Opinion

Charles O. "Chuck" Grigson, Gerald Hooks, and Leslie Hooks v. State

Court: Texas Court of Appeals, 3rd District (Austin)
Filed: Jul 31, 2015
Status: Published
Cited by: 0 cases
Authority: More cited than 3.1%

speaks favorably of the use of second-class mail to provide notice to class members

How later courts described this case

speaks favorably of the use of second-class mail to provide notice to class members
finding notice to be sufficient where it directed class members to website with full copy of the_ settlement agreement and informed them of their right to opt out and the consequences of not doing so
holding that "the standard class action requirements must be applied generally to the claims asserted by Attorney General, not the Attorney General himself," and directing court of appeals to address intervenors ' remaining points of error on remand
noting that public policy strongly favors pretrial settlement of class actions

Written by the judges who cited it.

The opinion

ACCEPTED

03-15-00436-CV

6313799

THIRD COURT OF APPEALS

AUSTIN, TEXAS

7/31/2015 3:00:46 PM

JEFFREY D. KYLE

CLERK

NO. 03-15-00436-CV

___________________________________________________

FILED IN

3rd COURT OF APPEALS

IN THE COURT OF APPEALS AUSTIN, TEXAS

THIRD JUDICIAL DISTRICT COURT 7/31/2015 3:00:46 PM

JEFFREY D. KYLE

AUSTIN, TEXAS Clerk

___________________________________________________

CHARLES O. “CHUCK” GRIGSON,

APPELLANT

VS.

THE STATE OF TEXAS, THE TEXAS DEPARTMENT OF INSURANCE,

THE TEXAS COMMISSIONER OF INSURANCE;

and FARMERS GROUP, INC. ET AL.,

APPELLEES

___________________________________________________

On Appeal from the 261st Judicial District Court of Travis County, Texas

Cause No. D-1-GV-02-002501

___________________________________________________

APPELLANT GRIGSON’S RESPONSE TO APPELLEES’ JOINT MOTION TO DISMISS

APPEAL FOR LACK OF JURISDICTION AND REQUEST FOR EXPEDITED

CONSIDERATION OF MOTION

___________________________________________________

Joe K. Longley Philip K. Maxwell

LAW OFFICES OF JOE K. LAW OFFICE OF PHILIP K.

LONGLEY MAXWELL

State Bar No. 12542000 State Bar No. 13254000

1609 Shoal Creek Blvd. #100 1609 Shoal Creek Blvd #100

Austin, Texas 78701 Austin, Texas 78701

512-477-4444 512-947-5434

Attorneys for Appellant Grigson

TO THE HONORABLE COURT OF APPEALS:

I. The 2015 order is a class certification order by virtue of its express

terms.

By its express terms, the July 6, 2015 Order of Preliminary Approval 1 now

before the Court is a class certification order appealable under Section 51.014(a)(3)

of the Texas Civil Practices and Remedies Code. Paragraph 2 of the 2015 order

defines the classes as required by Rule 42(c)(1)(B). 2 Paragraph 7 of the 2015 order

describes the notice to the class and paragraph 8 finds that the notice is “the best

notice practicable under the circumstances” as required by Rule 42(c)(2)(B).3

Paragraph 5 of the 2015 order finds the “fair and adequate representation”

requirement of Rule 42(a)(4).4 The Rule 42(a)(4) “fair and adequate

representation” finding in paragraph 5 of the 2015 order of preliminary approval

fundamentally alters the Rule 42(a)(4) finding made in paragraph 5 of the 2003

ORDER OF PRELIMINARY APPROVAL (July 6, 2015) (“the 2015 order”). EXHIBIT 1. The 2015

Order was entered pursuant to Rule 42 and the Insurance Code. 2015 Order at 2 and 5, para. 8.

TEX. R. CIV. P. 42(C)(1)(B): “Determining by Order Whether to Certify a Class Action;

Notice and Membership in the Class. . . . An order certifying a class action must define the

class . . . .”

TEX. R. CIV. P. 42(C)(2)(B): “Determining by Order Whether to Certify a Class Action;

Notice and Membership in the Class. . . . the court must direct to class members the best notice

practicable under the circumstances . . . .”

TEX. R. CIV. P. 42(a)(4): “Prerequisites to a Class Action. One or more members of a class

may sue or be sued as representative parties on behalf of all only if . . . the representative parties

will fairly and adequately protect the interests of the class.”

Appellant Grigson’s Response To

Appellees’ Joint Motion To Dismiss Appeal 2

order of preliminary approval, 5 a point best made by redlining the changes made in

the 2015 order.

5. The Court further finds that there has been no at no time

during the course of this litigation has there been any collusion

whatsoever between the State and the Farmers Parties with

respect to negotiating the Settlement Agreement and that the

State has represented, and will continue to represent, the

interest of the Farmers’ policyholders fairly and adequately and

without a conflict of interests.

Thus, the 2015 order makes the finding that Rule 42(a)(4) is satisfied in 2015

based on a record made 12 years after the 2003 order was signed. The Rule

42(a)(4) finding in the 2003 order had to be altered to meet Grigson’s 2015

charges of collusion, conflicts of interest, and inadequacy of the State in

representing the class. 6

These provisions in the 2015 order tracking the certification requirements of

Rule 42 unmistakably brand the 2015 order as a certification order subject to this

Court’s interlocutory jurisdiction.

