Consumer Watchdog – California Court: Safeco Must Disclose Surcharges

LOS ANGELES, CA -- A group of California attorneys have won a battle with Safeco Insurance Co. over surcharges the company was charging customers. A state appellate court decision allows policyholders to have their day in court, said Harvey Rosenfield, the author of Proposition 103, which Safeco allegedly violated.

According to the California Court of Appeal in Los Angeles, Safeco must disclose the previously "unapproved and undisclosed" surcharges. Attorneys, including Rosenfield, also with nonprofit group Consumer Watchdog, say only Safeco knows exactly how much it charged customers in alleged violation of Proposition 103, passed in 1998.

"This is an important victory for Safeco policyholders who paid hundreds of dollars more for auto insurance because Safeco knowingly broke the law and hid its lawbreaking from customers and state regulators," said Rosenfield, in a statement.

Consumer Watchdog said it originally sued Safeco in 2002 for violation of the law, which prohibits insurers from charging customers if they previously did not have insurance. Two years later, Consumer Watchdog said it was taken off the case after the industry got together to pass a ballot measure to stop frivolous lawsuits. A "volunteer" stepped up to continue the case, Consumer Watchdog said.

A judge in the Los Angeles Superior Court ordered Safeco to provide a list of people who were surcharged in order to give them an opportunity to take part in litigation. Safeco appealed and the appellate court confirmed the ruling.

Liberty Mutual purchased Safeco for about $6.2 billion last year. Post-merger integration of the companies includes coordinating what are now 15,000 independent agencies Liberty Mutual owns after adding Safeco to Agency Markets.

In 2008, the top five writers of private passenger auto insurance in California, based on A.M. Best Co. state/line data, were: State Farm Group, with 12.9% market share; Farmers Insurance Group, with 11%; Mercury General Group, with 9.4%; Auto Club Enterprises Insurance Group, with 9% and Allstate Insurance Group, with 8.4%.

Contact the author at:  Chad.Hemenway@ambest.com