Safeco to Rebate $40 Million in Insurance Case

Safeco Corp. plans to pay $40 million to its California insurance customers in order to settle a four-year fight with state regulators.

The payout was required under Proposition 103, a 1988 state ballot measure that required insurance rate reductions and some premium rebates.

Since then, several companies have been arguing with California regulators over the amount of the rebate. A company spokeswoman said Seattle-based Safeco spent $2 million in outside legal fees on the fight.

Under the agreement with the state Insurance Department, qualifying Safeco customers are entitled to an average of $111 per property or casualty policy and an average of $159 per automobile policy.

A statement issued by Safeco said refunds would be sent to about 360,000 Californians who bought or renewed auto and home policies between Nov. 8, 1988, and Nov. 7, 1989.

The rebates were authorized under a key section of Proposition 103 that required insurers to roll back rates to November, 1987, levels and cut premiums another 20% in 1989.

The state Supreme Court upheld Proposition 103’s constitutionality, but the insurers contended that the formula state Insurance Commissioner John Garamendi used to calculate the rebates violated the court’s order and illegally deprived them of a fair profit.