State Farm is issuing $13.3 million in refunds to California consumers with homeowners’ and renters’ policies after the state Department of Insurance deemed its rates excessive.
About 250,000 people will receive on average refunds of about $55 for overcharges between Dec. 8 and Feb. 13, the department said Thursday.
The refunds stem from a bitter legal dispute centered on Insurance Commissioner Dave Jones’ decision to order State Farm to cut its rates as of Dec. 8.
He has that authority under California’s landmark Proposition 103. But in a first, Jones ordered the cut to be applied retroactively to July 2015, a decision that would result in refunds topping $100 million.
State Farm sued, arguing that the mandated reductions were based on inaccurate calculations and that the insurance commissioner does not have authority to change rates retroactively.
In December, San Diego County Superior Court Judge Katherine Bacal put the refunds on hold until the court challenge is decided, but ordered State Farm to cut current rates per Jones’ order.
State Farm had said the company worked to comply with that order, but couldn’t cut rates until Feb. 13 because insurance renewal bills must be sent at least 45 days early.
The Department of Insurance threatened that the decision could cost State Farm more than $2.5 billion in fines and filed an order of noncompliance.
On Thursday, the department said State Farm asked the court to intervene and was rejected, resulting in the $13 million in refunds.
“We have used all our legal remedies to make sure State Farm’s customers are not overcharged and to make sure that State Farm complies with the rate reduction order,” Jones said in a statement. “It is past time that State Farm’s ratepayers receive the rate reductions to which they are entitled.”
Whether consumers will get refunds for rates charged prior to Dec. 8 is still being worked out in court.
“We appreciate our customers’ patience as we work to resolve the matter,” State Farm said in a statement. “We will continue to comply with the orders of the court.”
Times staff writer James Rufus Koren contributed to this report.
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