July 2008 Archives

There is no doubt the "good hands" people have been using them to pick Californian pockets.

Allstate Insurance Company was ordered to reduce their homeowner's rates by $255 million statewide by the California Department of Insurance.  Now the question remains whether it will issue the refunds owed their customers.

More than 850,000 customers will see their insurance rates reduced by about $250 as a result of the order.  The order represents a 28.5% reduction in the cost of homeowner's insurance premiums.  Incredulously, Allstate initially sought a 9.3% increase in premiums.

This is the second time in less than a year that Allstate was found to be overcharging its customers.  In March, the Department of Insurance ordered the company to reduce its auto rates by 15.9%, saving Allstate auto customers $124 per car.

The real story is that Allstate has taken its sweet time in reducing these excessive rates.   Allstate initially sued the Department of Insurance for reducing their rates, but later dropped its appeal.

The acrimony between Allstate and the California Department of Insurance has been going on for three years.  Lt. Governor, and former Insurance Commissioner John Garamendi, rightfully called for the company to issue refunds to consumers for the last three years.  That's how long Allstate has been overcharging customers while it fought the Department.

"The company has pocketed far more of the policyholders' money than was warranted," Garmendi said. "But, frankly, they must in my view provide a rebate for the three years in which they charged an illegal amount."

Now it will be up to a Republican, Insurance Commissioner Steve Poizner, to see those past illicit gains are not kept by the rogue company and that refunds are issued in a timely manner to the victims of Allstates' excesses.

But the real heroes of this story are the folks at Consumer Watchdog, a group led by Harvey Rosenfield, Doug Heller, Jamie Court and Pam Pressley.    Rosenfield, especially, deserves credit for crafting Proposition 103.

Proposition 103 provided for an elected Insurance Commissioner in the State of California.  More importantly, it gave the Commissioner the power to lower rates when they were excessive.

So far, Proposition 103 has saved California Consumers over $62 Billion.  In addition, Consumer Watchdog and their folks will take the lead in holding the current Commissioner accountable for making sure that Allstate refunds its illegal overcharges.

This should not be difficult.  The current Republican Commissioner has been outspoken in his desire to seek refunds from the company and he has seen, first hand, the arrogance and intransigence Allstate has demonstrated since he took office.

Further, Consumer Watchdog is already leading the charge to get these refunds for victims of Allstate.  Initially, the group had put the issue of refunds on hold until the California Department of Insurance determined the excessive rate issue.   Now they are free to pursue claims against the company because of the provisions of Proposition 103.

Allstate is sure to fight back.  They take a no-hold barred approach to their fight.  Earlier this year Allstate made good on its pledge to pull out of the property insurance business in California altogether.  A move that was designed to scare Californians into meeting Allstate's demand for excessive rates.

But the numbers don't lie.  In 2006 Allstate took in over $5 billion.  The total shareholder return from 1994-2006 was a whopping 590%.   It is noteworthy that Allstate can give-up the California market and still make billions of dollars.

"Allstate boasted of record profits to Wall Street, then came to California claiming it's not making enough money in order to charge its policyholders higher premiums. Proposition 103's prohibition on excessive rates protected California consumers with home and auto insurance policies from Allstate's price gouging and saved them over half a billion dollars this year," said Pamela Pressley, litigation director at Consumer Watchdog.

But Allstate, incredulously,  still claims increases are necessary.   And there are troubling signs at the Department of Insurance that the current Commissioner is tacking right in an effort to please his Republican breathren in order to position himself for Governor. 

Poizner, who came to the office as a moderate and promised to run the department in a nonpartisan manner, recently has looked increasingly like the old Republican model --  including taking a position as Co-chair of the John McCain Campaign Committee and putting part of  his vast personal fortune into rightwing Republican registration efforts.

But the most disturbing signs of trouble come in the recent reorganization of his executive staff, as two major consumer advocates have left the department.   Moreover, there are troubling signs that he has left the day to day operations in the hands of a longtime Republican idealogue, Jim Richardson, who is the former chief of staff to archconservative and former Republican minority leader Jim Brulte, while Poizner campaigns for Governor.

But one can only assess a politician's record by results and, so far, Poizner's actions in recovering excessive claims from thieves like Allstate have been good, but it is not over by a longshot.

