Claiming insurers worked together to strong-arm residents into low-ball settlements on their post-hurricanes Katrina and Rita claims, Louisiana Attorney General Charles C. Foti Jr. has filed a lawsuit against the state's top homeowners insurance writers.

"By using the same or substantially similar damage-estimating software, defendants signal their acquiescence to low-balling claim payouts," says the lawsuit, filed in Civil District Court for the Parish of Orleans. "Those insurers who failed to participate in this conspiracy were economically coerced into compliance by competitive advantage gained in having excessive profits to leverage against their competitors."

The lawsuit, which names State Farm, Allstate, USAA Casualty, Farmers, Lafayette and Standard Fire insurance companies, seeks return of what the attorney general calls illegal profits, plus treble damages and injunction relief.

Foti's lawsuit claims the insurers continue to "manipulate commerce and restrain trade" by conspiring to "rig" the value of policyholders' claims. The companies violated the state's Monopolies Act, Foti says in the court documents.

State Farm spokesman Fraser Engerman said Foti's lawsuit was "misdirected." State Farm has settled 99% of its Katrina-related claims and paid out about $3 billion, Engerman said.

"State Farm has become the largest insurer in Louisiana and the U.S. through competition," Engerman said. "Any suggestion that we follow what other companies are doing is wrong."

Mike Siemienas, spokesman for Allstate, said the complaint is a "hodgepodge of recycled and unfounded allegations" and the insurer will "vigorously fight" the allegations.

As others have before him, Foti points to the commonly referred to McKinsey documents -- a report from consulting firm McKinsey & Co. -- to explain what he calls a conscious effort on the part of insurance industry to edit engineering reports and delay payments. Foti calls the McKinsey firm the "architects" of this alleged movement. The process, according to Foti, is commonly called, "deny, delay, defend."

McKinsey is named a defendant in the lawsuit, as is the Insurance Services Office Inc. of New Jersey, which it blames for providing computer programs used by the industry to adjust claims, says Foti.

Engerman said the company occasionally uses outside consulting firms to help with efficiency but advice from these firms is not used in policy.

"We strive for customer service," said Engerman, who added the company has received fewer complaints per 1,000 claims than any other insurer in the state.

In 2006, the top writers of homeowners multiperil in Louisiana, according to A.M. Best Co. state/line product information based on direct premiums written, were: State Farm Group, with a 32.6% market share; Allstate Insurance Group, with 22.9%; Southern Farm Bureau Group, with 7.3%; Farmers Insurance Group, with 5.2%; and Liberty Mutual Insurance Cos., with 3.8%.

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