A Los Angeles Superior Court has granted a former Farmers Insurance customer, represented by Consumer Watchdog's attorneys, the right to challenge portions of a $455 million settlement of a national class action lawsuit against Farmers Group, Inc.
The case, known as Fogel v. Farmers Group, Inc., charges that Farmers required its policyholders to pay too much for a management fee that Farmers builds into its auto, home, and business insurance premiums. The company earns a 50% profit on the fee.
Last October, the plaintiff and defendants announced a settlement of the case, which includes $455 million to affected consumers and $90 million paid to the plaintiffs' attorneys, but the settlement details were not filed in court until two weeks ago.
Representing a former Farmers customer, Consumer Watchdog attorneys asked the court for permission to intervene in order to object to key provisions of the settlement. Over the objections of the insurance companies and the plaintiffs, Superior Court Judge William F. Highberger granted the Farmers customer's request to intervene in the case and postponed the preliminary settlement approval hearing until March 2, 2011.
Consumer Watchdog's legal papers raised the following objections to the settlement:
1. Consumers would be required to fill out a complex form in order to collect the estimated $20 refund; courts are increasingly skeptical of such settlements because very few customers end up submitting a claim.
2. Any unclaimed settlement funds would go to insurance entities that are controlled by Farmers and were originally defendants in this case. The settlement provides no guarantee that the unclaimed funds will be used to benefit current policyholders, and giving the money to a Farmers affiliate clearly will not benefit policyholders who are no longer with the company.
3. The settlement bars a wide array of future legal claims by policyholders against Farmers, Zurich and the insurance affiliates for issues entirely unrelated to the management fee issue targeted by the lawsuit. As a result, even if virtually none of the settlement is paid to actual policyholders, Farmers will be released from liability nationwide for a range of possibly illegal conduct that has nothing to do with the lawsuit.
"We are pleased that we will have the opportunity to pursue fair terms for class members, including actual refunds, before the court," said Consumer Watchdog lawyer and founder Harvey Rosenfield. "Class action lawsuits are an important tool for justice when consumers get ripped off and fixing the terms of this settlement will benefit Farmers' policyholders nationwide."
Consumer Watchdog is a nonprofit, nonpartisan organization with offices in California and Washington, D.C.