So we need to be vigilant in helping Consumer Watchdog in its quest to get the current Commissioner to fulfill the promises of his campaign.  If he does so, he just might become Governor.

In the meantime, next time you see the your friends with the "good hands"--keep yours in your pocket, lest they pick them clean again.

Onward,

Richard Alexander

Trust-busting president Teddy Roosevelt railed against the fat cats of his time. So did Louisiana Governor and U.S. Senator Huey Long, as flawed as he was. We need people like that in office today, because the fat cats are still fat and getting fatter - often at the expense of the handicapped, the mentally retarded, children and others who are dispossessed.

Our campaign system is skewed toward the wealthy. Corporate money flows into the election coffers of politicians, like wine into a wino. They're drunk on it. And while they insist it doesn't affect their decisions, it does buy a donor access. And that can often lead to incredible government subsidies for their interests.

A public official always will meet with someone who kept his or her political career alive. It's unfair to the rest of us.

When was the last time you heard of a working class mother holding a gala fundraiser for a candidate?  Right. Never. Corporations that get huge tax breaks from their Capitol Hill contacts could care less about her.

They count on infusions of money, the life blood of politics. And they return the favor 10-fold or more with subsidies for corporations. That is not a fair society. That is a recipe for upheaval.

It's government for sale. Step right up and write a check. Californians made a damaging, self-defeating mistake in 2006 when they voted down Proposition 86.   

On May 18, 2008, Brian Riedl wrote in a scathing San Jose Mercury News opinion piece that the latest farm bill would force Americans to pay billions of dollars in subsidies to millionaire agribusinesses. As he said, farm subsidies have long been America's largest corporate welfare program.

These subsidies aren't for the dying breed of small mom-and-pop farmers, the hardworking people who get up at dawn to milk the cows, plow the fields and then go home weary only to rise again.

Richard Holober, Executive director of the Consumer Federation of California, writes that since 2004, Chevron gave $3 million in political contributions in California. "For a company that made a record $14 billion in profits last year,'' he wrote, "it was money well spent." Despite public indignation, big oil crushed a proposed state tax on windfall oil profits."

The timeworn adage is that "money is the mother's milk of politics." And so it is. But whose money? And to what end?

Politicians need money to get their messages out. But from whom?  Campaign finance reform is long overdue. Let the money be from us, not from corporations. Let our elected representatives be beholden to the people, and the people only. 

We made a big mistake in the U.S. treating corporations as citizens, with the rights of people.  The Founders of this country never intended that.  Corporations do not have inalienable rights.

Onward,

Richard Alexander

If you're feeling down, or if you're a woman with difficult menstrual cycles, or if you can't concentrate, Paxil will help you feel better and focus more clearly. That's the marketing message for the highly prescribed and hugely profitable SSRI (selective serotonin reuptake inhibitor) from GlaxoSmithKline.

What the marketing hype tries to hide is that Paxil poses dangers for people of all ages, including children in the womb. Studies have linked Paxil to a 100% higher incidence of birth defects in children whose mothers used Paxil in the first trimester of their pregnancies than in children whose mothers did not use the drug.  One of the common birth defects is a condition called persistent pulmonary hypertension (PPHN). Babies with PPHN have difficulty breathing, and many of them require significant medical care.

Other problems for children born to women who have taken Paxil in their first trimester include heart malformations and cranial defects which result in an abnormally shaped skull.

Despite the marketing claims, evidence that Paxil actually does what the manufacturer promises is extremely sketchy, while evidence that Paxil causes harmful and potentially deadly side effects is strong. And, people trying to quit the drug often find themselves painfully addicted.

Recently, Paxil was the subject of one of the most damning reports imaginable. In Paxil Study 329, researchers reached this amazing conclusion:

"There was no significant efficacy difference between paroxetine (Paxil) and placebo on the two primary outcomes or six secondary outcomes in the original protocol. At least 19 additional outcomes were tested. Study 329 was positive on 4 of 27 known outcomes (15%). There was a significantly higher rate of SAEs with paroxetine than with placebo. Consequently, study 329 was negative for efficacy and positive for harm.

Paxil's effects have been so bad for so many people that an online support group has developed.  The site even offers a free E-book called Paxil Withdrawal Guide.

In a 1999 case Paxil was implicated in causing a manic-depressive to become psychotic and to murder his wife.  

