FARMERS SETTLEMENT APPROVED:

State District Judge Scott Jenkins gave preliminary approval to the $117.5 million settlement between the State of Texas and Farmers Insurance. The record settlement is the result of action taken by the Texas Office of Attorney General and the Texas Department of Insurance under which $117.5 million will be paid to Farmers policyholders in the form of combined savings and restitution. In August 2002, the Office of Attorney General (OAG) filed a lawsuit against Farmers Insurance Group for violations of the Deceptive Trade Practices Act and discrimination against some groups of homeowners. TDI also issued two enforcement actions against the company, including a cease-and-desist order, forcing Farmers Insurance to halt certain pricing practices. The settlement agreement between Farmers Insurance and the State of Texas was reached on Nov. 30, 2002, when Farmers agreed to change its pricing practices and return $100 million to policyholders. The settlement increased to $117.5 million after the date for retrospective rate reductions (refunds) was expanded from Dec. 28, 2001 back to Nov. 16, 2000. As many as 700,000 Farmers policyholders could begin receiving notices in June explaining the settlement, under which Farmers must cut its base rates by 6.8 percent and provide refunds and credits for certain types of overcharges. Farmers will also be required to change some of its rating and underwriting practices. The company has admitted no wrongdoing in the case and is not required to do so. According to the Austin American-Statesman, plaintiff attorneys challenged the case on the assertion that policyholders were not adequately represented in the settlement proceedings and that the state conceded too much to the insurer. Jenkins, however, rejected those arguments and others, including the notion that Farmers received a “sweetheart deal” from the state.

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