Farmers Issues Statement in Response to

July 13, 2001

Farmers Insurance Exchange, a member company of the Farmers Insurance Group of Companies, stated it is disappointed and concerned about the recent verdict against it rendered by the jury in Alameda County (Calif.) Superior Court in the overtime case of Bell vs. Farmers Insurance Exchange. The jury awarded a record-setting claim for overtime for a class of Farmers Insurance Adjusters in the final amount of $90,009,208 for overtime pay in a class action suit in Oakland. Farmers stated it plans to appeal the decision.

Farmers further maintained that throughout the 73 years of its existence, it has consistently believed it was correctly following all applicable state and federal labor laws, including those relating to the classification of its professional adjusting force as exempt from overtime, rather than as hourly non-exempt workers.

Farmers said it has hired and trained thousands of such valued employees over the years. The issue of the proper classification of such employees as either exempt or non-exempt is one which Farmers hopes will be clarified in this case by the California Supreme Court. It is a vital subject, which affects thousands of adjusters employed by Farmers and hundreds of other insurance companies.

According to Farmers, field claims adjusters such as those involved in the Bell case have historically been treated as exempt employees throughout the country. The verdict in this case has the effect of setting California adjusters apart from their peers in other states. Some of the significant benefits to field claims adjusters being classified as exempt include independence, the ability to set their own hours, such as high hours one week and low hours the following week, and being treated as professionals. Some significant disadvantages to being classified as non-exempt include having to keep time cards, working a regular 9 a.m. to 5 p.m. schedule, accounting for all hours worked to a supervisor and being treated as an hourly worker rather than a professional.

Farmers remains committed to providing superior service in its claims handling practices for its insureds and prompt ethical claims handling for third party claimants. In addition, Farmers will continue to comply with all laws, regulations and court decisions regarding its claims adjusting force, while also seeking final clarification of this important issue through the courts of appeals.

Farmers Insurance Group includes the nation’s third-largest home and auto insurers. Headquartered in Los Angeles and doing business in 41 states, the Farmers group of companies provides home, auto, business, life insurance and financial services to more than 10 million households through 17,000 exclusive and independent agents and district managers.

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