With all the harm that Paxil does, it's logical to ask why it's still on the market, and the easy answer is money. Paxil makes a lot of it for GSK, and the profit margin is absolutely staggering.

In 2005, a study found that the cost of the generic active ingredient for 100 tablets of Paxil was $7.60, while the price to the consumer was $220.27.

Businesses will make plenty of donations to powerful people to protect a profit margin like that.

A more insightful answer to Paxil's continued existence is that the FDA, which is supposed to protect consumers against dangerous drugs, is more interested in protecting the profits of drug makers. One reason for that obvious betrayal of the public trust is that drug manufacturers provide at least half of the FDA's funding.

So, despite the lawsuits, the damaged babies, and the citizens groups, GSK is free to market Paxil aggressively as an elixir for just about anything that ails you. You can even go to GSK's Paxil website and self-diagnose yourself for Social Anxiety Disorder (and, of course, a trip to your doctor for a Paxil prescription).

GSK, and other drug manufacturers, make such massive profits that they're able to consider a $6.4 million lawsuit against them just another cost of doing business, like labor and raw materials. With their billions in profits, they can pay $6.4 million out of Petty Cash.

Drug companies must like lawsuits, or they wouldn't willfully endanger the consumers who support them. So don't be afraid to stand up for your rights if Paxil has harmed you or your baby.

Onward,

Richard Alexander

Losing your house in a fire is devastating, but having your Insurance Company renege on their promise to cover your loss is beyond the pale.   But that is exactly what is happening all over California as increasing firestorms destroy happy lives.

From Lake Tahoe to San Diego, from Santa Cruz to Malibu the insurance industry is ducking and weaving in an attempt to deny homeowners the full replacement value of their home.

It is these Insurers who set the replacement value of your home in the first place. 

The scam starts by insurance companies offering low premiums to homeowners as a marketing tool to get their business.  To do so, the agents and/or companies undervalue the cost of the dwelling.  Then, when the catastrophe hits, the company refuses to pay the full replacement value of the home, much to the surprise of the victimized homeowner.

A recent survey by United Policyholders found that 75% of homes were undervalued by an average of $240,000 in the recent fires in San Diego and San Bernardino Counties.  And only 46% of the victims had received offers eight months after the fire.

This is not a new problem.  Insurance companies have been trying to get away with this fraud for years.  

When Katrina hit New Orleans most, if not all, of the victims found they were underinsured.  Moreover, the insurance companies began to utilize the small print in their adhesive contracts to avoid paying claims.

An "adhesive" contract is one in which the terms are dictated by one side and are not the subject of mutual negotiation.  In other words, the companies "stick" you with their terms.

Fortunately the law is on the side of the victims. 

Gigantic State Farm was held liable for $2.5 million for its bad faith in handling the losses of its insured.  State Farm claimed that its contract provided protection against wind, but not water and it did not have to pay the homeowners claim.

A federal judge ruled that State Farm was liable for the damages and a jury awarded punitive damages to the victims for the bad faith actions of State Farm.

But was this insurance company contrite?  Did it do the right thing for other victims?

No.  Here is State Farm's response:

Robert Hartwig, chief economist for the Insurance Information Institute in New York, said before the jury announced its decision that a punitive damage award would be "distressing" for insurers. "It adds even more cost and more uncertainty to the other problems that already exist in the Mississippi homeowners insurance market," he said.

Note to Mr. Hartwig:  There is no uncertainty if you pay the rightful claims owed to people who acted in good faith.  Nonetheless State Farm continues to argue that the result of this case will make it harder for them to "settle" future claims.

State Farm customers should not be settling for anything less than what they are rightfully owed.

The actions of the Insurance Industry have been so heinous that it forced one former U.S. Senator to see the light.  Trent Lott a one-time political beneficiary of these companies lost his own house and vowed to fight the Industry to his dying day.  It is unfortunate that it took a personal calamity to change the Senator's views, but he joins the thousands of victims who must continue to fight their insurance company, even as much of their life remains in ruins.

There are several ways to get help.  The California Department of Insurance will help investigate disputes with the companies.    http://www.insurance.ca.gov/

Consumer Advocates such as United Policyholders http://unitedpolicyholders.org will advocate for consumers and have a wealth of information regarding how to deal with your insurance company. 

