TEXAS DEPARTMENT OF INSURANCE INVESTIGATES FRED LOYA INSURANCE AND OLD AMERICAN COUNTY MUTUAL INSURANCE
By Rachel E. Montes posted in In The News on Monday, July 5, 2010
The Texas Department of Insurance is investigating two insurance companies for alleged violations of Texas insurance regulations. The companies being investigated are Fred Loya Insurance Company and Old American County Mutual.
The Texas Department of Insurance has apparently received a high number of complaints about claims being made with these two insurance companies. Those complaints from Texas drivers included such practices as delays in processing claims, unsatisfactory offers or settlements, denial of claims and liability disputes. Those complaints mirror our experience with Fred Loya Insurance Company on cases we have handled. As a general rule, when we see that our client is involved in a car wreck with someone who is driving a vehicle that is insured with Fred Loya, we expect that regardless of the facts, the claim will either be denied completely or that an offer will be so low, that in almost every case, a lawsuit will need to be filed.
Although Fred Loya Insurance Company and Old American County Mutual Insurance Company are not the largest insurers in the state of Texas, the number of complaints lodged against those insurers is significantly greater than the number of complaints filed against much larger insurance companies. The Dallas Morning News reported that it conducted its own analysis of complaints, and that their analysis revealed that 10 of the 25 largest auto insurers in the state – those with more than 100,000 policies – had worse-than-average customer service records. The two companies at the top of the list of complaints were Fred Loya Insurance Company and Old American County Mutual. (See www.dallasnews.com )
Fred Loya, which collected more than $283 million in premiums last year, performed nearly four times worse than a typical Texas insurer, according to the state-calculated “complaint index.” Old American County Mutual, a Dallas-based company that collected nearly $539 million in premiums, had a complaint index of 3.42 – or about three and a half times worse than a typical company. No other insurance company besides Old American County Mutual Insurance Company and Fred Loya Insurance Company broke 2.0 on the “complaint index”, which would be twice the average. Even more interesting and perhaps more telling about the complaints these two companies have received is that the two insurers have a business relationship. Fred Loya is listed as one of several managing general agents for Old American County Mutual Insurance on its website.
Old American County Mutual Insurance Company declined to comment on the high complaint numbers it has received. However, the explanation given by Fred Loya Insurance Company is probably a good word of warning to current and potential Fred Loya customers about how they can expect to be treated if they find themselves in a position where they need to make a claim. Edgar Meza, vice president of claims for Fred Loya Insurance Company, said many of the complaints stem from (1) differences over the market value of cars that are totaled and (2) from accidents involving a person driving a Fred Loya-insured vehicle who has been excluded from coverage.
Taking Mr. Meza’s statements at face value apparently there is a large number of people who are having difficulty in obtaining what they perceive to be a fair settlement from Fred Loya Insurance Company when a vehicle is a total loss. This is a problem not only for people who purchase a policy with Fred Loya insurance company, but it can also be a problem for people who are not insured with Fred Loya if the person who causes the accident is insured with Fred Loya because those claims will typically need to be processed by and paid for by Fred Loya. These insurance companies know how important it is to people to have transportation. Insurance companies know that when people faced with the choice of either (1) having no transportation or (2) settling a claim cheaper than they should just so that they can have transportation and keep their jobs, a lot of people will settle for a less than fair amount. As a result, even if you are not insured with Fred Loya you need to make sure that your own auto insurance policy carries collision and uninsured/underinsured motorist protection and preferably even rental coverage to give yourself the most protection possible in the event that your vehicle is involved in a collision with a Fred Loya insured or for that matter, an uninsured motorist.
Mr. Meza’s second explanation for the high number of complaints against Fred Loya is an even scarier comment about the practices of not only Fred Loya Insurance Company, but also some of the smaller insurance companies who are writing insurance policies that exclude coverage in what would normally be a covered situation. As Mr. Meza points out, Fred Loya Insurance Company serves a unique customer base, typically lower-income drivers who have trouble obtaining insurance. In our experience, that frequently translates to drivers with a bad driving record who are now forced because of a previous wreck, drunk driving incident or some other legal problem to prove to a court that they have auto insurance. These types of drivers will typically secure the absolute cheapest insurance they can find, and they will select the absolute minimum amount of coverage required by law.
