Texas Judge Strikes Down Rate Rollbacks

Revised: 09/22/2006

Texas Judge Strikes Down Rate Rollbacks

Mon Nov 8, 9:51 PM ET
By JIM VERTUNO, Associated Press Writer

AUSTIN, Texas - A Texas judge ruled Monday that state regulators acted unconstitutionally by mandating homeowner insurance rate cuts for customers of State Farm and Farmers Insurance Group.

Last year, the Texas Department of Insurance ordered Farmers to reduce its rates by 17.5 percent and State Farm by 12 percent. The cuts came under a law designed to curb skyrocketing homeowners insurance rates.

The insurers fought the rollbacks, claiming Texas denied them due process.

State District Judge Suzanne Covington in Travis County agreed with the companies and ruled the rollbacks unenforceable.

"We review our rates regularly and believe our current rates are fair and reasonable and do not warrant rollbacks," said Michelle Levy, a spokeswoman for Los Angeles-based Farmers. "Farmers has and will continue to work with the Texas Department of Insurance to address this matter in the best interest of all parties."

Texas Department of Insurance spokesman Jim Hurley said Covington's ruling did not address whether the rollbacks were appropriate and did not harm the agency's authority to regulate rates. He said the state could appeal.

The immediate effect on Farmers and State Farm policy holders will be negligible. Both companies said their reductions had not been enforced while they were under legal challenge.

Levy said Farmers hasn't changed its rates since a 6.8 percent reduction in December 2002. State Farm rates haven't changed since January 2003, said Sophie Harbert, a spokeswoman for State Farm, based in Bloomington, Ill. State Farm says it is the nation's largest home insurer, covering about 20 percent of U.S. homes.

"We do not believe any consumer has lost anything because of this ruling," she said.

An online information service of the United Farmers Agents Association, Inc.