State Farm Could Owe Up To $1,000,000,000

Posted in Home Insurance , State Farm

July 8th, 2009

State Farm Insurance, which provides over a million Texas homeowners with home insurance, may have to repay their customers as much as $1 billion in overcharges and interest. That’s what the Office of Public Insurance Counsel, one of Texas‘ biggest consumer advocacy organizations, is claiming, and it’s up to a judge to determine whether that stands or not.

The court case has been going on for some time now, beginning back in 2003 when the State of Texas ordered State Farm and other home insurance providers to reduce their premiums after a series of widely criticized rate hikes. State Farm responded by claiming that their home insurance premiums had always been fair and reasonable, and were a market-driven response to huge increases in the number of mold and water-damage claims that were spiking around that time. These increases were so frequent and so dramatic that in 2003 the State legislature actually took control over Texas home insurance rate determinations. As a result, they ordered State Farm to lower its premiums by 12%, and according to the Office of Public Insurance Counsel and other advocacy groups, State Farm owes its customers almost a billion dollars in overcharges, interest, and money that State Farm earned when it invested that money.

Texas homeowners who got home insurance through State Farm may not see this money, of course. The case continues to make its way through the Texas court system, and State Farm is fighting any repayment with all the legal resources at their disposal, and those resources are formidable. Many experts feel that State Farm could end up paying back some but not all of the money the state says it owes because State Farm was almost bankrupted by the mold and water damage home insurance claims, and the rate increases are seen by many as logical and legal responses to these dramatic circumstances.