Appeals Court in Texas Accepts State Farm Refunds Case

Dec 16, 2011

The following article was published in The Insurance Journal on December 16, 2011:

Appeals Court in Texas Accepts State Farm Refund Case

State Farm Insurance has asked an appeals court to throw out an order requiring the company to refund about $350 million to Texas customers.

A three-judge panel of the 3rd Court of Appeals in Austin took the case under advisement on Dec. 14.

A lower court in April ruled that then-Insurance Commissioner Mike Geeslin was within his authority to order the refund. The case involves about 1.2 million policyholders and what regulators say were excessive premiums between 2003 and 2008.

The Dallas Morning News reports a company attorney says the facts do not support refunds. Pete Schenkken also says the payout would threaten the ability of State Farm Lloyds to continue writing homeowners policies in Texas.

Lawyers for the state say customers who paid rates that were too high deserve refunds.

State Farm recently was allowed by Texas regulators to raise homeowners rates. Commissioner Elanor Kitzman OK’d State Farm to increase both rates and deductibles. State Farm sought the changes in September.

The new minimum deductible is 1 percent of a home’s insured value, instead of a flat rate. Critics say a higher minimum deductible means less coverage.

Kitzman also allowed an average 10 percent increase in homeowner rates. State Farm says higher discounts will reduce the actual increase to an average 1.4 percent.

New customers have paid the rates since Oct. 15. Existing policyholders saw the changes Dec 1.

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