Farmers Insurance Settles Bad Faith Class Action

Farmers Insurance of Arizona has settled a 'bad faith' class action originally filed in January 2004, for a reported $3 million.

The suit stemmed from allegations by a customer, Tucson resident Paul Schwam, that a business practice enacted in 2001 was a breach of Schwam's policy and policies owned by certain other customers. The policy was related to claims for medical expense coverage.

Schawm, who filed medical expense claims after being rear-ended in a car accident, found out that Farmers Insurance only paid his doctors and other health-care providers at PPO levels even though he wasn't a PPO member.

In addition to the $3 million as a class settlement, Farmers has agreed to pay Schwam $100,000 as an 'incentive award.'