In addition, all consumers should research how different companies handle these catastrophes before buying insurance.  There are actually some companies who pay their claims in a timely manner.  You should probably avoid the mass advertisers who claim to be a "good neighbor" or will put you in "good hands."   

But the best way to fight these corporations is to have a strong advocate, your own personal lawyer to deal with these companies for you.   Victims should not have to fight for their own money.  The insurance industry is in a position of power and many victims walk away with less than their due, simply because the process seems hard.  And given the complete destruction of their lives many victims are often not mentally or physically able to take on their insurance company.

So, if you are ever the victim of a fire, fight back.  Don't get burned after the fire.  Hire qualified legal counsel and insure your rights are protected. 

As we know well, your insurance company is only a "good neighbor" if you never make a claim.

Onward,

Richard Alexander

It is unconscionable for the Mercury News to devote its editorial page to the mythology that citizens who sue wrongdoers who have ruined their lives should give up their rights to aid the economy.  

The Mercury is guilty of publishing the propaganda of Lawrence McQuillan, the darling of right-wing crazies, without a shred of fact or reality checking.  

Even in the opinion section of the newspaper, lying should be discouraged and certainly not perpetuated without an appropriate warning.  But, that's to be expected after the Mercury lost its corporate memory when it fired nearly all of its experienced writers and reformulated itself to compete with the National Enquirer in supermarket checkout lanes.

The Mercury op-ed throws around alleged statistics and studies that have absolutely no relevance to reality. 

Th3 Mercury's bogus views of our tort system fly in the face of the truth.   A report recently released by the Department of Justice's Bureau of Justice Statistics deflates the myths that so-called "tort reformers" use to condemn our civil justice system. 

But you wouldn't know that from reading the Mercury News.

The Mercury is right there with the Republican scream machine using tort reform to justify the criminal acts of corporate and government leaders.  What an embarrassing patsy.

If the Mercury truly wants to help the economy it can focus his attention on the corporate criminals that make daily headlines stealing with impunity from the American people. 

Tort reform is a "get-away-free" card for the most heinous criminals on our planet.  If a criminal steals a loaf of bread three times in the wrong way, he can get life.  Corporate criminals, abuse the public, steal millions and walk away with golden parachutes.

 And where is our government? 

Does anybody really believe the Food and Drug Administration will protect them?  We have salmonella from our tomatoes or peppers, mad cow disease from our cattle, and nobody knows what coming from China to poison our children.

But don't offend China.  As of December 2007, China's Treasury securities holdings were $406 billion, accounting for 17.2% of total foreign ownership of U.S. Treasury securities and making China the second largest foreign holder of U.S. Treasuries after Japan, according to China's Holdings of U.S. Securities: Implications for the U.S. Economy. CSR Report to Congress, February 28, 2008.

But what is especially galling about the Mercury's op-ed page is that it attempts to correlate tort reform with loss of jobs in California: "entrepreneurs opt for states with balanced tort systems that discourage excessive litigation . . . ."

That's not the law.  It doesn't work that way.

Anyone who puts his or her products into the stream of commerce is subject to being sued for a defective product in the state where it is sold.  Ford cannot mandate that you can only sue in Detroit for deaths or injuries caused by its outrageously defective Explorer in Colorado. 

Silicon Valley was built by entrepreneurs before corporate plans to deny citizens the right to sue ever existed.  The loss of business in California is not because of our litigious nature, it is because corporations would rather pay starvation wages by exporting production to China, Indonesia and Mexico, where environmental controls don't exist, unions do not advocate for safe working conditions, fair pay and an 8 hour day and the Occupational Safety & Health Administration does not exist.  

The Mercury even goes so far as to claim that Volkswagen, Hitler's favorite car company, did not market its three-wheeled green car that goes over 46 miles per gallon because of potential lawsuits. 

Obviously the Mercury has been living under a bushel basket.  

Since 1969 U.S. Federal Motor Safety Standards have mandated that gas tanks not leak in crashes, passenger compartments doe not crush in expected crashes and that roofs of passenger vehicles survive a rollover.  Many foreign cars cannot meet those standards. That is why, for example, you don't see new Peugeots on our roads.

By the way, a Prius gets 46 miles per gallon and it has air bags. 

We have seen the likes of the corporate criminals who say "greed is good."  They sell tobacco to drag our youth into the pit of cancer, paint their toys with lead, put asbestos in cribs, and formaldehyde in trailer homes. 

