State Farm and the Texas Department of Insurance resume their long-running legal battle in state district court in Austin Monday over alleged overcharges by the state's largest home insurer dating back to 2003. The insurance department will try to persuade a judge that the company owes its policyholders at least $350 million - including penalty interest - for several years of excessive premiums. The state's public insurance counsel argued in the past that the figure is closer to $1 billion.
State Farm insists it owes nothing and has always charged fair and competitive rates to its 1.2 million customers in Texas. State Farm has claimed that payment of hundreds of millions of dollars in refunds will wipe out a third of the capital of its homeowners insurance subsidiary in Texas and also make it impossible for the company to pay back a $1 billion loan incurred because of big losses in the early 2000s.
The case has been delayed twice in the last eight months because judges assigned to hear it were found to have had insurance coverage with State Farm and therefore had a conflict of interest in deciding on refunds. Judge Tim Sulak will now hear the case and both sides have been informed that he is not a State Farm policyholder and thus has no conflict. Sulak will hear arguments and rely on extensive court documents that have been filed by the parties over the last several years. Meanwhile, state lawmakers are considering a bill this year that would assess bigger interest penalties on insurers that continue to fight rate reduction orders in court.