Can someone in Dallas, Fort Worth, Grand Prairie, Arlington, Mansfield, Granbury, or anywhere else in Texas sue their insurance company when their insurance company is cheating them by charging excessive fees?
According to an article written by Tiffany Hsu and Marc Lifsher, reporters for the Los Angeles Times, that is exactly what some customers of Farmers Group did. The article is titled, “Farmers Group agrees to pay $455 million to settle policyholder suit.”
This article tells us about a class action lawsuit which accused a Los Angeles based insurance management firm of charging excessive fees to customers. Farmers insist the lawsuit is without merit but they agreed to settle the lawsuit anyway.
The October 8, 2010, article tells us that Farmers Group, Inc., and its Swiss parent agreed to pay $455 million to 13 million current and former policyholders to settle a 2003 lawsuit that accused them of charging excessive fees to customers.
If the settlement is approved by the Los Angeles County Superior Court judge, it would resolve all claims dating back to 1999. Payments to people who purchased Farmers home, automobile, personal liability amd commercial property coverage are expected to average $35, but individual settlements could vary considerably, according to representatives of Farmers Group.
Don’t jump on the plaintiffs lawyers too much but it appears they will be paid as much as $90 million dollars. Keep in mind that they are representing 13 million clients. This is a about $7 per client.
Farmers and Zurich Financial Services Group continue to assert that there is no basis for “the plaintiffs’ claims regarding the management services fees Farmers charged.” However according to Farmers chief executive, the company is choosing to settle rather than prolong the uncertainty and cost of a legal battle that has already lasted seven years.
Farmers is the third largest personal lines insurance company in the United States.
Another interesting figure at issue in this case is the number $1.5 billion. In the year 2000 alone, that is the amount of money Farmers collected as a percentage of premiums paid to the exchanges and passed along to Farmers Group.
In the lawsuit Farmers is also accused of breaching its legal duty as well as committing fraud and engaging in unfair business practices.
According to the article, it appears the agreement between Farmers and Zurich “is a sweetheart deal where they pass big amounts of money around in the form of management fees paid by the consumer.”
The article tells us that the lawyers for the policyholders say the settlement is “very good for policyholders,” and will help Farmers give fair premiums.
Zurich is reported to say it will cut their third-quarter earnings by $295 million.
The advantage of class action lawsuits is it allows a situation where someone is cheated out of an amount of money that is relatively small (in this case $35) to get justice. Otherwise the costs and time involved in pursueing the claim would not be justified. In a class action lawuit the individual participants are not required to actually participate in any way other than signing some papers and maybe providing some records.
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