Thursday, 30 September 2004 17:00

Texas auto policy holders get refunds for betterment charges

Texas Attorney General Greg Abbott has filed court-approved settlements with two auto insurers to refund more than $3.4 million to Texas policyholders who paid more out of pocket on claims for auto repairs in certain years than their policies required. 

Progressive County Mutual Insurance Co. agreed to pay $2.35 million, including interest, in refunds to about 11,000 policyholders who had repair claims from January 1996 through May 1999.

Old American County Mutual Fire Insurance Co. will pay refunds of $1.07 million to an estimated 4,500 policyholders who had repair claims from January 1996 to September 2001.

The companies, along with others in the industry, engaged in the practice known as "betterment," in which they claimed that the use of better or newer parts to repair the vehicle increased its value. Companies then charged the amount of this supposed "increased value" to the policyholders, thus reducing the amount the company paid for the repairs. Policyholders were then forced to make up the difference, in addition to their deductible, to the repair shop.

The Attorney General has successfully settled 17 betterment cases since 2000, alleging that insurance companies merely increased the value of the replaced part, and not the entire vehicle. Texas law does not permit such a charge or deduction, and auto insurance policies require that the companies fully pay for the repair, less the deductible, even if the parts used were better than the ones they replaced.

Under the terms of the agreement, the companies agreed not to engage in this practice and will refund the total amount of overcharges, plus interest, to customers who had claims involving betterment deductions.

Since 2000, the Texas Attorney General's office has obtained betterment settlements with State Farm, Nationwide, USAA, Geico, Travelers, Safeco, Sentry, Liberty Mutual, Allstate, Home State County Mutual Insurance Co., Consumers County Mutual Insurance Co., Farmers, Texas Farm Bureau, Trinity, and CNA for an estimated $16.4 million in total auto repair refunds to date.

Two lawsuits against State and County Mutual Insurance Co. and Maryland Casualty Insurance Co. are still pending.


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