Posted On: April 10, 2007, 10:45 pm CDT

Posted By: You choose

State Farm Insurance
Co. said today it settled claims of more than 100 policyholders who
accused the company of trimming coverage about a decade before the 1994
Northridge earthquake. The Bloomington, Ill.-based insurer would not
confirm a newspaper report that the policyholders received $100 million
to drop their lawsuit, or divulge other details of the agreement reached
last November. "The settlement amount is confidential, as agreed to by
all parties, but represents a small part of the more than $3 billion
paid by State Farm to more than 117,000 policyholders whose property was
damaged," a company statement said. The settlement is the largest known
single payout by an insurer involved in post-earthquake claims, the Los
Angeles Times reported. According to an internal company memo in
September 1984, executives considered informing policyholders about
restructuring plans but decided against it because it would "appear
inconsistent with our marketing philosophy."

Company Used Muddled Terms The lawsuit said two insurance plans were
ultimately replaced by a less expensive policy, and the company
eliminated the notion of "guaranteed replacement," which would require
the insurer to replace homes destroyed by a quake even if the cost
surpassed a policyholder's coverage limit. Instead, State Farm sent
policyholders notices that described the coverage as "new" or different"
without disclosing that it amounted to less coverage, according to the
lawsuit filed by 117 homeowners. In May 1997, a Superior Court judge
How is this not wrong? Melanie