Dispute Between State Farm and Texas Goes On

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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 ruled the insurer was denied its due process rights in a fight with the Texas Department of Insurance over homeowner rates. A 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.

The case goes back to Insurance Commissioner Mike Geeslin for review using stricter standards to determine how much State Farm policyholders might have been overcharged since 2003. TDI 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 said the ruling backs 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,” said Alex Winslow of Texas Watch, a consumer advocacy group.

In 2003, regulators ordered the company to lower its rates by 12 percent, an amount they believed State Farm was overcharging Texas customers.