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Because of the articles at my headline news Web page, my insurance company of 40 years, USAA, refused to sell me umbrella liability insurance or homeowners insurance. Ironically, USAA was started by military officers because they were denied car insurance by regular car insurance companies. I was urged to join USAA when I was a senior at West Point and I did. I was urged to buy the new liability insurance in question by our USAA financial planner. Neither homeowners insurance nor umbrella liability insurance covers business claims. USAA says with regard to the homeowners,

This action was taken due to the increased liability exposure presented by your in-home publication endeavors.

I have had a home office for the entire 40 years that I have been a USAA member. I have been writing for publication out of my home office since 1976—32 years ago.

In a call, a USAA representative said the cancellation was because of my headline news page. When I pointed out that neither homeowners insurance nor umbrella liability covered business activities, she said that the headline news page “blurred the line between business and personal.”

My son speculated that the USAA executive who decided to cancel and refuse to offer was probably an Obama supporter. I would have thought a McCain supporter would be more likely. McCain was in the military. Or it could have been a Hillary supporter since I criticized all three of them. If it was any of the three, USAA has inappropriately put itself in the business of telling its members how to vote or comment upon the political debates of the day.

Another reader speculated that my criticism of the U.S. military and calls for reform of it are the reason. It would be a sad day if an insurance company that specializes in military personnel opposes any of its members criticizing or calling for reform of the military. If not us, who?

Here is a letter I wrote to Josue Robles,the CEO of USAA

John T. Reed
John T. Reed Publishing
342 Bryan Drive
Alamo, CA 94507

March 25, 2008

General Joseph Robles
9800 Fredericksburg Road
San Antonio, TX 78288


Dear General Robles:

I had what I thought was an odd and disturbing discussion with some of your employees today.

• I have been a USAA member since I was a senior at West Point 40 years ago. My wife and sons Dan, Steve, and Mike are also members.
• On 3/24/08, my wife and I had a hour-long session with your financial planner [redacted]. He said we should [purchase] umbrella liability insurance coverage [details and reasons redacted]. For that purpose, he put a liability underwriter on the phone with us.
• On that same day, my wife decided to switch our homeowners insurance to USAA in spite of the fact that it was more expensive for less coverage than AAA because she thinks USAA is a great company.
• Today, 3/25/08, a woman called to tell me that USAA refuses to sell me either homeowners insurance or umbrella liability insurance because of the CONTENT of the headline news articles at my Web site

I suggest that USAA revert to underwriting based on objective criteria like liability claims history rather than subjective criteria like whether a USAA middle manager finds my writing acceptable.

I do not think the VP who made this decision about covering me thought through the implications. His action suggests that I could get approval for the policies in question if I remove from my Web site all words and phrases not approved of by the head USAA censor.

If his decision is, indeed, USAA policy, it suggests that USAA needs to issue the following public statement in USAA magazine and/or at the USAA Web site:

Although many, if not most, USAA members have risked their lives for America’s freedoms, and USAA has proudly celebrated those members’ efforts to defend freedom in USAA magazine, USAA is displeased by members who actually try to exercise their freedoms of speech or the press and may cancel your homeowners and umbrella liability policies if you publicly say things that USAA does not approve of. While USAA members have risked and lost their lives defending those freedoms, USAA itself will not tolerate even the remotest possibility that it may have to defend a member for exercising those freedoms.

The VP’s decision also implies that all USAA members should be warned against either becoming prominent or speaking or writing publicly. This would appear to cover all prominent USAA members like David Petraeus, Al Haig, Norman Schwarzkopf, Wes Clark, Oliver North, and so forth. It is my impression that these members have displeased large numbers of people by various things they have said. Also, less prominent USAA members should be admonished to avoid statements or activities that might displease others like writing letters to the editor, posting comments on the Internet, having a blog or Web site, running for public office, serving on homeowners association boards, writing op-ed pieces for publication, writing books or articles, umpiring or coaching youth sports, and other public expressions or actions that may displease anyone.

