State Farm Insurance does not have to refund consumers some $650 million in alleged overcharges while its dispute with Texas regulators over homeowner rates is reviewed.
A state appeals court has ruled the insurer was denied its due process rights in a fight with the Texas Department of Insurance over homeowner rates. The three-judge panel from the 3rd Texas Court of Appeals concluded that State Farm was held to an unfair standard in justifying its rates for homeowners insurance.
“Because we have determined that the commissioner applied an unconstitutional proof requirement at the rate review hearing, we hold that State Farm Lloyds (the company’s homeowners subsidiary) was denied due process in this proceeding,” the judges said.
They sent the case back to state Insurance Commissioner Mike Geeslin for review using stricter standards to determine how much State Farm policyholders might have been overcharged since 2003.
Insurance Department spokesman Jerry Hagins said the agency was reviewing its options under the decision.
“We look forward to a hearing on the merits of this case so we can resolve this issue and get some refunds back to State Farm policyholders,” he said.
State Farm officials were pleased with the ruling, saying it backed up their position in the dispute over rates.
Consumer groups worry the court ruling could keep State Farm from paying a portion of the overcharges the state alleges the company owes.
“This decision will likely result in a pennies-on-the-dollar settlement that is bad for State Farm policyholders and good for State Farm because it allows them to pocket hundreds of millions of dollars in overcharges,” said Alex Winslow of Texas Watch, a consumer advocacy group.
The fight between State Farm and the Insurance Department began in 2003 when regulators ordered the company to lower its rates by 12 percent. The Insurance Department found State Farm was overcharging Texas customers by that amount.
Information from: The Dallas Morning News, www.dallasnews.com