their choice if ever policy holder was like me. Get an agreed cost and pay that amount ever time.


    11/11/2007 8:40 PM

    Don't get me wrong here, these are great posts.  I just have an itch for the primary topic of the thread.  What will the lawsuit do to the industry?  "Anybody got any fresh ideas?"

    I would not let a contractor that I did not select to do a MAJOR job on my residence. I would expect the insurance company adjuster to write an estimate that I would except, reject in whole or in part. If I rejected the scope and amount then I would file my estimate with a proof of loss form and a payment demand. I have never seen ANY insurance company who would use a contractor of their choice if ever policy holder was like me. Get an agreed cost and pay that amount ever time.

    Exactly..and, right on the topic of this discussion...Where is the "Claims Industry Going"?....When is someone going to develop a system that helps close a claim from a customers point of view, that actually gives the insurance company data they can use with confidence. 

    It seems to me like buying a new car.  Once you are confident that you aren't paying "to much", then you relax, and, let the car dealer make a fair profit.  The stress is in not knowing what stuff "cost".  Oh yea, and policyholders that milk the system.     

    If you really want to analyze the "Claim Industry"...we spend a lot of time and money focusing on the "Estimate"...It seems to me that the estimate is just the estimate.  It certainly has to be done, however, as we have proven time and time again, and, as is the subject of this lawsuit....what is most important to the "shareholders" of an insurance company is basic "Negotiation 101".  Write it Low, and, don't get in a hurry about it!

    The thing is, most insurance companies do not want to be involved with being responsible for "project management" on the reconstruction, if that's what you mean. 

    Exactly...and, banks would rather not repo cars..however, if they want to make more loans, for higher interest...it can't be helped.
    Why not embrace it?  What is replacement cost?  Is it the items in an estimate based on an average, using materials and labor that is readily available?  Seems to me replacement cost is what it cost? 

    Seems to me that if someone had a system that allowed the insurance companies to cost the reconstruction from a "material list", and, work order basis..then...they could give some of this data to the property owner and help them help themselves. 

    Seems to me that there may be an opportunity in the Insurance Market for a new insurance company that had this technology and "mindset" to capture plenty of marketshare from the current gorilla's. 


    My Point

    Is there anyone out there thinking "Outside the Box".  Anybody out there not working that may want to use their skills helping close claims?  Seems like a shrinking market for independent insurance adjusters.  Shall we keep doing what we have been doing and getting what we've got, or, does anyone have any idea how  to employ 10,000 "catadjusters" in a more "orderly" fashion than dependence on a 10 billion dollar plus hurricane.  

    Again, not trying to offend here.







    Ray Hall
    Senior Member
    Senior Member

    11/11/2007 8:51 PM

    Donnie go back in the old CADO files and dig out my FICUS TREE system.


    11/12/2007 7:25 AM

    Thanks Ray...obviously...it has been a few years since I lurked around here....

    Perhaps we should start a new thread...or private discussion regarding your concepts....I didn't fully read everything you posted, however, see if I understand...basically...you have developed a method for managing humans in the catastrophe realm that actualy resemble the real world processes that take place...yes....

    So..the bigger question is "How do you create a company or economy" out of this..and, "What type of web based system is required to implement it?  I would love to collaborate with you on this...and, I started a new thread in the general discussion called "Web Based Software Requirements".....If you don't want to talk about it for business and intellectual property reasons...why don't you call me and I will talk to you about what I am doing!  I am a contractor / adjuster / software consultant...and, I have invested a lot of time and money in trying to figure out a solution that could help this industry, and, my pocketbook as well. 