However, it seems to me that USAA has among its members, or claims to, a disproportionate number of leaders. Leaders, by definition, come in contact with extraordinary numbers of people and take positions, either by statements or by actions, that displease many of them. That being the case, a policy of rejecting homeowners and umbrella liability insurance for members who act or speak publicly mocks the very idea of who is allowed to become a USAA member.

Thank you,

John T. Reed,
925-820-7262, fax 925-820-1259

Robles’ response to my letter? Nothing. A woman from USAA Member Relations left a message on my answering machine. I returned her call twice and left two messages saying so on her voice mail. She never called me back.

In an unsigned letter dated 4/3/08, USAA said,

At this time, we are unable to honor your request because of the increased exposure presented by your publication endeavors.

It also said “You can request more information.”

I have.

Very simply, it seems to me that either USAA needs to reverse this decision or cite the pertinent objective criteria based strictly on sound insurance principles. Furthermore, the decision to reject my application should be made exactly the same with regard to all of the other past, current 6.5 million, and future USAA members who are similarly situated, that is, have a home office and write or otherwise comment publicly on matters of public interest. I suspect that I am the only one who has been treated this way by USAA and that the decision was subjective and based on nothing but my failure to conform to the political views of someone at USAA.

Here is the letter I received from USAA on 4/26/08:

April 18, 2008

Dear Mr. Reed:

Your letter to General Robles has been referred to me for review and response. Thank you for taking time to write. Please accept my apologies for any misunderstanding regarding the decision four our declination of your requested coverage. Your disappointment with our decision in understandable.

Declining a member’s request for coverage is difficult, and the decision is never made arbitrarily. Prudent underwriting often requires judgment-based decisions that may adversely affect an individual member, but which we believe serves the best interests of the Association as a whole.

USAA provides personal lines insurance to members with acceptable risks. Due to the level of increased risk, USAA does not provide a homeowners or an umbrella liability policy when there is a pending lawsuit. In addition, we believe your business and personal opinion publications present a higher degree of exposure for future lawsuits, similar to the lawsuit that was pending when you requested coverage. Thus, due to the potential exposure, it was decided to not offer the requested coverage for you.

I understand this was not the decision you were seeking. However, our General Agency may be able to assist you in finding coverage through other companies that specialize in underwriting broader risk coverage. You may reach them by calling [redacted].

I appreciate the opportunity to explain our position and hope that our explanation was helpful in understanding our decision. If you have further questions involving this matter, please contact [redacted—the woman who did not respond to my two prior voice mails to her] of our Member Relations staff at xxx-xxx-xxxx.


Russell Powers

Senior Vice President

USAA Property and Casualty Alternative Markets

And here is the letter I sent back to him:

Russell Powers
9800 Fredericksburg Road
San Antonio, TX 78288


Dear Mr. Powers:

