5th Apr 2016

Print Friendly, PDF & Email

In general
“Farmers” is a name attributed to several entities involved in the business of insurance. The advertising, letterheads on correspondence, often refer to “Farmers” or “Farmers Insurance Group,” or some other Farmers description. Policies of insurance may refer to a trade name of “Farmers Group” or “Farmers” on the actual policy, but within the policy refer to a paragraph containing several named insurers. It is this paragraph that designates which insurer issued the policy by a designation in the box marked with an “X” next to the name. The alternative name used in the policies are:

1.    Fire Insurance Exchange, or
2.    Truck Insurance Exchange.

Fire Insurance Exchange and/or Truck Insurance Exchange are the “insurers” and must be named in the insured’s complaint. Suit against the attorneys-in-fact exist depending on what additional facts exist. The relationship of the name “Farmers” to its insuring entities causes confusion. “The relationship between the two is not clear.” [Shafer v. Berger, Kahn, Shafton, Moss, Figler, Simon & Gladstone, 107 Cal. App. 4th 54, 60, 131 Cal. Rptr. 2d 777 (2d Dist. 2003)]  Truck Underwriters Association is attorney-in-fact for Truck Insurance Exchange. [Tran v. Farmers Group, Inc., 104 Cal. App. 4th 1202, 1207, 128 Cal. Rptr. 2d 728, 731 (1st Dist. 2002)]  This relationship was set forth in the insurer-respondents’ briefing. [Tran, 104 Cal. App. 4th 1202, 1207, fn.3]  This designation on the insurer’s appellate briefs conflicts with the SEC filing, referred to below. [Tran v. Farmers Group, Inc., 104 Cal. App. 4th 1202, 128 Cal. Rptr. 2d 728 (1st Dist. 2002)]

Fire Insurance Exchange is an affiliate member of the Farmers Insurance Group of Companies. [Baron v. Fire Ins. Exchange, 154 Cal. App. 4th 1184, 1187, 65 Cal. Rptr. 3d 502 (6th Dist. 2007)]

Levels of authority
Fire Insurance Exchange and/or Truck Insurance Exchange have levels of authority for settlement of real property losses.

There is a LARGE-LOSS DIVISION. Real property losses exceeding $75,000 are handled by a separate department designated as LARGE LOSS CENTER OF EXCELLENCE. Additionally, there are zone managers. An example is northern California which has a zone manager. [Baron v. Fire Ins. Exchange, 154 Cal. App. 4th 1184, 1188, 65 Cal. Rptr. 3d 502 (6th Dist. 2007)]

Two types of adjusters
Farmers Group employs two different types of adjusters. Independent adjusters handle claims when in-house adjusters are unavailable, but unlike the in-house adjusters, independent adjusters have no authority to settle claims. [Baron v. Fire Ins. Exchange, 154 Cal. App. 4th 1184, 1187, 65 Cal. Rptr. 3d 502 (6th Dist. 2007)] See § A28 ADJUSTER; § I23 INDEPENDENT ADJUSTER.

The insurance application
When applying for insurance, an individual will be asked by a “Farmers” agent to sign an application. The application in fine print near the end of the document will set forth that “Farmers Group” is being appointed as their exclusive attorney-in-fact to provide management services. See Tran v. Farmers Group, Inc., 104 Cal. App. 4th 1202, 1208, 128 Cal. Rptr. 2d 728 (1st Dist. 2002). The compensation in the application will exceed 20% of the gross premiums.

S.E.C. filing as of 2002 explained the relationship between Farmers Group and Farmers Insurance Exchange, Truck Insurance Exchange, and Truck Underwriters Association. The S.E.C. filing set forth an itemization of authority of Farmers Group being one that:

1.    selects risks
2.    issues policies
3.    prepares invoices
4.    mails invoices
5.    collects premiums
6.    manages the investment portfolios
7.    and performs certain other administrative functions

[Tran v. Farmers Group, Inc., 104 Cal. App. 4th 1202, 128 Cal. Rptr. 2d 728 (1st Dist. 2002)]

Farmers Group [Attorney-in-fact]

Farmers Group, according to the S.E.C. filing referred to above, operates as the attorney-in-fact for all three Farmers Group exchanges. [Tran v. Farmers Group, Inc., 104 Cal. App. 4th 1202, 1207, 128 Cal. Rptr. 2d 728 (1st Dist. 2002)] The three exchanges are:

1.    Farmers Insurance Exchange
2.    Truck Insurance Exchange
3.    Truck Underwriters Association

Truck Underwriters is a wholly owned subsidiary of Farmers Group. Truck Underwriters is the attorney-in-fact of Truck Insurance pursuant to the terms of a subscription agreement.

