Provider of home coverage probed

By James Temple

CONTRA COSTA TIMES

A state agency is investigating whether divisions of Farmers Insurance Group, the state’s second largest provider of homeowner policies, is illegally overcharging its customers.

The California Department of Insurance has "received numerous complaints and continues to receive complaints" that the Los Angeles-based company has violated an array of its stated policies, according to a notice of non-compliance.

Farmers Insurance could be charged an administrative penalty of up to $10,000 per intentional act, department spokesman Gary Gartner said. The number of incidents will be determined at a hearing slated for early 2006.

Farmers Insurance said in a prepared statement it is in discussions with the Department of Insurance and is confident it can resolve the matter "in the best interests of our customers."

"Our goal is to offer a rating plan that prices insurance products accurately and equitably for our California customers," the company said.

Among other things, the department believes Farmers Insurance surcharges policyholders for fire, wind, hail, lightning and earthquake damage, even though its rules prohibit such charges; exacts fees for claims losses even when those losses are ultimately withdrawn, denied or covered by customer deductibles; and often arbitrarily assigns a premium based on "very high risk of fire danger," when its database doesn’t indicate a home’s proximity to a fire hydrant.

On top of administrative penalties, the Foundation for Taxpayer and Consumer Rights argues Farmers Insurance should pay refunds to any customer who was improperly charged.

"This company thinks it can break the law without being held accountable," said Harvey Rosenfield, founder of the Santa Monica-based consumer watchdog group, which petitioned the Department of Insurance to participate in the proceedings. "It’s an arrogant, outrageous practice by an arrogant, outrageous company."

James Temple covers real estate for the Contra Costa Times. Reach him at 925-977-8534 or jtemple@cctimes.com.