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Farmers vs. Allen Kerr.

For more than 30 years, Allen Kerr was one of Farmers Insurance Group's most productive agents in Arkansas.

That changed on Halloween 2011, when Farmers, of Grand Rapids, Michigan, terminated its relationship with Kerr and his Allen W. Kerr Insurance Agency Inc. of Little Rock.

Ultimately, Farmers would tell the Arkansas Insurance Department that the business relationship was severed by "mutual consent of the parties." But for more than a year, Farmers maintained that Kerr had willfully misrepresented risks in his commercial book of business, according to the case file obtained by Arkansas Business under the Freedom of Information Act.

"Allen Kerr was making misrepresentations on applications for insurance by misrepresenting the risk that was to be covered," Thomas Rogers of Austin, Texas, an attorney for Farmers, said in a Feb. 3, 2012, letter to the AID. "Farmers trusted this agency to provide truthful and accurate information on policy applications."

At the time, Kerr was a Republican member of the Arkansas House of Representatives. In January of this year, he was appointed by newly elected Gov. Asa Hutchinson to be commissioner of the Arkansas Insurance Department.

Kerr, 58, started his career and his agency in 1981, and for most of the next 30 years he was the top producer in a Farmers' district of 40 established agencies, according to Kerr's profile on the AID website.

Termination

The death of a drunk driver changed the relationship between Farmers and Kerr.

"This problem came to light after the host-of-liquor liability loss of over one million dollars on the bar which Allen Kerr had submitted as a fine dining restaurant on the policy application," Farmers' attorney said in a letter to the AID.

The name of the establishment was redacted in the file that Arkansas Business received, but it is believed to be Cregeen's Irish Pub, which has locations in North Little Rock and Jonesboro.

J.B. Williams, Cregeen's owner, said last week that he couldn't comment on the settlement, but he confirmed that Cregeen's was insured by Farmers when a driver who had been drinking at Cregeen's and another establishment in Jonesboro died in a wreck.

Kerr said last week that Cregeen's submitted a claim and Farmers wanted to dispute it.

Kerr wouldn't release details about the claim to Arkansas Business. But in a Sept. 8,2011, email included in the case file, Kerr told Charlie Snyder, then the state executive director for Farmers in Arkansas, that he did not intend to mislead the carrier about the nature of the business.

"The word 'Pub' does appear on the written and signed application, however, I took this as part of the theme of the restaurant and not that it was going to be a bar," Kerr wrote in the email.

A day later, Snyder asked his supervisor in Los Angeles for permission to terminate Kerr.

"Based on the information that I have reviewed, there is a trend of misrepresentations throughout his commercial book of business regarding business risk types, square footage, age of dwellings, and the type of construction and placement of coverage unacceptable to the Companies," Snyder wrote on Sept. 9, 2011.

Snyder also said he found 78 misrepresentations in 406 policies. Kerr's commercial policies "appear to be improperly rated versus what should have been charged. This would cause the company to be exposed to risks that we were not receiving the correct premium," Snyder wrote.

Termination of Kerr's employment for "willful misrepresentation that is material to the operation of the agency" was approved on Oct. 22,2011, and Snyder told Kerr on Oct. 31 that he was being fired for that reason.

But in an acknowledged error that would come back to haunt Farmers, the company notified the AID that Kerr was terminated because he "mishandled premiums belonging to the Company."

Aftermath

Kerr said last week that none of Farmers' allegations was true.

"I was a good agent," he said. And he said he wanted to see proof when he learned of the allegations.

"In the 31 years that I was with Farmers, there was never one dollar, not one penny ever missing," he said. "We kept extremely good records, and we had just been audited by the company, probably three months prior, and we had a glowing report, as we always had."

And he said a Farmers commercial manager would review policies like the one written on Cregeen's before it was accepted.

"We had everything sent to the company," Kerr said. "They did their loss control on it."

In fact, Kerr said, Farmers had multiple opportunities to make sure the Cregeen's policy was written correctly.

"The insurance company renewed that policy at least three times and had more than several opportunities to go out and take a look at it," Kerr said.

Still, Kerr said, he was shaken by the termination, which he blamed on Snyder.

"This is a company that you trusted and counted on for 31 years," he said. "You thought you could count on them."

Snyder, who has since retired, couldn't be reached for comment.

Investigation

After receiving Farmers' termination letter for Kerr--the one that misstated the reason for the termination--the AID opened an investigation and requested proof from Farmers about the allegations.

Within a month, Farmers realized its mistake and attempted to replace the first termination letter with a revised one that described Kerr's termination as "willful misrepresentation."

Farmers said it sent the replacement letter by FedEx on Nov. 28, 2011. The envelope arrived, but the AID said it was empty.

By the end of January 2012, the department was complaining that Farmers wasn't responding. And the focus of the investigation appeared to shift to Farmers.

"Based on Farmers' repeated failure to cooperate with the Department in this investigation, the Department is proceeding with an administrative proceeding of Farmers to determine whether there should be a fine, suspension or revocation of Farmer's [sic] Certificate of Authority," Associate Counsel Amanda Andrews emailed Little Rock attorney John Coulter.

Thomas Rogers, a corporate lawyer, took the case over from Coulter. Rogers agreed that Farmers made a mistake in the first termination notice but maintained in a Feb. 3, 2012, letter that Kerr was terminated for "willful misrepresentation."

Rogers listed more examples of what Farmers found troubling, including a used car lot that was described as an auto repair facility in the application Kerr submitted.

"There are at least nine risks which Allen Kerr placed with Farmers that do not qualify as acceptable business," Rogers wrote.

Rogers offered to show the results of its audit and investigation in confidence, but the case file Arkansas Business received doesn't indicate whether that happened.

Kerr told Arkansas Business that Rogers' descriptions weren't accurate and that the risks had been subjected to Farmers' underwriting and been approved by Farmers' commercial manager.

"You got to remember: This is a multibillion-dollar company," Kerr said. "They're just not going to let some agent run around out there throwing business in there and not checking on it."

Cleared

William Lacy, the AID's deputy commissioner and general counsel, ruled in favor of Kerr and closed the case on July 31, 2012.

Kerr, Lacy wrote, "has committed no violations of Arkansas law, nor has he violated his appointment agreement with Farmers, as he has done nothing to willfully misrepresent anything that would be detrimental to his Agency." Instead, Lacy suggested that the problem lay "with Farmers' own underwrites systems and procedures."

As the case was moving forward, Kerr said he contracted as an agent for other carriers. "I knew I would be exonerated," he said. "It never crossed my mind that we'd end up any other way, because we simply were good agents."

Kerr sold his agency in June 2013.

Another Case

Kerr's case was mentioned in a February 2013 order in which then-Insurance Commissioner Jay Bradford fined Farmers, but that order started with the May 2012 termination of another agent.

Farmers accused Eric Preyer of mishandling premiums, but the AID found that Farmers submitted no evidence to support the accusation.

The AID said Farmers was supposed to implement procedures "to avoid erroneous transmissions to the Department," but the Preyer case was evidence that it had not. As a result, the AID said it "expend[ed] extensive resources in investigating erroneous allegations against" Kerr and Preyer.

Farmers disagreed with the AID's findings and conclusion of law, but agreed to pay a $5,000 fine because it "wishes to enter into this Consent Order to avoid further proceedings in this matter."
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Title Annotation:Farmers Insurance Group
Author:Friedman, Mark
Publication:Arkansas Business
Date:Aug 10, 2015
Words:1410
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