AUSTIN - Texas Attorney General John Cornyn today announced a settlement with Safeco Insurance Company for $132,000 in estimated refunds to Texas consumers. The settlement concerns Safeco's practice of reducing auto repair claims payments to its policyholders for "betterment" of the vehicle. Under the settlement, Safeco agrees to stop the practice of deducting for betterment and will refund the amount charged for betterment, plus 10%, to policyholders who had an auto repair claim from January 1, 1997 to present.
The settlement in the form of an Assurance of Voluntary Compliance, was approved today in Travis County District Court.
"Safeco is the first insurance company to settle with us on the betterment issue, and is to be commended for doing what's right for its Texas policyholders,"said Attorney General Cornyn. Safeco settled without the necessity of filing suit.
On February 14, Attorney General Cornyn filed lawsuits against 16 other major insurers regarding the practice of deduction for betterment on auto repair claims. The lawsuits are still pending.
The settlement with Safeco requires the Seattle based company to pay an estimated $132,000 in restitution to just over 1400 Texas consumers. Safeco also agrees that this settlement will not affect its insurance rates. Safeco will also pay $15,000 in attorneys fees and other expenses to the Attorney General's office. The Assurance of Voluntary Compliance does not require Safeco to admit liability or wrongdoing of any kind.
"Betterment" is an insurance industry term for increasing the value of a vehicle by paying to repair it with better or newer parts. For example, if your engine is damaged in a collision and your insurance company decides to replace it with a newer engine, some companies deduct an amount for betterment or depreciation on the claim payment. The standard Texas auto policy does not allow for such a deduction, and a 1998 Austin Court of Appeals opinion states that these deductions are not permitted.
This investigation was handled by Assistant Attorney General Jim Wenzel, in the Insurance Practices Section of the Attorney General's Office Consumer Protection Division.
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