State Farm claims Insurance Commissioner order is unlawful

By Marian Johns | Dec 18, 2016

SAN DIEGO — State Farm’s request to halt an Insurance Commission order was denied recently in a California Superior Court.

The company maintains the order is unlawful and that it will continue to legally challenge the commission’s directive which requires the company to reduce its rates and issue refunds of more than $100 million to some of its policyholders.

A Superior Court Judge recently denied the State Farm’s emergency request to block the mandate, which was scheduled to take effect Dec. 13th. A second court date had been set on Dec. 16 for a hearing regarding State Farm’s motion for a stay.

In November, Insurance Commissioner Dave Jones ordered State Farm to issue refunds, plus interest, for extra homeowners insurance premiums collected by the company since July 15, 2015. According to a press release sent out by the California Department of Insurance (CDI), the order also mandated State Farm to decrease its homeowner insurance rates by an average of 5.37 percent, its renter insurance rate by 20.30 percent and its condo insurance rates by an average of 13.81 percent, which amounts to a weighted average of 7 percent, according to the CDI.

“State Farm is disappointed with the commissioner’s decision regarding State Farm General Insurance Company’s homeowners rates in California,” Sevag Sarkissian, a State Farm community and media relations representative told the Northern California Record.

“We do not believe the commissioner’s decision is lawful and therefore are taking the necessary legal steps to challenge the rate reduction, rate refund and public release of our confidential trade secret documents,” Sarkissian said.

In addition, the commissioner’s order also mandated that State Farm disclose information regarding its profits and expenses per Proposition 103. State Farm claims that the disclosure of its financial information violates the company’s rights and protection of “trade secrets.”

State Farm, which requested a rate increase of 6.9 percent in December 2014, filed two lawsuits to fight the commissioner’s order. Prior to the commissioner issuing his order, an Administrative Law Judge ruled the company did not justify the rate increases.

State Farm has filed two lawsuits in an effort to overturn the commissioner’s order claiming the commissioner lacks the legal authority to force the company to issue refunds for overcharging. State Farm also claims in their lawsuits that the company’s constitutional rights to fair profit are being violated because all of State Farm’s investment income is being factored into the equation. Finally, State Farm claims that California voters set up a system to study rates and to hold necessary public hearings to stop companies from overcharging residents.

Due to the denial of State Farm’s motion for stay regarding the Commissioner’s order, the directive will be effective as of Dec.13.

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