Home State County Mutual Insurance Co. agreed to return about $680,000 to almost 2,000 eligible policyholders who made claims for vehicle repairs dating back to January 1996. In addition, Consumers County Mutual Insurance Co. will pay refunds of about $19,000 to 142 policyholders.
"Consumers deserve to be refunded money that was taken from them when they made legitimate vehicle insurance claims. This appears to have been a routine practice across the industry for too long," said Attorney General Abbott. "That's not the way the standard auto policies in Texas work, and I'm seeing to it that these companies return the money to consumers."
"Betterment" not acceptable in Texas
The companies engaged in the unlawful practice known as "betterment," in which they claimed that the use of better or newer parts in the repair increased the value of the vehicle. Companies then charged the amount of this "increased value" of the vehicle to the policyholders, thus reducing the amount the company paid for the repairs. Policyholders were then forced to pay the difference to the repair shop.
The Attorney General has successfully settled more than a dozen of these cases since 2000, alleging that by engaging in betterment, insurance companies have merely increased the value of the replaced part, and not the entire vehicle, as the companies have claimed. Texas law does not permit such a charge or deduction, and auto insurance policies require that the companies fully pay for the repair, less the deductible, even if the parts used were better than the ones they replaced.
Under the terms of the agreement, Home State and Consumers agreed to no longer engage in this practice and will refund the total amount of overcharges, plus interest, to customers who had auto repair claims dating to January 1996.
Since 2000, the Texas Attorney General's office has obtained betterment settlements with Farmers, Texas Farm Bureau, Trinity, State Farm, Nationwide, USAA, Geico, Travelers, Safeco, Sentry, Liberty Mutual, Allstate and CNA insurance companies for an estimated $12.4 million in total refunds. Several similar lawsuits against other insurers are pending.