Allstate to Refund $3.44 Million to Texas Auto Policyholders

The Texas Attorney General’s Office announced that Allstate and its affiliated insurance companies have agreed to a settlement that will result in refunds of $3.44 million to more than 23,000 Texas auto policyholders who paid more on claims for vehicle repairs than was required under their policies.

The Allstate agreement marks the 12th such settlement obtained since 2000 with major auto insurers. Attorney General Greg Abbott said the settlement emphasizes that companies such as Allstate may not deceive motorists who pay deductibles and make proper claims for vehicle repair work.

The companies engaged in a practice known as “betterment,” supposedly increasing the value of a policyholder’s vehicle by using better or newer parts. Companies such as Allstate then routinely reduced the amount paid for repairs by an amount believed to equal the improved value of the vehicle because upgraded parts were installed, such as new rather than rebuilt transmissions.

Abbott has argued insurance companies have merely increased the value of the replaced part, and not the entire vehicle, as they claim.

“This practice is an end-run around the standard Texas auto policy, and it hits consumers hard in the pocketbook,” Abbott said in the announcement. “The companies decided putting newer parts on the policyholders’ damaged vehicles should entitle them to deduct an amount for supposedly improving the value of the vehicles. Auto policies in Texas do not allow for this deception.”

The Attorney General’s office said that under the settlement, Allstate and its affiliated auto insurance companies will refrain from deducting for betterment on policyholders’ claims. The company agrees to refund the full amount charged for betterment, plus interest, to policyholders who had auto repair claims paid from Jan. 1, 1997, to the present. Allstate will mail checks directly to policyholders who are eligible for payment under the settlement.

Allstate agrees that this settlement will not affect its current insurance rates. The company will also pay $175,000 in attorneys’ fees and other expenses to the Attorney General’s office. The settlement does not require Allstate to admit liability or wrongdoing.

The companies named in the settlement are Allstate County Mutual Insurance Co., Allstate Indemnity Co., Allstate Life Insurance Co., Allstate National Insurance Co., Allstate Property and Casualty Insurance Co. Allstate Texas Lloyds Inc. and Allstate Insurance Co.

Since 2000, the Texas Attorney General’s office has also obtained betterment settlements with Farmers, Texas Farm Bureau, Trinity, State Farm, Nationwide, USAA, Geico, Travelers, Safeco, Sentry and Liberty Mutual insurance companies for an estimated $12.3 million in total refunds. Several similar lawsuits against other insurers are pending.