State Farm Insurance, facing state allegations that it overcharged customers by hundreds of millions of dollars, raised the possibility Monday that some customers weren't charged enough for their policies.
State Farm attorneys, who vigorously denied the charges of excessive rates in a hearing before state Insurance Commissioner Mike Geeslin, also contended that the company was not required to show "clear and convincing evidence" that its rates were fair.
The company first made that claim in a brief filed with the commissioner's office just before it closed Friday – a legal maneuver that brought criticism not only from state attorneys but also from Geeslin, who noted that the case has already dragged on for several years.
Geeslin halts hearing
Lawyers for the Texas Department of Insurance accused State Farm, the largest property insurer in the state, of trying to "confuse and delay" the case by filing the eleventh-hour brief, and Geeslin decided to halt the hearing at midday while he considers the new arguments advanced by the company. The hearing will reconvene Wednesday.
Geeslin called the last-minute filing by State Farm "troubling," saying he was concerned that the new twist could lead to more appeals in a case that began in the fall of 2003.
"I don't want to add years and years of litigation to a case that has already gone on for years and years," he said.
The State Farm brief raised the possibility that the company – the largest property insurer in Texas – is entitled to recover undercharges for policies that may have been priced too low from 2006 to 2008, when State Farm was ordered not to raise rates without prior approval from the insurance commissioner.
An attorney for the insurance department and Public Insurance Counsel Deeia Beck, a state official who represents insurance consumers, both argued during Monday's hearing that State Farm has no legal right to seek compensation for allegedly being forced to undercharge customers on homeowner policies.
"State law does not allow State Farm to recover premium undercharges through this proceeding," said Elizabeth Rett, representing the state agency.
State Farm attorney Susan Conway argued that the company never overcharged its customers and does not owe any refunds, as the state contends. Some officials have estimated that the overcharges could total nearly $650 million, including penalty interest.
"State Farm maintains that its rates are not excessive and have never been excessive," Conway told the commissioner. "Any rate reduction would be unreasonable, and no rate reduction is warranted."
6-year legal fight
The alleged overcharges stem from an order by the insurance department in 2003 that called on State Farm to reduce its rates for home insurance statewide by 12 percent. The company refused and launched a legal battle against the state that has continued for nearly six years.
Monday's hearing before Geeslin was scheduled after a state appeals court ruled that State Farm was denied its due process rights when the insurance department first ordered the rate reductions.
State attorneys argued that the legal burden is on State Farm to show "by clear and convincing evidence" that its rates are "just, reasonable, adequate, not excessive and not unfairly discriminatory."
State Farm, on the other hand, is arguing that the "preponderance of evidence" from the hearing will determine whether its rates are excessive and whether it owes refunds to customers. The state contends that State Farm bears the burden of proof in arguing that its rates are justified.
No comments:
Post a Comment