California Insurance Commissioner Ricardo Lara cannot force insurers to pay consumers when they charge excessive rates, the California Court of Appeals in San Diego has ruled.
The court ruled that State Farm would not have to pay more than $100 million in refunds plus interest to Californians who reportedly overcharged the company to cover homeowners, condos and renters.
The court also held that in determining whether to approve an application by State Farm General, a subsidiary of State Farm Mutual, to raise its rates, the commissioner could not take into account the relative share of the investment income that the company earns when it invests money All subsidiaries.
A spokesperson for Lara did not immediately respond to a request for comment.
Consumer Watch, an advocacy group involved in the case, issued the following statement on behalf of founder Harvey Rosenfeld, who wrote State Proposition 103:
Californians passed Proposition 103 to protect themselves from abusive rates and discriminatory practices by requiring insurers to keep rates and premiums fair at all times or else they would be held accountable by the insurance commissioner or in the courts. The appeals court decision stripped the insurance commissioner of the powers that voters gave him to protect California residents from excessive rates. The consumer watchdog organization will seek its invalidation by the California Supreme Court.”
The court found, among other things, that Lara’s interpretation of certain regulations was inconsistent with state insurance law, and approved early Supreme Court decisions to overturn his rate order. The court also found that Lara “mistakenly ordered a retroactive price and a refund.”
According to Consumer Watchdog, too, as a result of the decision, there is an estimated $3.5 billion in excess fees that insurance companies charged California motorists alone during the pandemic in 2020 that went unpaid.
In October, Lara directed three auto insurers to reimburse California drivers for excess premiums collected from the start of the pandemic, or face legal action.
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