Court: Farmers Insurance Broke Law, Can Keep Money

December 15, 2008

A California appeals court says Farmers Insurance broke the law by failing to disclose a $5 service charge — but the company won’t have to pay back more than $115 million it collected.

The 4th District Court of Appeal in Santa Ana ruled that Farmers did violate a state code by failing to disclose the $5 it adds to monthly premiums to cover billing costs. The fee isn’t charged to customers who pay the premium in a lump sum.

A class-action lawsuit accused Farmers of unfair competition and a lower court in San Diego ordered it to repay policyholders about $115.6 million.

But the appellate court threw out the award, saying the plaintiff lacked standing to sue because he didn’t show he would have rejected the policy because of the fee.

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