A judge in Texas has sided with the Lone Star State’s insurance commissioner, upholding an order for State Farm Insurance to pay out $350 million to over one million overcharged customers.
The state contends that State Farm Lloyds, the insurance giant’s homeowners division, overcharged 1.2 million customers between 2003 and 2008, and that the company continued to charge about 12% too much, even after being warned by regulators that rates were too high.
In 2009, the insurance commissioner ordered State Farm to pay out either refunds or credits to customers, averaging around $200 to $300 per customer.
But in court, State Farm, which took in $1.7 billion in homeowner insurance premiums in Texas last year, argued that the amount of the refund “would be disastrous and irresponsible… The commissioner failed to consider the impact the refunds would have on the financial stability of State Farm Lloyds.”
Citing “substantial evidence to support the commissioner’s decision,” the judge upheld the refund order, which some Texas consumer advocates should be closer to $1 billion.
Not surprisingly, State Farm says it plans on appealing the decision:
“We knew no matter which way the judge ruled, an appeal from either party was highly likely in this case,” a company rep told the Dallas Morning News. “State Farm Lloyds’ rates are, and always have been, fair and competitive — and we remain confident the commissioner’s order will be reversed.”
State Farm is told to pay $350 million [Chron.com]