Truck Insurance is a reciprocal or interinsurance exchange. [R & B Auto Center, Inc. v. Farmers Group, Inc., 140 Cal. App. 4th 327, 362, 44 Cal. Rptr. 3d 426 (4th Dist. 2006)]

The attorney-in-fact executes the Exchange’s insurance contracts. [R&B Auto Center, Inc. v. Farmers Group, Inc., supra] The attorneys-in-fact are bound by the ordinary rule that an attorney-in-fact is an agent owing a fiduciary duty to the principal. [R & B Auto Center, Inc. v. Farmers Group, Inc., 140 Cal. App. 4th 327, 363, 44 Cal. Rptr. 3d 426 (4th Dist. 2006)] The scope of the fiduciary responsibility depends on the terms of the power of attorney. [140 Cal.App.4th 327, 364]  [See discussion, supra, this section.

Premiums received from insureds are deposited into a general Farmers account which Farmers Group will “sweep,” taking money and applying it “to where it belongs.” [Tran v. Farmers Group, Inc., 104 Cal. App. 4th 1202, 1209, 128 Cal. Rptr. 2d 728 (1st Dist. 2002)]

The Group makes the decision whether the policy is to be issued by Farmers Insurance Exchange or Truck Insurance Exchange. [Tran, 104 Cal. App. 4th at 1209] The Group employees issue the policies. [Tran, 104 Cal. App. 4th at 1209] The guidelines for the contents of the issued polices are generated by the home office of Farmers Group. [Tran, 104 Cal. App. 4th at 1209] The policies are generated by Farmers Group, Inc. computers for Farmers Insurance Exchange and Truck Insurance Exchange based upon a decision of an analyst or underwriter. [Tran, 104 Cal. App. 4th at 1209] For duties of attorneys-in-fact, see § R19 “RECIPROCAL” INSURERS.

Entities having no employees
Testimony in Tran v. Farmers Group, Inc., 104 Cal. App. 4th 1202, 1209, 128 Cal. Rptr. 2d 728, 733 (1st Dist. 2002), described which entity has no employees and which entity has employees.

Farmers Insurance Exchange: Farmers Insurance Exchange has no employees.

Truck Insurance Exchange: Truck Insurance Exchange has no employees of their own.

Truck Underwriters Association: Truck Underwriters Association which is the attorney-in-fact for Truck Insurance Exchange has no employees of its own.

Farmers Group Inc.: Farmers Group Inc. has employees that issue policies on behalf of the Exchanges, acting as the Exchanges’ representatives, and following guidelines provided by the Exchanges. [Tran v. Farmers Group, Inc., 104 Cal. App. 4th 1202, 1209, 128 Cal. Rptr. 2d 728 (1st Dist. 2002)]

Power-of-attorney, contents
The contents of the power-of-attorney pertaining to Farmers Group was not contained in the appeal record in Tran v. Farmers Group, Inc., 104 Cal. App. 4th 1202, 1214, 128 Cal. Rptr. 2d 728 (1st Dist. 2002). The terms of the power-of-attorney will be contained in the insurance applications given to the customer by the Farmers agent. If the attorney desires to read the described powers, the client must furnish the application to the attorney.

Part of the power-of-attorney is set forth in R & B Auto Center, Inc. v. Farmers Group, Inc., 140 Cal. App. 4th 327, 364, 44 Cal. Rptr. 3d 426 (4th Dist. 2006). R&B Auto Center, Inc, however held that the limited fiduciary duty did not require Farmers to cause to be issued a policy containing lemon law coverage with respect to used car sales. [140 Cal.App.4th 327, 365, n.19]

Claims adjusting liability of farmers group, inc. as attorney-in-fact
The fiduciary duties can extend no further than the terms of the power-of-attorney and the contract of insurance. [Tran v. Farmers Group, Inc., 104 Cal. App. 4th 1202, 1215, 128 Cal. Rptr. 2d 728 (1st Dist. 2002)] To this extent Tran v. Farmers Group, Inc. modifies Delos v. Farmers Group, Inc., 93 Cal. App. 3d 642, 665-666, 155 Cal. Rptr. 843 (4th Dist. 1979) (Delos appeal briefs were written by this author).

Pleading requirements to affix tort liability between attorney-in-fact and insured
In Tran v. Farmers Group, Inc., 104 Cal. App. 4th 1202, 1207–1208, 128 Cal. Rptr. 2d 728 (1st Dist. 2002), the plaintiff alleged cause of action for (1) breach of the covenant of good faith and fair dealing, (2) breach of fiduciary duty, (3) fraud, (4) conspiracy to defraud, and (5) intentional infliction of emotional distress. It was alleged that all the insurance company defendants share the same general management, accounting system, trademarks, and advertising. This was sufficient to withstand a general demurrer.

References in bold are to Mr. Cornblum’s legal text CALIFORNIA INSURANCE LAW DICTIONARY AND DESK REFERENCE (2015, 2016), published by ThomsonReuters (1-800-344-5008 to order 2015 3-Volume text – 2016 Edition available June 2016).

Leave a Reply

*