Zurich Settles Out Of Court

by Glen Shapiro, LawAndTax-News.com, New York

13 October 2010

Zurich Financial Services Group (Zurich) has announced that it and its wholly-owned subsidiary, Farmers Group, Inc. (FGI), have agreed in principle to a proposed comprehensive settlement in relation to a class action lawsuit pending in Superior Court in Los Angeles, California.

The proposed settlement will resolve all claims, dating back to 1999, in a complaint originally filed in August 2003 by Benjamin J. Fogel, who bought automobile, homeowners and umbrella insurance policies through three exchanges, Farmers Insurance Exchange, Fire Insurance Exchange, and Truck Insurance Exchange.

In the lawsuit, the plaintiff challenged the allegedly excessive level of management services fees paid by the Exchanges to FGI and certain of its affiliates.

While Zurich and FGI said they do not accept that there is any basis for the plaintiff’s claims regarding the management services fees that FGI charged to the Exchanges, a sum of USD455m will be made available to up to 13 million policyholders who may qualify for a distribution under the settlement, with any residual amount going to the Exchanges owned by their respective policyholder subscribers.

The allocation plan for payments to class members has not yet been determined, and while actual individual payments may vary considerably, this averages to an estimated USD35 per class member or policyholder subscriber, Zurich said. Zurich also will pay attorneys’ fees to class action counsel of up to USD90m.

As part of the settlement, the plaintiff has agreed to dismiss the case and drop all claims against FGI and its parent Zurich. All terms of the proposed settlement are subject to execution of a formal settlement agreement and court approval.

Zurich said that it has decided to settle this case "in order to provide certainty to its shareholders and clarity to customers as well as to avoid the risks and significant expense of continued litigation."

"Because the case would have depended in part on events dating from years or even decades ago, the ability to mount a vigorous defense would have been constrained by the passage of time, the turnover of Farmers’ customers and agency force and the challenge of retrieving subscription agreements on policies, many of which expired long ago," the company added.

Recommended