From Grand Prairie, Arlington, Fort Worth, Dallas, Hurst, Euless, Bedford, Pantego, Dalworthington Gardens, Mansfield, Crowley, to all over Texas, people who have their insurance with State Farm Insurance should find this interesting.
The Houston Chronicle ran a story on April 11, 2011, by writer Terrence Stutz. The title of the article is, “State Farm Is Told To Pay $350 Million.”
The article tells us that State District Judge Tim Sulak found that state Commissioner Mike Geeslin acted properly when he ordered State Farm Lloyd’s to reimburse an estimated 1.2 million customers for overcharges as well as penalty interest going back to 2003. The amount owed is nearly $350 million.
Judge Sulak made a ruling after listening to two hours of arguements from attorneys from State Farm, the Texas Department of Insurance and the Texas Office of Public Insurance Counsel.
State Farm has indicated it intends to appeal in this decade long debate going on in the state’s insurance market.
The Insurance Department and the state public insurance counsel, who represents consumer’s interests, say that State Farm continued to overcharge customers for several years despite warnings from regulators that rates were too high. Public Insurance Counsel argued that State Farm should be on the hook for nearly $1 billion.
Of course, State Farm argues that they owe nothing and that their charges were competitive charges. The dispute is over premiums charged for homeowners coverage between 2003 and 2008.
The commissioner’s order for refunds was handed down in November 2009. In it, State Farm is called to either issue refund checks or provide a credit on policy renewals. Refunds for longtime customers should range between $200 and $300.
Geeslin welcomed the decision after this long battle. Of course it may not be over.
“Simply explained, the 2009 order is a function of law and evidence, and the court agreed that there was substantial evidence in support of its findings.”
During arguements in front of the judge, State Farm attorney, Susan Conway, said the refund ordered by Geeslin would wipe out a third of State Farm Lloyd’s capital and threaten the finances of the state’s largest property insurer.
“This refund would be disastrous and irresponsible,” she told the judge. “The commissioner failed to consider the impact the refunds would have on the financial stability of State Farm Lloyd’s.”
A new report from the Texas Department of Insurance indicates that State Farm had a very profitable year in 2010, after paying out just 52 percent of its premiums to cover property losses. The 52 percent “loss ratio” was close to the state average of 48.4 percent for the 20 largest companies and significantly better that the 60 percent loss ratio that is considered a benchmark for profitability in Texas.
It is noteworthy to realize that State Farm Lloyd’s collected nearly $1.7 billion in homeowners premiums in Texas last year.
State Farm’s attorney suggested that the commissioner levied about $53 million in penalty interest against State Farm because it appealed his rate decisions – including his initial finding that State Farm was overcharging customers by 12 percent.
The commissioner that State Farm had a choice in the matter – to reduce rates as the commissioner ordered or continue to charge excessive rates.
A leading consumer group, Texas Watch, said the judge’s ruling in the nearly 8 year old legal battle points to one conclusion: State Farm needs to pay up.
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