Texas Seeks Over $10 Million In Refunds From Credit Insurance Firm
Service Life & Casualty Insurance Co. cited for failure to refund premiums
AUSTIN - Texas Attorney General Greg Abbott has filed a legal
action against an insurance company, seeking over $10 million in
refunds to Texans who purchased “credit insurance” when financing their
vehicles. The policies were written to protect vehicle owners during
the finance period.
Written by Service Life & Casualty
Insurance Co of Austin, the policies in question ended before their
full term expired, but the policyholders did not receive refunds of the
unearned insurance premiums that were owed to them.
“Unbeknownst
to most policyholders, this company wrongly held back money consumers
paid up-front for insuring the life of their vehicles’ finance plans,”
said Attorney General Abbott. “That money belongs to those Texans and
we plan to have it returned it to them.”
The Attorney General’s
investigation has already identified about 48,000 Texas consumers who
may be owed refunds from Service Life. The average refund for each
consumer is currently estimated at $200, plus interest. The Attorney
General expects to identify even more consumers who are owed refunds as
this lawsuit progresses.
Service Life offers credit insurance
through Texas auto dealerships to protect consumers for the period of
their vehicle loans. Buyers then have the option to purchase the
insurance, which would be used to pay off the vehicle loan in the event
the buyer develops a long-term disability or dies during the period of
the loan.
Like many credit insurers, Service Life’s policies are
“single-premium policies,” in which a single payment for as much as six
years of coverage is financed as part of the buyer’s total loan.
However, the company failed to live up to its promise to refund
premiums when their customers’ loans were paid off early or their
insurance otherwise ended early.
The Attorney General’s lawsuit
requests a court judgment, with interest, ordering Service Life to
refund unearned credit insurance premiums owed to Texas consumers whose
loans were paid earlier than the expected period of the loans. The
company’s own policies state - and the Texas Insurance Code requires -
that if a consumer pays off his or her debt early, Service Life will
refund the unearned portion of the insurance premium.
The
Attorney General’s lawsuit cites violations of the Insurance Code and
Texas Deceptive Trade Practices Act (DTPA). In addition to refunds to
harmed consumers, the suit seeks civil penalties of up to $20,000 per
violation of the DTPA and $10,000 per violation of the Insurance Code.
The
injunction sought would prohibit the company from engaging in its
current refund practices and requires it to modify those practices so
that consumers get full and timely refunds in the future.
The
Attorney General filed a July lawsuit against American National
Insurance Co. of Galveston for engaging in similar practices. That
lawsuit is pending.
