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So Much for Delay on the Lead Rate Case

Posted in Opinions & Judgments

The Third Court of Appeals has released its opinion in the lead State Farm rate case, Geeslin v. State Farm Lloyds (No. 03-05-00067-CV).  So much for any concerns that the recent panel-switch would delay the decision—although the Court did not decide all the cases together, as Chief Justice Law indicated it might.  Here is the opening paragraph (footnote omitted):

This appeal concerns the validity of a rate order issued by the commissioner of insurance.  The rate order was based on now-expired article 5.26-1 of the insurance code, which provided the procedure by which Texas homeowners insurance providers were to file their initial homeowners insurance rates with the Texas Department of Insurance (“TDI” or the “department”) as required by Senate Bill 14 in 2003.  Tex. Ins. Code Ann. art. 5.26-1 (West Supp. 2004-2005).  The rate order required State Farm Lloyds to reduce its filed homeowners insurance rates by twelve percent.  State Farm Lloyds sought review in district court.  Finding that article 5.26-1 was unconstitutional and that State Farm Lloyds’s due process rights had been violated, the district court vacated the rate order.  Appellants now seek reversal of the district court’s judgment.  We conclude that the portion of section 4 of article 5.26-1 setting out what insurers are required to prove on appeal to the commissioner (“the proof provision”) is unconstitutional on its face and as applied to State Farm Lloyds.  Therefore, we affirm the judgment of the trial court in part as to its findings that the provision of former Article 5.26-1, section 4, which requires an insurer to prove that a rate reduction would produce inadequate rates, is unconstitutional and that State Farm Lloyds’s due process rights were violated.  Because we further hold that the unconstitutional proof provision is severable, we sever that provision, reverse the trial court’s judgment as to the constitutionality of the remainder of the statute, and remand to the department for further proceedings consistent with this opinion.

Lots of juicy issues here.  This dispute seems far from over.