Thank you for your letter of 4/18/08 regarding why I was turned down for umbrella liability insurance and why my homeowners insurance was cancelled.
1. Your statement that I have a pending lawsuit is false. As I told your agent, the suit was settled on 7/5/05 and was later dismissed by the court with prejudice when my opponent failed to submit a promised stipulation.
2. You offer no business insurance, and I did not apply to you for any business insurance, so my business is none of your business. No insurer has ever paid a claim on a homeowners or umbrella liability policy related to my business in the 40 years I have been buying such insurance.
3. The personal opinions of USAA members are also none of your business. Illegal activity by a member, like running a crack lab in his house, would be pertinent to writing homeowners insurance coverage, but not the legal expression of opinions. Expression of opinion in the U.S. is protected by the First Amendment and therefore cannot be the subject of a lawsuit. Any lawsuit filed against any USAA member or any other U.S. resident based on his or her opinions would immediately be dismissed for “failure to state a claim.” [Federal Rule of Civil Procedure 12(b)(6)]
4. I was offered and requested an explanation and a look at the information in my USAA file about me. Instead of an explanation, you simply restate that USAA will not write the insurance in question because of my Web site. Your letter neither mentions nor includes the promised information from my file.
5. To the extent that your rejection of my application for insurance was based on a “pending lawsuit,” the decision not to cover me must be reversed since there never was any pending lawsuit during the application period.
6. To the extent that the coverage was rejected by you due to fear of future lawsuits regarding my opinions, it must be reversed because such suits are a legal impossibility under well-settled U.S. law.
7. To the extent that the coverage was rejected by you due to my business, it must be reversed because your policy excludes business activities from coverage and I accept that exclusion.
8. In the absence of a reversal of the decision, please send me the explicit, written USAA underwriting criteria under which I and all similarly situated USAA members have been denied homeowners and umbrella liability coverage in the past or will be in the future. In other words, I want to see the written policy that was in existence at the time of my application that the decision makers were following when they concluded that the USAA underwriting criteria require that I be rejected.
9. Please send me the USAA file information about me that I was promised in the letter from you that I attached to my letter to Robles.

Thank you,

John T. Reed

No such policy
Basically, USAA insists they cannot send me the policy or guidelines that their executive was relying on when he cancelled my homeowners insurance and refused to quote on umbrella liability because they have no such policy or guidelines.

What do you suppose are the chances that a company as big as USAA—9.4 million members—has no policy or guidelines on whom to write homeowners and umbrella liability insurance on? If that is the case, the training of new underwriters (insurance decision makers) would go like this:

USAA Executive: Welcome to USAA. Your job is to decide which homeowners and umbrella liability insurance policies to cancel or refuse to write. Good luck.

New USAA employee: Excuse me. Is there are rule book or standards or policy on whom we approve or disapprove?

USAA Executive: Nope. Just use your own judgment.

New USAA employee: But I’ve never worked in insurance before. I majored in art history in college. My only other experience was teaching elementary school.

USAA executive: Don’t worry. You’ll figure it out.

Probable policy
Here is what seems to me to be a more likely explanation. Some empty suit at USAA turned down my application and cancelled my homeowners insurance because one of my Web articles angered him personally. It gored his ox. So he canceled and rejected me as part of a personal vendetta on his part to get back at me for something I said. When other executives found out, they figured better to back him up than to admit what he did.

Most likely, there is a policy about whom to write homeowners and umbrella liability on at USAA and every other insurance company. It probably says something like this.

Reject applicants against whom nonfrivolous lawsuits have been filed in the last five years, litigious applicants, and applicants whose occupation is known to trigger lawsuits that might be covered by our liability insurance.

Claims history
Indeed, USAA did ask me if I had been involved in litigation in the last five years. I said I had, but that the plaintiff withdrew one set of suits and the rest were dismissed by the court with prejudice. I also told them that the litigation in question had been filed in 2002, more than five years ago, and ended in 2005, more than three years ago, and that it would not have been covered by USAA had they been my insurer at the time because it was business related, not home or personal related. I also told them that no insurance company paid any claims related to that litigation. I have long had both homeowners and umbrella liability with other companies.

I think insurance companies should look into the claims history of any applicant. But when they find no claims or few claims, they ought to approve the insurance.

Other USAA members who piss people off
USAA insures U.S. current and former military non-commissioned and commissioned officers and civilian equivalents like state department presidential employees. Accordingly, I conclude that they insure all sorts of people who are famous and piss some people off. Here is a partial list of prominent, controversial people whom I expect are almost certainly insured by USAA:

