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Farmers Hit With $90 Million Judgment in Overtime ...

LOS ANGELES, Jul 11, 2001, (A. M. Best via COMTEX) -- A California jury slapped Farmers Insurance Exchange with a $90 million judgment in a class-action lawsuit that alleges the insurer for years cheated its claims adjusters out of overtime pay.

The judgment, by an Alameda County Superior Court jury, could reach as much as $130 million after lawyers' fees and interest are added, the Los Angeles Times reported.

Farmers said it would appeal the decision.

Farmers said it was "disappointed and concerned" about the verdict in the lawsuit, Bell vs. Farmers Insurance Exchange. "Throughout the 73 years of its existence, Farmers has consistently believed it was correctly following all applicable state and federal labor laws, including those related to the classification of its professional adjusting force as exempt from overtime, rather than as hourly non-exempt workers," the company said in a statement.

Field claims adjusters have historically been treated as exempt employees throughout the United States, Farmers argued. The company said California is setting adjusters within that state "apart from their peers in other states" if it allows the verdict to stand.

"The issue of proper classification of such employees as either exempt or non-exempt is one which Farmers hopes will be clarified in this case by the California Supreme Court," the company said.

Farmers said the advantages of exempt status for adjusters include independence, the ability to set their own hours and treatment as professionals.

Steven Zieff, of Rudy, Exelrod & Zieff, counsel for the plaintiffs, said the verdict covers the affected adjusters for their unpaid overtime from Oct. 1, 1993 to the June 26, 2001 trial date. "The class members in this case were all personal lines claims representatives," said Zieff in a statement. "They processed automobile and homeowners insurance claims. The 2,402 class members comprise about one-third of Farmers' California work force."

Zieff also claimed that Farmers hasn't changed its practices and still doesn't pay its claims adjusters overtime. "The claims adjusters are also seeking to have the court order Farmers to immediately begin paying overtime and to immediately keep the necessary time records to do so," said Zieff. "It is expected that the court will rule on this issue in the next several weeks."

In a similar case, Amerco (NASDAQ: UHAL), the holding company for Republic Western Insurance Co. and Oxford Life Insurance Co., agreed to pay millions of dollars to resolve a class-action lawsuit in California concerning overtime compensation at its U-Haul International Inc. subsidiary (BestWire, May 31, 2001).

Amerco will recognize an expense of about $10.3 million for fiscal year 2001 related to the settlement.

That class-action lawsuit, filed on behalf of managers for U-Haul in Los Angeles County Superior Court, alleged managers at the truck-and trailer-rental company were required to work as much as 60 hours a week without extra compensation, even though they spent much of that time doing the same kind of work as hourly employees.

The financial strength of Farmers Insurance Group is rated A+ (Superior) by A.M. Best Co.