Contested Insurance Settlement Gets Judge’s Preliminary Approval

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Judge rejects consumer group's argument that settlement would shortchange class members.      


LOS ANGELES – A judge has given his initial thumbs-up to a $545 million settlement of a long-running insurance class action, rejecting a consumer advocacy group's argument that the deal shortchanges the class.

The suit brought allegations that Farmers Group breached its fiduciary duties to millions of policyholders and violated California business code by tacking on unfair "management fees" to the cost of various types of insurance policies.

Terms of the settlement before Los Angeles County Superior Court Judge William F. Highberger call for Farmers to pay $455 million to 13 million policy holders who qualify for the money, court papers state. The average refund has been estimated at just $20 per class member.

Farmers policyholder R.C. Heublein, represented by Consumer Watchdog, a Santa Monica-based advocacy group, argues that the class deserves more.

In a tentative ruling issued last week, Highberger rejected the group's arguments that the settlement was a dud because it would require class members to fill out a complicated form in order to collect, and because any unclaimed money would go to insurance entities controlled by Farmers.

"The court is not persuaded that the former objections have any merit," Highberger ruled.

A Wednesday hearing is set for preliminary approval of the settlement. Final court approval of the proposed deal is scheduled for September.

The class is represented by a host of lawyers, including Thomas V. Girardi of Girardi Keese, who stand to be paid $90 million in attorney fees. Highberger ruled that the attorney fee request by class counsel seemed reasonable.

Farmers Group spokesman Mark Toohy declined to comment, pending Highberger's final ruling.

The settlement scuffle is notable, especially because it found Consumer Watchdog battling with the same prominent trial attorneys with whom it normally sides on behalf of consumers.

Harvey J. Rosenfield, Consumer Watchdog founder and author of Proposition 103, which reformed much of California's insurance industry, expressed disappointment in the case's likely outcome.

"We think the money should go back to the policy holders on whose behalf this case was brought," Rosenfield said.

Girardi, however, questioned Consumer Watchdog's motives for intervening.

"Consumer Watchdog is always after the money," Girardi said. "Their whole deal is 'Let's screw up the settlement, and if we screw up the settlement, maybe something good will happen for us.'"

The case is Fogel v. Farmers Group Inc., BC300142 (L.A. Super. Ct., filed Aug. 1, 2003)

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