Farmers Insurance Deal Gets Initial OK

.c The Associated Press

AUSTIN, Texas (AP) - A judge on Thursday took the first step in ending months of legal fighting between Texas and Farmers Insurance Group when he gave preliminary approval to a $117.5 million settlement.

The settlement between the state and Farmers was approved by State District Judge Scott Jenkins.

Texas had claimed that Los Angeles-based Farmers used unfair and discriminatory practices to overcharge its homeowners customers.

Notices explaining the settlement could be sent to 700,000 Farmers policyholders as early as next month, Jenkins said.

The settlement requires Farmers to cut its base rates by 6.8 percent and give policyholders refunds and credits for certain types of overcharges, such as rates that were too high because of credit scoring errors.

Farmers was not required to admit wrongdoing under the agreement, although the insurer must change some of its business practices.

Texas Attorney General Greg Abbott said he was pleased the deal can move forward.

``The agreement holds Farmers Insurance accountable for what the state saw as deceptive and unjust practices. Consumers can take comfort in knowing that the court has carefully scrutinized this landmark settlement and found that it is truly in their best interest,'' Abbott said.

Jenkins rejected arguments by attorneys challenging the settlement who claimed consumers were not adequately represented in the negotiations or compensated. They said the state gave up too much to appease Farmers, which in September had threatened to leave the Texas market.

Joe Longley, an Austin attorney who challenged the settlement, maintained that the settlement is worded too broadly and that because it is a class action, many policyholders will lose their rights to sue Farmers and get nothing in return.

Farmers spokeswoman Michelle Levy said the insurer was pleased.

Jenkins will schedule a final ``fairness'' hearing on the settlement.