They would prefer that families devastated by these crimes have no recourse.  The tort system is the only chance for justice for many people. 

When O.J. Simpson killed is wife, it was the tort system that provided justice.  When a child suffered brain damage due to his mother being exposed to toxins, it was the tort system that provided justice.  When corporate criminals knowingly hurt other people, it is the tort system that provides condemns the wrongdoing and makes the bad buys pay.

Finally, the biggest and most positive changes in the health care industry are the result of the tort system.   The escalating cost of healthcare is not because of litigation, it is because of the enormous greed by insurance companies, HMOS, pharmaceutical companies and doctors.

Experts agree that our health care system is riddled with inefficiencies, excessive administrative expenses, inflated prices, poor management, and inappropriate care, waste and fraud. 

The next time the Mercury News gives up its opinion page to a one sided diatribe it should not refuse to print opposing views.

Onward,

Richard Alexander

Recently, you probably have received emails from a former Nigerian Counsel offering to split $100 million with you, if only you provided him with all of your personal information and kept the communication confidential.  An obvious scam.

A much more effective and more lucrative scam is to have a licensed Insurance Agent sell a real Insurance Annuity Contract to a person of advanced age, robbing them of their life savings--while the agent pockets a hefty commission and the insurance company reaps the financial huge benefits by never having to pay-off.

These contracts are designed to prey on vulnerable seniors who believe their Insurance Company would do them no harm.  The scam simply robs seniors and their heirs of their life savings.

Recently, you may have missed the $10 million Allianz Insurance Company was forced to pay in fines to the California Department of Insurance for bilking seniors.  An investigation by the Department of Insurance found that the Company had routinely sold annuity policies to seniors 85 years and older, effectively bilking them of their life savings.  

Allianz has been forced to pay fines in other states as well.  But the victims of this crime rarely report it and rarely recover their own losses.  Embarrassed they did not understand the terms of the contract after being pressured into signing it, many victims never come forward.

Allianz is not the only company doing this, just the most visible to date.  The problem is so prevalent the legislature set up a special fund for District Attorney's to use to prosecute these crimes.   The Life and Annuity Consumer Protection fund was created to incentivize District Attorneys to investigate and prosecute this "nonviolent" crime.  The program is paid for by tacking on an extra dollar to every annuity contract sold in the state, which then goes to a special fund.

In addition to the fines, Allianz as part of a settlement, must conduct a review of all those who were 65 years and older when they bought their contract.  Allianz must contact all those who are 76 years and older to make sure they understand their contract.  Allianz must amend their contract to make them more understandable.  Allianz must clearly point out the terms of bonuses being offered to their sale force and when they are paid.  Allianz must allow seniors impacted by their fraudulent techniques to request cancellation of their contracts.

These are not options, but mandates that Allianz must fulfill as a result of their conduct.

Allianz got off easy.  

Their profits more than compensate for their outrageous, deceptive and corrupt behavior. Companies like this should not be fined, but shut down.  Confiscate their book of business and distribute it to honest carriers.

Seniors and their families need to be the first line of defense.  The best way to protect consumers is through education and following some simple rules when buying an annuity contract.

Annuity contracts are never simple.  They are challenging documents that must be read and understood.   Seniors should never tie up money that they may need.  Food, housing, medicines should never be sacrificed for a promise to pay tomorrow.

Here is some important advice.

First, never sign anything you don't understand.  

Second, insist that a trusted friend or family member be with you during any presentation or signing. 

Third, never sign anything in front of an agent, make them leave the documents with you and allow yourself time to read and think about the product.  If it is a good deal today, it will be a good deal tomorrow. 

Obtain full disclosures of all surrender penalties and make sure everything is done in writing.

Finally, and most importantly, never believe that an Insurance Agent or Company is on your side.  They are paid for selling products.  If there is no sale, there is no commission.

For the most part, annuity contracts are bad deals for those of advanced age.  The numbers simply don't work out, and too often the victim and their heirs pay a hefty price.

If you find yourself a victim of this practice, report it immediately.  See an attorney, who is paid to fight for you and doesn't get paid unless you collect.

In the final analysis, it is your money.  Insurance companies doing what Allianz has done are one step removed from the ex-Nigerian Counsel who has been sending you email. 

Onward,