Office of the Attorney General News Release Archive

Thursday, October 18, 2001


Refunds Associated with 'Betterment' Practices on Auto Insurance Claims

AUSTIN - Texas Attorney General John Cornyn today announced the settlement of a lawsuit in Travis County District Court against Travelers Insurance Companies, resulting in $310,000 in estimated refunds to Texas policyholders for certain impermissible vehicle repair practices.

The settlement concerns Travelers' practice of reducing auto repair claims payments to its policyholders for "betterment"of the vehicle. "Betterment" is an insurance industry term for increasing the value of a vehicle by paying to repair it with better or newer parts. This reduced claims payment generally causes a policyholder to pay more out-of-pocked expense to cover part of the repair when the policy should cover it all, beyond the customer's deductible.

Under the terms of the settlement, Travelers agrees to stop the practice of deducting for betterment on its policyholders' claims and will refund the amount charged for betterment, plus interest, directly to policyholders who had auto repair claims from Jan. 1, 1997, to the present.

"Travelers is to be commended for its willingness to do what is right for its Texas policyholders," said Attorney General Cornyn. "I would hope other insurers follow Travelers' example."

Last year, Cornyn sued 16 major insurance companies regarding their illegal betterment practices and, in addition to Travelers, has reached settlements with USAA and State Farm. Three others, GEICO, Safeco and Liberty Mutual, settled prior to Cornyn filing lawsuits against them.

An example of a betterment practice might involve an engine damaged in a collision. The vehicle owner's insurance company may decide to replace it with a newer engine, but some insurers have deducted an amount for betterment or depreciation on the claim payment. The standard Texas auto policy does not allow for such a deduction. A 1998 Austin 3rd Court of Appeals opinion also has held that these deductions are not permitted.

The settlement requires Travelers pay refunds to about 1,400 of its eligible Texas policyholders. The company will be sending refund checks directly to these policyholders. Travelers also agrees that this settlement will not affect its insurance rates. Travelers will also pay $31,300 in attorneys' fees and other expenses to the state. The settlement does not require Travelers to admit liability or wrongdoing of any kind.

The company has been unable to identify information on a few policyholders and betterment deductions made on these in 1997. Consumers who believe they had an auto repair claim in 1997 against Travelers involving betterment should contact the company about possible refund eligibility. The toll-free number is 800/238-6208.

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