Filed Under:Markets, Personal Lines

American Family Pays Arizona Homeowners $1.2M To Correct Mistake

NU Online News Service, May 13, 3:13 p.m. EST

American Family Mutual Insurance will pay 5,000 of its Arizona policyholders nearly $1.2 million after making an error involving repayment of taxes charged to contractors.

The Arizona Department of Insurance says a roofing contractor last December contacted regulators to report American Family was not including a tax building contractors must pay to the state—a Transaction Privilege Tax, which is normally included as part of an insurance claim.

The complaint to the insurance department followed a wave of claims from a winter storm in January and a hail storm in October last year.

The insurance department says American Family conducted an internal audit and found out a mistake by out-of-state adjusters led to it underpaying about 5,380 claims in 13 counties because the tax was not included in the payment. The insurer paid policyholders about $1.1 million to correct the error, plus about $45,500 in interest, says the insurance department.

Now that the Arizona Department of Insurance is aware of the problem it says it is looking into whether other insurers that used out-of-state adjusters overlooked the tax in claims payments.

American Family Insurance Group is the fourth-largest writer of personal property insurance in Arizona, with a 7.3 percent market share, according to Highline Data.

Highline Data is a part of Summit Business Media, which also owns National Underwriter.

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