Texas Judge Denies State Farm Injunction Request

December 6, 2004

A state district judge recently ruled in favor of the Texas Department of Insurance (TDI) and its efforts to recoup more than $100 million for customers of State Farm Lloyds, an amount the agency contends the company overcharged consumers.

According to TDI, the 345th State District Court rejected State Farm’s request for an injunction against the insurance department. The court’s action allows the department’s challenge of State Farm’s homeowners insurance rates to continue. The objective of TDI staff throughout this action has been to provide rate relief for State Farm policyholders who have been charged excessive rates. In contrast, State Farm chose to pursue legal action in an attempt to further delay the process.

TDI staff, using authority granted by the Texas Legislature in 2003 in Senate Bill 14, ordered State Farm to reduce its homeowners rates by 12 percent in September 2003. State Farm appealed the reduction in district court, claiming that the company had been denied due process in ordering the rate reduction.

The State District Court ruled in favor of State Farm on a procedural issue in November. However, the facts of the case—that State Farm’s rates are excessive based on the department’s actuarial analysis—were not considered by the court.

“TDI staff’s latest action, based on a different law was designed to address the court’s concerns regarding due process,” said TDI’s Deputy Commissioner for Policy, Mike Geeslin. “Despite State Farm’s objections, the courts have allowed the debate based on the facts to move forward. In the end we believe the facts will show that their rates can be reduced.”

TDI staff contends that State Farm Lloyds has been overcharging its policyholders since June 11, 2003, the effective date of Senate Bill 14. TDI is seeking a refund of the excessive premium plus 10 percent interest. The total amount will be calculated from June 11, 2003, to present.

The Associated Press reported recently that State Farm indicated it has no problem proceeding to a hearing on the insurance department’s latest rating action. According to a State Farm spokesperson, the company believes when looked at objectively its homeowners rates will prove to be justified.

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