Court docket guidelines insurance coverage commissioner can not drive State Farm to pay thousands and thousands in refunds


Jones eventually found that the rate hike was unjustified and directed State Farm General to cut its home insurance rates by about $ 77 million a year in the future. The commissioner had also concluded that State Farm General had overcharged its existing customers since July 2015, and asked the insurer to reimburse more than $ 100 million.

To overturn the commissioner’s decision, State Farm filed four separate lawsuits in the San Diego Superior Court. Last Friday, the court of appeal ruled in favor of the insurer.

In their lawsuits, State Farm alleged that the insurance commissioner had no power to compel an insurer to reimburse additional expenses. The Insurance Commissioner and CW pointed out that California voters changed the law to notify insurers operating in the state that they must always adhere to fair tariffs. The Commissioner and CW also pointed to two cases where the California Superior Court unanimously upheld the commissioner’s authority to order installment refunds, and also noted that voters gave the commissioner full authority to conduct consumer insurance protection under Proposition 103.

But the court rejected these arguments and called Proposition 103 a “rule against retroactive sentences”. The court also alleged that Proposition 103’s “focus” was “on fairness to consumers and insurers,” adding that it “was not convinced by CW’s argument that ‘[f]Forcing consumers to inflate tariffs would defeat the purpose of protecting consumers from arbitrary insurance tariffs. ‘”

Both CW and the insurance commissioner argued that Proposition 103 protects Californians against attempts by insurers to hide their investment income, and that State Farm was not entitled to an exception to the rule. However, the court ruled that Proposition 103’s requirement that the Commissioner verify that insurance rates “mathematically reflect the insurance company’s investment income” must be read in order for State Farm Mutual to establish a wholly-owned subsidiary in California. CW has argued that this tactic allows the insurer to “hide its least profitable investments in this subsidiary and ignore the California business’s proportional share of portfolio profits” while ignoring the real economics of the business. CW also noted that the State Farm insured 20% of California homeowners at the time.

CW has commented on the court’s interpretation of Proposition 103.

“The voters did not pass Proposition 103 to protect insurance companies. You have enough money and lawyers to protect yourself, “the organization said in a statement. Discrimination, reckless insurance industry behavior and anything else that could harm consumers.

“The insurance industry would not have spent $ 63 million unsuccessfully defeating Proposition 103 at the ballot box, and countless hundreds of millions more in legal challenges to the law since it was passed if the move protected the industry’s right to go to California high fees to be paid, as the court suggests. “

The court’s decision could also have an impact on the estimated $ 3.5 billion in overheads current California Insurance Commissioner Ricardo Lara has placed on insurers, CW said in a press release. The surcharges come from auto insurance premiums charged based on tariffs set before the pandemic resulted in restrictions.

“The Californians passed Proposition 103 to protect themselves against arbitrary tariffs and discriminatory practices by asking insurance companies to keep tariffs and premiums fair at all times or to be held accountable by the commissioner or in court,” said Harvey Rosenfield, author of Proposition 103. “The Court of Appeal’s decision stripped the Insurance Commissioner of the powers voters gave him to protect Californians from overcharging. Consumer Watchdog will petition the California Supreme Court to overturn them.”

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