Farmers Agrees to Pay $84 Million to Settle Texas Claims

July 07--After waiting more than a decade, Farmers Insurance customers in Texas might finally be about to see some compensation for alleged overcharges by the company.

Farmers Insurance Group has agreed to pay $84.4 million to settle a 2002 lawsuit that claimed Texas policyholders unfairly paid higher premiums for less coverage under a proposed settlement.

The settlement involves the state's claims that Farmers violated the Texas Practices Act and the Texas Insurance Code.

The amount is in addition to a 6.8 percent reduction in homeowners rates that was implemented earlier, resulting in a total settlement of $127.5 million.

The Texas Attorney General Ken Paxton's office, which announced the approval of the preliminary settlement, said companies such as Farmers Insurance must be held accountable.

"People in Texas and across the country need to have confidence in the companies they depend on to insure their homes, health and property," Paxton said in a written statement. "Any company that overcharges and deceives its customers out of their hard-earned money must be held accountable, and I'm pleased that Texas consumers will finally have closure in this case."

In 2002, the attorney general's Office filed a lawsuit against Farmers Insurance for violations of the Texas Deceptive Practices Act. State investigators said Farmers deceived consumers and engaged in discriminatory practices during a five years period. The efforts resulted in excessive charges for customers and reduced coverage, the agency said.

Farmers Insurance said Tuesday it continues to work towards a resolution in the case.

"Farmers Insurance is committed to obtaining final approval of a settlement that was initially reached with the State of Texas more than 10 years ago," spokesman Luis Sahagun said in a written statement. "At the end of this process, we look forward to delivering an outcome that is fair and equitable to all parties."

Texas Insurance Commissioner David Mattax called the agreement "a significant step toward returning funds to deserving Farmers customers."

But consumer groups criticized the agreement, saying it fails to hold Farmers accountable.

"This deal lets Farmers pocket millions in overcharges without paying interest on its wrongfully collected premiums the company has held since 2002," said Alex Winslow, executive director of the policyholder advocacy group Texas Watch. "The bottom line is that Farmers customers are left holding the bag. We've said it before: This is a sweetheart, pennies-on-the-dollar deal that lets Farmers off the hood for millions in excessive premiums."

The settlement will impact an estimated 1.8 million current and former Farmers Insurance customers, according to court documents.

The plan, however, still has another hurdle ahead before it can move forward.

A preliminary approval means policyholders will now receive notices on the proposed settlement.

A final settlement hearing slated for Feb. 1, 2016 will determine if the deal is considered "fair, reasonable, and adequate and should be approved," the court filing said.

It's at that hearing that anyone who has intervened in the case previously, or any affected policyholder, can object to the plan. The judge in the case will then make a final ruling on the plan.

Court documents say that three intervenors in the case have already objected to the settlement and "have indicated they will raise objections" during the Feb. 1 hearing.

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