Appeals court shuts down California home insurance ruling

California home insurance - Ruling
Federal judge likely won’t stop S...

Consumer advocates say they’ll be bringing the case to the California Supreme Court.

A California home insurance ruling has been overturned in appeals court, but consumer advocates say they’ll take the case to the state supreme court to reverse that decision.

Consumer advocates said the ruling undermines the ability of the state to order billions in refunds.

The state appeals court in San Diego rejected a 2016 finding from the state insurance commissioner, which found that a subsidiary of State Farm was overcharging on its California home insurance rates. The commissioner at the time, Dave Jones, ordered the insurer to pay policyholders back over $100 million in total. That decision, however, was reversed by the appeals court.

Harvey Rosenfield, founder of Consumer Watchdog stated that this decision places Insurance Commissioner Ricardo Lara’s recent refund order in peril. Lara recently decided that insurers must refund up to $3.5 billion after having overcharged motorists in the state who had considerably reduced their driving throughout the pandemic crisis’ stay-at-home orders in 2020.

California home insurance - law

According to Rosenfield, the recent ruling against the home insurance refunds undermines the law.

Rosenfield pointed to the voter-approved 1988 ballot proposition he authored, which created the insurance commissioner in the state as an elected position and gave that position the authority to reject proposed rate increases as well as to order refunds.

However, Michael Soller, Deputy Insurance Commissioner, views the ruling more narrowly, instead stating that this particular decision was too focused on State Farm and the state’s strategy to stop the insurer “from manipulating its corporate investment policies in order to increase insurance premiums for California consumers,” which was a claim also rejected by the court.

Instead, the 4th Appellate District Court of Appeal’s three-judge panel ruled “that the retroactive rate and refund were impermissible,” under the powers they had interpreted as having been imposed by Proposition 103.

In the judges’ ruling regarding the California home insurance refunds ordered for State Farm, they determined that the Proposition 103 initiative “was meant to ensure fair and reasonable rates,” and that the commissioner “broad discretion in adopting regulations to administer the initiative.”

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