Texas AG Reaches Final Settlement with Insurers for Auto Repair Overcharges

Texas Attorney General Greg Abbott announced the last two in a five-year series of settlements with various insurance companies to give refunds to Texas policyholders who paid more out of pocket on claims for auto repairs than their policies required.

State and County Mutual Fire Insurance Co. agreed to pay $952,000, including interest, in refunds to about 2,900 policyholders who had auto repair claims from January 1996 through February 2003. In November Abbott filed a settlement with Maryland Casualty Co., which requires the company to make refunds totaling $53,000 to about 185 Texas policyholders who filed claims between January 1996 and September 1999.

“Consumers who make valid claims following traffic accidents expect to be treated fairly by insurance companies,” Attorney General Abbott said in the announcement. “They also deserve refunds from companies that used deceptive means to take money from them through such schemes as this.”

The companies, along with others in the industry, engaged in a systematic, unlawful practice known as “betterment,” in which they claimed 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.

Under the terms of the current agreement, most eligible policyholders will automatically receive a check reflecting the total amount of overcharges, plus interest, to customers who had auto repair claims involving betterment.

However, many policyholders have not yet been identified, and these individuals must submit a claim form to the settlement administrator. Any consumer who believes he or she may be entitled to a refund should call (817)-732-2111 ext. 3025, or mail an inquiry to Robert Hudson, Claims Administrator, c/o Wellington Financial Services Inc., P.O. Box 230, Fort Worth, TX 76101.

Since 2000, the AG has settled 19 betterment case for an estimated $17.4 million in refunds, 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.