A federal judge on Monday found that a $52 million class action settlement by Farmers Group Inc. was fair and that the parties should proceed with sending notices to auto insurance policyholders who will share part of the settlement.

There's still about six months to go until a final fairness hearing to approve officially of the settlement—comprised of $40 million for the class and about $11.5 million in attorney fees and $500,000 in expenses—but the ruling begins the process by approving of the steps and deadlines to finish the case by May 2020. Farmers will pay class members through account credits or checks rather than making them submit claims, said a Dec. 11 motion for settlement.

The case, Grigson v. Farmers Group Inc., shows the value of a good mediator. Lawyers for both sides told Judge Lee Yeakel of the U.S. District Court for the Western District of Texas during a settlement hearing that none of them had experienced another case in their careers with such extensive time dedicated to mediation.

They met in person five times and had countless telephone sessions with Deborah Hankinson, a former Texas Supreme Court justice, explained plaintiffs counsel Roger Heller of Lieff Cabraser Heimann & Bernstein. It was Hankinson who came up with the $40 million settlement figure, he added.

Plaintiffs attorney Joe Longley said at the hearing that the case is unusual because it's a Texas-only settlement that will apply to about 700,000 customers of Farmers Texas County Mutual Insurance Co.

The dispute was over the Farmers Smart Plan Auto policy, launched in 2016, that the plaintiffs claimed offered new Texas customers identical coverage at a lower price than the insurer's current policy for existing policyholders, said the Oct. 22, 2018, amended complaint. Also, Farmers raised rates on those existing policyholders. Plaintiffs Charles Grigson, Lisa Hoing and David Kelly alleged that Farmers took aggressive, deliberative and deceptive steps to ensure that its insurance agents only offered the cheaper plan to new customers, not existing policyholders. They brought a claim for insurance price discrimination under Texas Insurance Code Sec. 544.

Farmers denied all allegations of wrongdoing in a Nov. 19, 2018, answer. The Texas Department of Insurance in 2015 approved of Farmers' rate increases for current policyholders, the answer noted. In a motion to dismiss that Yeakel rejected in January 2018, Farmers argued that the Texas law in question didn't cover the alleged discrimination because it dealt with pricing of the same insurance policy, but this case dealt with two policies. Farmers also argued that the claims were barred by the filed-rate doctrine, which stops a plaintiff from suing over a rate that a regulatory body has approved.

At the hearing, Farmers' attorney, Scott Incerto, said the case was hotly contested for three years.

"It's a strong result. I think the plaintiffs faced a lot of legal hurdles," said Incerto, a partner in Norton Rose Fulbright in Austin, explaining that the difficulties would have been class certification, proving whether the two Farmers policies were really the same or different, and disproving whether the filed-rate doctrine applied in the matter.

The final fairness hearing to approve the settlement is scheduled for May 22, 2020.

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