One thing that Fred Loya is doing to reduce the cost of insurance is to severely limit is exposure by limiting who is insured. On a standard Texas auto insurance policy, the owner of the vehicle has the ability to allow his or her friends and family to drive the vehicle with his or her permission. If the driver to whom the vehicle is entrusted causes a wreck, under a standard Texas auto insurance policy, the driver is covered under the policy unless that particular driver has been specifically identified as an “excluded driver.” The typical scenario for an excluded driver is the family who has a teenage driver that is causing the insurance rates for the entire family to sky-rocket. In that situation, many families opt to list the teenager as an “excluded driver” and to require the teenager to get his or her own insurance policy.
In contrast to standard Texas auto policies, Fred Loya Insurance Company is writing some policies that essentially exclude all other drivers except for the named insured. To those who are not involved in handling claims, this may not sound like it would create a big problem, but it does because it creates an increased risk of “uninsured” drivers. In fact, the Texas legislature created a law, The Safety Responsibility Act, to protect the motoring public from uninsured drivers. Western Alliance Ins. Co. v. Alberez, 380 S.W.2d 710 (Tex. App. – Austin 1964, writ ref’d n.r.e.). Under this Act, the insurance company insuring the vehicle must provide a policy of insurance which complies with the Texas Transportation Code §601.073.
These “we don’t cover anyone but you” policies create a number of problems. For example, it creates a situation where if the policyholder lends his vehicle out to a neighbor, a friend or even to a spouse, there is no coverage.
- There is no liability insurance coverage to pay for the damages they cause to someone else’s vehicle, property or for personal injuries;
- There also is no coverage for damage to the insured’s vehicle because an excluded driver was driving the vehicle;
- In addition, it also puts the driver of the vehicle in a position of receiving a “no insurance” ticket because the policy does not cover anyone except the named insured;
- For those insureds who were required by a court order to insure the vehicle, those policy holders may find themselves in violation of a Court order because the vehicle was not technically insured;
- If a coverage dispute arises, sometimes an insurance company will decide that the insurance company is in a better legal position if it pays a claim even though they claim that there is no coverage, but they then have the right to sue the policyholder for their decision in paying a claim that was not covered;
- Other coverages such as uninsured/underinsured motorist coverages and Personal Injury Protection (P.I.P.) coverages can be in jeopardy if the driver was not insured under the policy; and
- The likelihood that a person who insured with Fred Loya or Old American will be sued is substantially increased anytime an issue arises that results in a delay in the payment of a valid claim as typically these issues have to get sorted out through the litigation process.
In addition, Mr. Meza’s comments that Fred Loya Insurance Company serves a unique customer base, typically lower-income drivers who have trouble obtaining insurance is disconcerting as the quality of claims coverage should not vary depending upon the socio-economic status of the customer as there is no difference in the duty of good faith and fair dealing or the duties an insurance company owes to an insured or to a beneficiary under the Texas Insurance Code depending upon the income status of the person. This issue is also particularly troubling considering the fairly recent marketing push by Fred Loya to increase its position in the insurance market in Texas. Questions arise about whether the company is targeting a particular segment of the public. Either way, there is apparently a need to be mindful of the old saying, “You get what you pay for.”
Other than a general buyer beware message to the public this investigation might serve, the question is where does this investigation leave the general public and why is it important. The reality is that insurance companies in Texas have a lot of power. Ben Gonzalez, an Insurance Department spokesman, said the agency is limited in how it can respond to consumer complaints. For example, the department cannot force a company to pay a disputed claim if there is no violation of the law. Also, the agency cannot decide who is at fault in an accident. We cannot resolve every case, he said. “Complaints do help us identify issues of concern with a particular company.” In addition, the Texas Department of Insurance has indicated that Old American has also been cited for canceling hundreds of auto policies after claims were filed on each. While the insurance company may claim that the cancellations were justified, you still have to be concerned as a consumer that an insurance company has a reputation that it is there to collect premiums, but not to pay claims in a timely or fair manner.
While your experience with these insurance companies may have been positive, this investigation points out that as a consumer, you should take more into account when purchasing insurance than just the amount of the premiums.
Montes Herald Law Group, LLP
Attorneys Rachel Montes and Tom Herald
1121 Kinwest Parkway, Suite 100
Irving, Texas 75063
Telephone: (214) 522-9401
Facebook at Montes Herald Law Group, L.L.P.