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State Farm to appeal order for refunds
12:00 AM CST on Thursday, November 26, 2009
AUSTIN – State Farm Insurance plans to appeal a state ruling that ordered the company to refund $310 million to its Texas customers for charging too much for homeowners coverage dating to 2003, a spokesman said Wednesday.
Kevin Davis of State Farm said attorneys will file an appeal in state court in Austin on Monday challenging the order by state Insurance Commissioner Mike Geeslin, who said the company was charging excessive rates until 2008. State Farm maintains that it owes not a dime of refunds.
"We disagree with the order and the rationale for the order," said Davis, noting that the company asked for a rehearing with Geeslin on Wednesday as a prelude to the appeal that will be filed in state court.
"This decision not only challenges State Farm financially, it creates an unstable environment for consumers and the insurance industry," he said, comparing the order to the financial strain that the company faced with Hurricane Ike last year.
State Farm's decision to continue the fight means that the insurer's 1.2 million customers will have to wait even longer for refunds – if the state prevails. State Farm and the Texas Department of Insurance have been in court over homeowner rates since 2003.
Although the commissioner's refund amount was substantially less than the $1 billion sought by the state's public insurance counsel, State Farm has consistently argued that it doesn't owe any refunds and at one point even suggested that some of its homeowner policies were underpriced.
"State Farm's rates are, and always have been, competitive and reflect the risks of the Texas market," Davis said. "Since 2003, State Farm has paid billions in homeowners' claims for Texas policyholders ... and has been consistently at the top of the list in customer service" based on data collected by the insurance department.
Consumer groups blasted State Farm for prolonging the battle.
"This is yet another in a long line of stall-and-delay tactics that State Farm has used to hold on to the nearly $1 billion that it owes its customers," said Alex Winslow of Texas Watch. "It raises the question of when will the Legislature finally say 'enough is enough' to the insurance industry."
Under the state order, State Farm was told to either issue refund checks or provide a credit on policy renewals. Refunds for longtime customers were expected to range between $200 and $300.
The rate dispute began when the insurance department ordered State Farm Lloyds – the company's home insurance subsidiary – and several other insurers to lower their premiums because they were deemed excessive.
That followed an overhaul of insurance laws by the Legislature in 2003.
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