February 9, 2017
Auto insurance company Farmers faces a putative class action lawsuit alleging it discriminates against longtime customers by offering preferential pricing to new customers while raising rates on its current customers.
Lead plaintiffs Charles Grigson and Robert Vale allege in their class action lawsuit that Farmers Texas County Mutual Insurance Company “betrayed” their policy holders through “illegal and discriminatory” policy regimes in early 2016.
The plaintiffs claim that when Farmers rolled out its policy pricing, it unfairly offered new customers lower rates and did not inform current customers about them. Further, argue the plaintiffs, Farmers raised rates on current policy holders.
Grigson alleges that he has been a Farmers Texas auto policyholder since 1981. He says that in January of 2016 he was insured by two Farmers auto policies, but was never informed about the available lower premium rates.
In early May, Grigson says became aware of the lower rates and attempted to apply, but was told he was ineligible because he was not a new customer.
Similarly, Vale alleges in the class action that he’s held a Farmers auto policy since 1997. He says his policy expired in May of 2016, but he was not made aware of the preferential pricing policy at the time of renewal and paid a higher rate.
Both plaintiffs were eventually allowed to apply for the lower policy rates, according to the complaint.
“In nearly all cases,” allege the plaintiffs in the class action, “the premium rate that an existing [Farmers] policyholder pays is higher than the premium rate a new customer would pay under FSPA for identical or virtually identical coverage.”
“The rate difference between FSPA and FA2 can be as high as 20-40%, or even higher,” continue the plaintiffs. “In some cases, individuals and/or families may save more than $1,000 for every six (6) month policy period by switching to FSPA.”
According to the class action lawsuit, the pricing regime that favors new customers violates Texas State Law. Additionally, the plaintiffs allege that there was no “actuarial basis” for the preferential pricing for new customers.
The plaintiffs say that they, and other existing Farmers policy holders, have suffered “significant economic damages” as a result of the pricing regime. “Existing [Farmers] policyholders have paid, and continue to pay, higher premiums than they should. Through its unfair discrimination, FGI is forcing Farmers Texas’s most loyal, existing FA2 policyholders to effectively subsidize the lower FSPA rates offered only to new Farmers Texas customers.”
According to the class action lawsuit, Farmers intimidated its insurance agents into concealing the better rates from existing policy holders. This will erode the trust between the policy holders and their agents, say the plaintiffs.
The plaintiffs are seeking an injunction against Farmers to stop the preferential pricing regime. Additionally, they are seeking damages and/or restitution, pre- and post- judgment interest and attorney’s fees and costs.
The plaintiffs seek to represent a Class of Texas Farmers auto policy holders affected by the preferential policy regime initiated on Jan. 4, 2016.
The plaintiffs are represented by Michael L. Slack, John R. Davis, and Paula Knippa of Slack & Davis LLP, Joe K. Longley of the Law Offices of Joe K. Longley, and Roger N. Heller and Jonathan D. Selbin of Lieff Cabraser Heimann & Bernstein LLP.
The Farmers Preferential Auto Insurance Pricing Class Action Lawsuit is Grigson, et al. v. Farmers Group Inc., Case No. 1:17-cv-00088-LY, in the U.S. District Court for the Western District of Texas, Austin Division.