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Farmers Short Rate Case Moves Forward With Court Of Appeals Victory

Did you cancel your insurance policy midterm? You may be entitled to compensation.

On December 20, 2012, the California Court of Appeal held that two California Farmers’ policyholders could proceed with their case, which claims that Farmers over-charged them and all California Farmers policyholders who terminated their policies before their expiration, also known as a “Mid-Term Cancellation.”

The lawsuit claims that Farmers failed to disclose and explain that if a Farmers insured made a Mid-Term Cancellation, they would receive less than their unused pro-rata share of their premium. The circumstances in which this happens are: policyholders find a lower premium with other insurer, a car or house is sold, or a policyholder dies.

If you insured your home, property, car, truck or motorcycle with Farmers before January 1, 2012 and cancelled your policy mid-term, you too may have been underpaid by Farmers, and should learn more about the Farmers Short-Rate & Siemens Washer Litigation. To do so, email Eppsteiner Law, APC – or call 800-240-2216 to speak with an attorney.

If you were insured with a company other than Farmers and were paid less than your pro-rata unused premium when you cancelled your insurance, you too may have a valid claim. To discuss your insurance company’s underpayment of a premium refund, email Eppsteiner Law, APC – or call 800-240-2216 to speak with an attorney.

Farmers Insurance “Short Rate” Refund – Did Farmers Pay All You Were Owed?

Did your insurance company fail to inform you that it would charge you a penalty if you cancelled your policy? Did your insurance company inform you that it would charge a “short rate” if you cancelled your policy? Did your insurance company explain what a “short rate” is? OR: Did your insurance not tell you that it would penalize you if you cancelled your policy? Did your insurance company fail to tell you how it would compute the amount of the premium it would return to you if your cancelled your policy? (We expect it is the latter, not the former: e.g., you didn’t know your insurance company would charge you a penalty if you cancelled your policy, and you were not informed of the amount of the penalty.)

Some insurance companies don’t refund all of the unused portion of its policyholder’s premium. Insurer’s call refunding less than the unused portion of your premium “paying a ‘short rate.’”

Many insurers refund all the unused portion of a premium when an insured cancels their policy. However, a few insurer’s keep part of their insured’s unused premium. They effectively charge a penalty fee if your cancel your policy.

Farmers insurance is one of the companies that does not return all of the unused premium to its insureds when they cancel their Farmers’ policies.

In Farmers’ policies, Farmers states that if it cancels the policy, it will refund all of the unused premium. (It calls this returning the premium “pro-rata.”)

However, Farmers does not return all of the unused premium to its policyholders when the policy holder cancels the policy. When the policyholder cancels their Farmers policy, they are paid something less than the unused premium and something less than the “pro-rata” share of the premium they paid. Farmers calls its payment of less than the unused portion of the premium the “short rate.” What this really means is that if a Farmers’ insured terminates their policy at any time other than renewal of their policy, Farmers will charge the insured a penalty fee. The penalty fee is the amount of money that is the difference between the “short rate” and the “pro-rated unused portion of the premium.”

Farmers’ policies do not define “short rate.” Therefore a policy holder cannot know what the “short rate” is. Farmers’ insureds are not informed that they will be charged a penalty if they cancel their policies before the policy’s renewal. How can an insured agree to something not explained before they buy a policy or defined within the policy?

A Farmers policyholder has contacted Eppsteiner Law, APC to complain that he was charged a penalty for cancelling his policy. He further complained that he was never informed that he would be penalized if he cancelled his policy: not by Farmers’ and not by his Farmers’ agent. When this Farmers policyholder asked his Farmers agent what the “short rate” was, they told him they couldn’t explain it. When this same insured asked a Farmers Insurance Group employee how Farmers computes the “short rate,” the employee said they could not explain it. When this insured queried Farmers in writing about how to compute the short rate, Farmers wrote to him and said it could not explain the “short rate” computation because it was too complex.

The foregoing demonstrates that Farmers’ insureds cannot know they are agreeing to be paid the “short rate” when they buy their policies. How can you agree to something not understood or known by Farmers insurance agents and employees? How can a Farmers insured agree to something that is not explained before they purchase their policy, not defined in sales material and not even defined Farmers’ policies? The answer to these questions is that Farmers’ insureds did not agree to anything they don’t know, is not explained to them and is not defined within their Farmers’ policies.


Eppsteiner Law, APC is investigating Farmers’ practice of paying its insureds the short rate of their unused premiums. If Farmers or another insurer has charged you a penalty, e.g. paid you a “short rate” refund, contact Eppsteiner Law, APC. Farmers’ insureds may not even realize that Farmers charged a penalty when it refunded your unused premium.

Contact Eppsteiner Law, APC if you cancelled a Farmers’ policy today toll-free and without obligation at 858-350-1500 or via our online contact form. You may have the right to recover the penalty Farmers charged you for cancelling your policy.



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