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Burg Simpson Expands State Auto Class Action To Include More Plaintiffs and More States

By Burg Simpson
May 23, 2013
4 min read

On May 17, 2013, Burg Simpson amended its Class Action Complaint against the State Auto Insurance Companies to include five new states and add the names of five more victims of State Auto’s fraudulent insurance practices.  In expanding the class, Burg Simpson now seeks to represent homeowners living in Ohio, Kentucky, Tennessee, Michigan, Pennsylvania, West Virginia, Illinois, and Wisconsin that have paid unjustified premiums for unnecessary insurance coverage that State Auto alleged was necessary to fully insure one’s home.


Standard Homeowners Insurance policies fully insure one’s home, so long as the home itself and other structures on the property are insured to 80% of their replacement cost value.  Plaintiffs allege that State Auto however misrepresented to consumers that this standard policy was inadequate to ensure full replacement cost coverage.  In turn, State Auto sold its customers a form of policy called the Defender Endorsement that set coverage limits for the home at the 100% of the replacement cost of the home.  As previously noted, the standard Homeowners Insurance policy already provides full replacement coverage.  Thus Plaintiffs allege that the extra insurance purchased through the Defender Endorsement is unnecessary.

In exchange for the Defender Endorsement’s unnecessary coverage, State Auto required homeowners to grant State Auto full authority to set the coverage limits for the home as it saw fit based on inflation and property evaluations performed by State Auto.  This is significant authority, as most other coverage limits and premiums set forth in the policy are contingent on the coverage limits set for the home.  In granting State Auto the authority to dictate the amount for which the home should be insured, homeowners trusted in State Auto to act reasonably to protect their assets.  Plaintiffs allege that State Auto unfortunately abused this unchecked grant of authority to generate a windfall in premium revenue through what it calls the “Insurance to Value Program.”


Plaintiffs allege in the Amended Complaint that, beginning in 2009, State Auto instituted the Insurance to Value Program to systematically raise the coverage limits set for homes and thereby increase premium revenue.  To execute this program, State Auto used the authority granted by the Defender Endorsement to “reevaluate” the replacement cost of its policyholders’ homes.  Shortly after a home’s reevaluation, State Auto began sending annual notices to the homeowner through form letters and renewal forms that indicated that policy limits went up as a result of increases in repair and replacement costs.  While State Auto’s form letters and renewal forms often made representations that policy limits only increased by 5.5% over the previous policy year, in reality, State Auto increased policy limits by far more than 5.5%.  In fact, in some instances State Auto increased coverage limits by more than 23% over the previous policy year, contrary to State Auto’s express representation.

Similarly, it appears that the replacement cost values that homeowners trusted State Auto to honestly determine were not grounded in reality.  Two of the named Plaintiffs purchased their home in 2003 for approximately $129,000. They insured their property with a State Auto Homeowners Policy that included the Defender Endorsement.  In 2009, State Auto valued the replacement cost of the home at $203,600.  By 2012, State Auto increased the replacement cost of their home to $494,000.  This amounted to an increase of more than 142% in three years even though the homeowners had made no significant improvements to their property.  This unjustified and unwarranted increase resulted in an increase in premiums from $660 in 2009 to $1,895 in 2012.


Excess insurance does not benefit the homeowner.  A homeowner cannot profit from unnecessary levels of insurance imposed upon him or her by their insurance company.  Rather, in the event of a total loss, the insurance company will pay the lesser of the policy limits or the actual replacement cost of the home.  Because of this, Plaintiffs allege that State Auto’s systematic increases in policy limits above the actual replacement cost of the home have resulted in homeowners paying millions of dollars in excess premiums to State Auto in exchange for phantom insurance they can never collect.  Burg Simpson seeks to hold State Auto and any other insurance company that engages in such allegedly fraudulent practices accountable to the homeowners that trusted in their insurance company to insure some of their most valuable assets.


If you or a loved one own a home and you believe your policy limits and premiums for Homeowners Insurance have increased without cause, you may be entitled to compensation.  The attorneys at Burg Simpson would be happy to speak with you and review your records to determine if you have a viable case against your insurance company. Call 1-800-713-9340 or fill out our contact form for a FREE no-obligation consultation today.

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