$117 Million Refund For Texas Homeowners In Limbo

In a home insurance case that has become known as ‘the missing insurance refunds,’ Farmers Insurance, which is one of Texas biggest insurers has fallen upon hard times.

Back in the autumn of 2002, the company and state regulators agreed to resolve allegations that the firm has overcharged customers with a $117 million settlement that included refunds and lower rates for nearly half a million homeowner policies.

However, this settlement has turned out to be a long running disaster, and a battle for the customers to get the compensation they deserve.

After the agreement was made, it was challenged by a group of Farmer policyholders, who insisted it was a negative deal for them.

Although a state judge upheld the settlement, his decision was overturned by an appeals court and then taken to the Texas Supreme Court, which sent the legal dispute back down for further negotiations.

Therefore, the case still sits in limbo, going on for seven years, and Farmers customers are still waiting for their money.

Michelle Levy, a spokeswoman for Farmers in Texas said: "Farmers has worked closely with the Texas Department of Insurance and remained ready to implement the agreed-on settlement for several years. We're ready to take action, but there's nothing we can do until the courts have decided this."

Overdue settlement
Joe Longley, an attorney said the case should be sent back to trial court because all the deadlines and conditions of the original settlement have long passed. For many reasons, the settlement is “no longer viable” and must be redone, he said.

Meanwhile, the attorney general’s office, is trying to have the agreement certified as a class action representing all Farmers customers in the state. Such certification could overthrow other claims against the company.

Huge losses
The settlement occurred after the company threatened to pull out of the Texas home insurance market because of massive mold losses. The company were also still licking their wounds after repeated attacks by Gov. Rick Perry, who made the firm prime target when he was running for elections.

Farmers is now the third-largest home insurer in the state, providing coverage to about 714,000 homeowners.

State crying out for insurance change
Alex Winslow of Texas Watch, a consumer group active in insurance issues, said the delayed Farmers settlement is an example of the flawed system of regulation in Texas. "Due process is a right for everybody, including insurance companies. But seven years is too long," Winslow said.

Beaman Floyed of the Texas Coalition for Affordable Insurance Solutions agreed that the insurance sector needs to be reformed: “Instead of chasing the short-sighted goal of artificial price fixing, we should stick with the goal of creating a well-regulated competitive marketplace that can handle our state's tough climate efficiently and still attract companies and capital.”

Farmers however, emphasized that the company agreed to pay refunds to its clients but has been blocked from doing so due to class action intervention. “They have left Farmers unable to implement the settlement, including retrospectively reducing rates and adjusting certain rating factors,” said Levy.

By: Cat White

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