San Diego Superior Court Judge Katherine Bacal has partially rejected an emergency stay request from State Farm General Insurance Co. on an order issued by California Insurance Commissioner Dave Jones to reduce rates and issue refunds to policyholders in the state.
In a hearing on Dec. 16, Bacal denied the stay request on reducing rates but approved it on issuing refunds to policyholders.
State Farm has to reduce homeowner and renter rates by 7 percent. The original order issued by California Insurance Commissioner Dave Jones on Nov. 7 also required the State Farm to issue refunds totalling more than $100 million to its policyholders.
After State Farm requested a rate increase of 6.9 percent, Jones held a public hearing. Based on the evidence presented during the hearing, Jones determined that "rates charged by State Farm are excessive."
Jones ordered State Farm to reduce its homeowners' insurance rate by an average of 5.37 percent, its renters' insurance rate by an average of 20.39 percent, and its condominium insurance rate by an average of 13.81 percent — for a total average of 7 percent.
Rate regulation in California applies to homeowners', auto, and other property and casualty insurance. Under Proposition 103, which was passed by California voters in 1987, insurers must obtain approval from the insurance commissioner before they increase or reduce rates.
The minutes from the Dec. 16 hearing state: "If the rate reduction order were stayed, consumers would be required to continue paying rates that the commissioner found to be excessive. In this regard, a stay contravenes the public interest that Proposition 103 was intended to protect."
Following Friday's decision, Jones issued a statement saying: "I am very pleased that the court denied State Farm's attempt to overturn my order requiring State Farm to reduce its rates going forward. I look forward to having my team work with the court to craft an order that requires State Farm fully identify the rate payers so that State Farm is actually able to issue rebates, totaling $110 million when this case is concluded. I am confident that we will convince the court that excessive rates are unlawful under Proposition 103 and State Farm consumers are entitled to rebates totaling more than $110 million."
"State Farm is disappointed with the commissioner's decision regarding State Farm General Insurance Co. homeowners rates in California. We do not believe the mandated rate reduction and rate refund are lawful, and we are considering our options, including taking legal action," a spokesman for State Farm told PropertyCasualty360.com in November.
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