Retired General Wesley Clark
Retired General and former Secretary of State Al Haig
Presidential Candidate John McCain
Retired Lieutenant Colonel Oliver North
Former Secretary of Defense Donald Rumsfeld
Former ace fighter pilot and former Congressman Randal “Duke” Cunningham who is now in prison for pleading guilty to accepting bribes, conspiracy, mail fraud, wire fraud, and tax evasion
“Chainsaw” Al Dunlap, a West Point graduate famous for firing thousands of employees when he took over Scott Paper and Crown-Zellerbach, later fired by Sunbeam he paid $15 million to settle a shareholder suit against him
Congressman Jack Murtha
President George W. Bush
Senator John Kerry
All of the officer members of Swiftboat Veterans For Truth
The members of West Point Graduates Against the War

I could go on, but you get the idea. These guys are tons more famous than I. They piss people off by the tens of millions because of appearances on TV and participation in national politics. Has USAA canceled their homeowners insurance and rejected all of them for umbrella liability policies? I would be surprised if they did.

Alcohol, drugs
Then there is alcohol. I have never had a drink of alcohol in my life—because my father was a drunk. Who is more likely to trigger a lawsuit, a homeowner or driver who drinks alcohol regularly, or a teetotaler? I expect that USAA insures at least five million alcohol drinkers and I have trouble imagining that none of them ever drank too much. I have never used any illegal drugs. Never even experimented with marijuana like almost all my baby boomer peers. I didn’t even exhale. How many USAA members have always been drug and alcohol free? Aren’t those who are less likely to get sued? There must be actuarial data on that.

The umbrella liability insurance that they rejected me for is an adjunct to car and homeowners liability coverages. It is to get more coverage than the max those types of policies offer.

I have never expressed any of my opinions on my car. But I have seen many others do so with bumper stickers and such. Career military people generally do not. It would violate their code of obsequiousness. But I would not be surprised if retired military or other non-active duty USAA members have such stickers. They will not be sued for their opinions, but their cars may be keyed as a result of those stickers—at USAA’s expense after the deductible. Has USAA prohibited insuring or cancelled insurance on members with political bumper stickers? Not that I am aware of.

Also, since I have been a member of USAA for 45 years, they have a substantial history on me including my propensity, if any, to trigger liability claims for car insurance and, I believe, prior homeowners policies. I do not know how my claims history compares, but I expect I am one of the best. For example, I have only gotten one ticket for a moving traffic violation in my whole life (speeding), took a drivers class, and thereby got it removed from my record. I have lived in the same house, which we had built, for 30 years. I have been married once for 38 years and counting. I am, figuratively speaking, an Eagle Scout. Exactly when is my propensity to trigger excess insurance claims going to emerge if not in 45 years?

One other thing: USAA says they rejected me because of my headline news Web articles. I have never even received a lawsuit threat pertaining to those articles. Do you know what the most frequent comment I do get about those pages is?

You should run for president.

I have no plans to do that. For one thing, I would have trouble carrying the precincts where the USAA executives live in San Antonio.

At no time during the difficulties with USAA described above have I been without the insurance coverage in question. They are not the only insurance company in America, just the only one I know of that bases insurance decisions on the personal opinions of empty suit executives.

We switched to another insurance company and saved almost $1,000 a year

Later in 2008, my wife and I switched our car insurance away from USAA to a new company. Although USAA is the cheapest car insurance company and were cheaper than the company to which we switched, we still saved about $900 per year. How so?

When you combine car, home, and umbrella liability to one insurance company, they can be more competitive on the overall quote. As I said, umbrella liability insurance is really more or less an adjunct to car and home insurance. Our new insurer charges about $900 less for car and homeowners combined than USAA charged us. Plus the other company provides more than the amount of umbrella liability coverage USAA refused to even quote on.

In all, USAA lost about $10,000 per year in premiums from us as a result of their decision to cancel our homeowners insurance and to refuse to write umbrella liability. I urge other USAA members to get quotes form other companies on the combination of car, home, and umbrella liability. Because the three are related, trying to get those coverages from two or three different companies is not optimal.