    11/12/2007 2:22 PM


    I don't believe any major carrier would tell anyone to underpay a claim.  Certainly not an Independant, it would come back to haunt them for sure sooner or later.  My point was they do make it a habit of sending the youngest, single, least experienced staff adjusters they have out as the first wave on most cat losses.  And although they may be computer literate and able to use an estimating program, they are no where's near qualified to scope a job properly.  Hence, you end up with a lot of short sheets.  With the sudden influx of new wannabe storm troppers (myself included) you also have to be concerned about the quality of sheets being generated by independants now.  These will be weeded out by lack of work and poor product in time.  But in the meantime, the carriers are saving a lot of money by underpaying claims, deliberate or not.  Most homeowners are not going to follow through, but accept what they are paid and pick up the difference on these short estimates.  I for one believe that the carriers are quite aware of the facts and know that by sending in adjusters that are not well trained in reconstruction are saving themselves a chunk of change.   Call me old fashioned, but remember the days when contractors wrote the estimates and the adjusters ajusted?  I know that won't work in a cat situation, but it should still be available to the homeowners as an option.  You can bet your panties that should my home ever have a fire that I'm not going to let an adjuster hired by the company write the estimate I settle on, and neither would you

    Veteran Member
    Veteran Member

    11/12/2007 3:03 PM
    should my home ever have a fire that I'm not going to let an adjuster hired by the company write the estimate I settle on, and neither would you

    How can you feel good about being an adjuster with that attitude?
    I don't look at it that way, it's not that black and white. Whoever gets their estimate done first, it is a point of reference for everyone to align the confusion of a damaged property.

    Maybe the adjuster does a detailed, thorough scope. It does happen. Even if the estimate is terrible, it is a point of reference. "hey you left these 3 things out on this room, and..."

    If the carrier issues the first settlement based on available info, and later there are some missed items that come up - it's better to pay the undisputed known claim when you know you owe it. I don't believe insurance companies are evil - or I wouldn't keep doing this job.

    Call me old fashioned, but remember the days when contractors wrote the estimates and the adjusters ajusted?

    Contractors are not entrusted with policy knowledge, matching issues laid out by the DOI, and frequently focus on what the customer wants to "put back" as opposed to a strict focus on what was there.  You have 25 years construction experience with insurance type restoration claims, so you understand these issues.  Lots of contractors do not.

    I had a claim just last week where a tree yanked off the power line and masthead to the side of a house.  Contractor estimate didn't include a lot of the collateral damage to the facia board, and some interior damage from some wiring repair.  I never, ever consider a contractors sheet to be a complete statement of damage associated with a claim.  Sometimes I learn from them, or find something I overlooked, but truthfully it is more often the other way around.  I often find missing items from contractor's estimates, and shine a spotlight on it to see if they were going to do the "unnamed task" within the job, or if it needs to be added.

    Contractors that do not use Xactimate tend to write very brief, one-page estimates.  And when the budget gets tight, opinions can vary on what was or wasn't included in the estimate.  That rarely happens with an adjusters estimate - as we focus on unit costs and tend to be very specific in what bits and pieces are part of the claim settlement.
    One other thing, to put this all into perspective.  If a house has significant damage, the mortgage company will be named in the settlement.  Many lenders take a controlling interest in paying out funds.  It is often paid in thirds.  Even if you own your house free and clear, you wouldn't pay 100% of the job to the contractor immediately.

    With that in mind, if you had a green adjuster write your damage sheet and the carrier paid it immediately - it's not like you signed a third-party release of all claims.  You have a contract with the insurance company, and they will have to respond to communication in a timely manner, look into alleged supplements or overlooked damages.

    Bob H

    11/12/2007 5:06 PM
    I guess the Hamburger Restaurant industry will be sued next because of the national pricing policy of Burger King, McDonalds, Wendy's, etc.

    Then Auto Repair Shops who use the Mitchell Labor Guide...

    what next?
    Tom Toll
    Moderator & Life Member
    Senior Member
    Senior Member

    11/12/2007 7:14 PM

    Who knows whats next, but one thing for sure, we will find out. This business is ever changing, and unfortunately, not for the better.

    Success is not final, failure is not fatal: it is the courage to continue that counts.
    Founding Member

    11/12/2007 8:08 PM

    More interesting Reading, what else do we have to do? Perhaps we could volunteer for "dancing with the stars" or work in a Thanksgiving Soup kitchen.

    Anything positive will be appreicated:


    "Anyone who has never made a mistake has never tried anything new... Albert Einstein"
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