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Today Los Angeles Times columnist Michael Hiltzik takes a hard look at a proposed settlement in a lawsuit against Farmers Insurance opposed by Consumer Watchdog.  According to Hiltzik, under the settlement, Farmers would likely keep the lion's share of a $455 million settlement fund intended for consumers while lawyers for the plaintiff would walk away with $90 million in fees.

Read Hiltzik's entire column here.

Read more about the settlement and the lawsuit against Farmers Insurance here.

According to Hiltzik:

The case, which percolated in Los Angeles Superior Court for about seven years before the settlement was reached in October, involves allegations that Farmers, as a parent company, charged excessive administrative fees to its own insurance units.

The effect, according to the plaintiffs, was to overcharge customers who bought residential or commercial insurance from the units, which are known as "exchanges" and are technically owned by the policyholders.

This was no penny-ante deal. More than 13 million customers may have been overcharged on fees that totaled $9 billion from 1999 through the end of last year. Farmers maintains that the allegations were baseless, but it settled to put the case behind it and to avoid the risks and costs of litigation. Thomas V. Girardi, the lead plaintiffs' lawyer, says the settlement will keep Farmers on the straight and narrow in the future.

The settlement calls for Farmers to send claim forms to customers in the affected class, who would be entitled to rebates averaging about $35. Any unclaimed money would go to the exchanges. Girardi and other attorneys who brought the case also are in line for up to $90 million in fees.

According to the preliminary approval issued by Los Angeles Judge William F. Highberger earlier this month, claim forms should reach customers by mid-June. The court will hold a hearing Sept. 7 to decide whether the response warrants his giving the deal a final OK.

The view of Consumer Watchdog, which has been monitoring the case for years, is that there there's some sleight of hand in the settlement. The group contends the exchanges are just Farmers by another name. Consumer Watchdog's founder, Harvey Rosenfield, says that means Farmers would end up keeping any money not paid directly to customers.