Judge Allows Farmers Firms to Mail Auto Rate Hike Notices : Insurance: She says if companies want to antagonize customers, it’s up to them. Court may still reject the increase.

The Farmers group of insurance companies may notify more than 300,000 auto insurance customers next week of an upcoming rate increase, as long as policy holders are also told that the rate hike ultimately might not take effect, a Los Angeles judge said Friday.

Superior Court Judge Miriam A. Vogel told Farmers lawyers that she will not decide until Dec. 18 whether to allow an average 5.9% rate increase that the companies want to impose beginning Jan. 1.

In the meantime, she said, they may send out notification, “if they want to run the risk of antagonizing their customers.”

But Vogel ordered Farmers, the second-largest seller of auto insurance in California, to include with the notice a caveat which states: “This notice contains a rate increase which is subject to a court hearing to be held on Dec. 18. If it is determined that the increase is not effective, you will be advised.”

The judge told Farmers representatives, “If I were one of your customers, I’d be annoyed. You want to be the only carrier in the state of California to raise your rates? Aren’t you afraid you are going to lose your customers?”

A Farmers spokesman said a rate increase would actually be in the interest of Farmers customers because then they would be assured they were with financially healthy companies that would be able to meet their obligations.

Farmers spokesmen said the companies stood to lose about $7.5 million if they waited another month to send the required notice of an impending increase. This way, if they win Vogel’s assent to a increase at the hearing, the companies will be able to start collecting it Jan. 1 instead of Feb. 1.

Attorneys for Farmers pleaded that their companies ought to be allowed to escape Insurance Commissioner Roxani Gillespie’s six-month freeze on auto insurance rate hikes because they had given notice of an increase a week before she imposed the freeze Oct. 2.

Lawyers for Gillespie were seeking an injunction Friday against the Farmers rate increase, but Vogel said she would not make a decision until the Dec. 18 hearing. In the meantime, she emphasized, Farmers rates are frozen just like those of every other auto insurance seller in California.

The judge said she wants legal assurances at the hearing that all companies will be able to recoup any money they lose if it is later determined that during Gillespie’s freeze they have not received a fair rate of return on their California business.

Gillespie’s chief attorney, Karl Rubinstein, said it could take several months before a fair-rate-of-return standard is set. He expressed confidence, however, that companies will be receiving a fair return, both during the current freeze on rate increases and later, when increases will not be allowed to exceed the consumer price index for the previous year.

Gillespie is seeking a court order from Vogel upholding the freeze. Vogel indicated that she wants to settle the recoupment issue before deciding on that or taking up a new Gillespie complaint that many insurers are conspiring to block implementation of Proposition 103.