We also had USAA car loans, although the last loan we got included a stunt we did not appreciate. I bought a new Lexus. USAA agreed to give us a car loan by phone on the day we bought it. But when the papers arrived for us to sign, they gave USAA the right to a second mortgage on our home. Say what!? We called and asked, in a nice way, “What the hell is this?” USAA had never done that to us before on other car loans. They said it was a new policy. “And keeping it secret and burying it in the fine print is also a new way USAA is doing business? That’s not the USAA we knew in the past.”

They agreed to remove the clause.

I got an email from a woman who said she knew a woman who worked for USAA and she said they used to always be on her about customer service. But more recently, they were pressuring her to cross sell. I have not experienced that, but I am getting to the point where I am less skeptical about USAA doing such a thing than I would have been in the past.

Shopping around to help USAA

One final note. I discovered a rub mark on my front bumper a year or so ago. It was no big deal, but I wanted to get it fixed. I stopped at a body shop and got an estimate. About $4,000. “Jesus H. Christ!” I thought. Although I was covered by USAA then, and they, not I, would be paying for all but $500 of it, I thought it was too much. USAA had cultivated a we-are-family atmosphere throughout our association with them up til then. “Once a member always a member” and all that.

Later, my son got some work done on his car at a less fancy body shop. I asked them for a quote on the same rub damage on my car. About $1,200. I went ahead and had it done. USAA paid all but the $500 deductible.

I am no longer with USAA for car insurance, but if I was, I would not bother shopping around to get them a better price on body damage. Before you do such favors for them, you might want to read the fine print in the contracts they have recently asked you to sign and get competing quotes or home, umbrella liability, and combinations of those and umbrella liability. USAA may no longer be the same company they used to be and that you thought they still were.

A duplicate of my statement was sent to Burdette Law Firm

The 4/30/09 USAA statement of my SEP contains a note that “A duplicate of this statement has been sent to Burdette Law Firm.” I asked my wife who the Burdette Law Firm was. She never heard of them. Me neither. I called USAA. They said it’s a law firm in Germantown, TN. I never heard of Germantown, TN or any firm there. I have no law or accounting firm anywhere. I only use lawyers and accountants on an ad hoc basis. I have never had any financial statement of mine sent to any lawyer or accountant by my bank or securities broker.

USAA said they will stop sending copies of my statements to Burdette Law Firm. They will also research how they came to send one there to begin with. They might also want to research why the Burdette Law Firm did not call the USAA 800-number to ask why they received my statement.

On a subsequent call, USAA said they were unable to figure out why the Burdette Law Firm got my statement and speculated that a clerk at USAA may have transpopsed a digit in an account number for another client who did want their statement to go to the Burdette Law Firm.

Is this related to my headline news Web articles? I have no idea what it’s related to. Neither did the USAA clerk to whom I reported it. She said it’s often done by law when the USAA account holder is a registered securities dealer. I am not now and never have been a registered securities dealer.

I guess I should be grateful they did not say, “The balance of this account has been sent to the Burdette Law Firm.”

If any reader knows why the Burdette Law Firm might want my statements, I would be interested in hearing about it.

USAA charged triple the Vanguard maximum

In May 2010, I directed both USAA and Vanguard to sell TIPs bonds in SEP IRAs they held for me. Vanguard charged me $50, their minimum for the amount of TIPs in question. USAA charged me $375 for selling a larger amount of TIPs. But Vanguard said $50 was their minimum and $125 was their maximum, regardless of the amount. In other words, USAA’s commission for selling some TIPs was three times the maximum ever charged by Vanguard regardless of the amount sold. I was surprised by this because USAA has an image of being cheaper and better in terms of service than its competitors. So if you are considering USAA or a competitor, you need to read the fine print and ask about all the charges you may incur throughout the relationship. One of the reasons I chose USAA instead of Vanguard initially was their management fee for an S&P 500 index fund was .19% compared to Vanguard’s .20%. Apparently, you need to also ask about the commissions for buying and selling securties.

John T. Reed