ORDER OF PRELIMINARY APPROVAL (June 27, 2003)(“the 2003 order), para. 5. EXHIBIT 2.

See CHARLES O. “CHUCK” GRIGSON’S FOURTH AMENDED PLEA IN INTERVENTION. EXHIBIT

3. INTERVENOR GRIGSON’S RESPONSE IN OPPOSITION TO CLASS CERTIFICATION AND

PRELIMINARY APPROVAL (“Grigson’s Opposition to Class Certification”). EXHIBIT 4.

Appellant Grigson’s Response To

Appellees’ Joint Motion To Dismiss Appeal 3

II. The reason the 2015 order does not say “the court hereby certifies

the settlement classes” is because of the State and Farmers’

agreement to abrogate this Court’s jurisdiction in violation of Texas

law.

The State and Farmers do not address the express terms of the 2015 Order

that make it a Rule 42 certification order. Instead, they construct a “Back to the

Future” alternate reality wherein a 12-year-old class certification order approving a

12-year-old terminated class settlement 7 is “fast forwarded” to the present in an

effort to support the approval of a 2015 class settlement containing different terms

negotiated under different circumstances, neither of which were present or

addressed when the 2003 order was entered.

Why would the State and Farmers agree to go to such extremes to avoid

entry of a 2015 order that contains the words “the court hereby certifies”? There is

only one answer—to try to abrogate this Court’s statutory jurisdiction over this

appeal. The settlement history of the last two years in this case proves the point.

On August 23, 2013, the State and Farmers filed their joint motion to

approve a 2013 settlement, 8 the predecessor settlement to the 2015 settlement now

Grigson’s Opposition to Class Certification at 4-7 (detailing the termination of the 2003

settlement agreement and 2003 certification order).

STATE OF TEXAS AND FARMERS PARTIES’ JOINT MOTION FOR PRELIMINARY APPROVAL OF

SECOND AMENDED SETTLEMENT AGREEMENT AND STIPULATION AND CLASS NOTICE (August 23,

2013) (“the 2013 motion”) EXHIBIT 5. The 2013 motion sought approval of the SECOND

AMENDED SETTLEMENT AGREEMENT AND STIPULATION. (August 29, 2013) (“the 2013

Settlement”). EXHIBIT 6. In the record in the trial court, the 2013 agreement is frequently

referred to as “SASA.”

Appellant Grigson’s Response To

Appellees’ Joint Motion To Dismiss Appeal 4

before the Court. In their motion to approve the 2013 settlement, the State and

Farmers said that:

Approving a class action settlement as to a putative class is

generally a multi-step process. Only the first step is to occur at

the upcoming hearing--preliminary approval of the proposed

settlement and conditional certification of a temporary class.9

Consistent with the 2013 Motion, the 2013 Settlement, under the heading

“CERTIFICATION OF SETTLEMENT CLASSES”, said that “[t]he Parties

agree that the Court may enter an order conditionally certifying the Settlement

Classes”10 and that an order of preliminary approval be entered “substantially in

the form of Exhibit A hereto.” 11 The order marked Exhibit A states that “this

Court hereby certifies, for purposes of effectuating the Settlement Agreement, the

following Settlement Classes.” 12

On April 28, 2014—the day before the preliminary approval hearing on the

2013 settlement—Grigson filed his Plea in Intervention as a policyholder member

of the putative class and as an owner of the Exchanges. 13 Grigson prayed that the

2013 Motion at 17-18 (citations omitted and emphasis added).

2013 Settlement at 8, para. 4.

2013 Settlement at 8, para. 3.

2013 “Proposed Order” at 2, para. 2 (attached as Exhibit A to 2013 settlement). EXHIBIT 7

here.

Grigson’s Plea in Intervention and Objection to Preliminary Approval of Second Amended

Settlement Agreement. (“Grigson’s Original Plea in Intervention.”) EXHIBIT 8.

Appellant Grigson’s Response To

Appellees’ Joint Motion To Dismiss Appeal 5

2013 settlement not be approved because there was a conflict between the

policyholder-owned Exchanges (who were paying all of the settlement) and

Farmers Group Inc. (who was paying nothing); 14 there was a conflict “created by

one firm, Fulbright and Jaworski, representing both FGI and the Exchanges;”15 and

because the State was an inadequate class representative having agreed to

surrender the State’s jurisdiction to consider FGI’s high management fees in

making rate decisions in the future and having agreed to accept $2 million of

policyholder money for case “expenses,” terms that directly conflict with the

interests of the class.16 Of particular importance to the matter before this Court

now, Grigson also pled that a new certification hearing and order was required

because the 2003 settlement was different from, and had been expressly

superseded by, the 2013 settlement: “Previous certification of the 2003 Classes did

not certify anything pursuant this 2013 settlement.” 17

On April 29, 2014, the trial court rejected the 2013 settlement.

Acknowledging Grigson’s objections and those of the two other intervenors, the

court expressed concern that the settlement would “obliterate” another Texas class

Grigson’s Original Plea in Intervention at 7-8. EXHIBIT 8.

Grigson’s Original Plea in Intervention at 7. EXHIBIT 8.

Grigson’s Original Plea in Intervention at 8-9. EXHIBIT 8.

Grigson’s Original Plea in Intervention at 5. EXHIBIT 8.

Appellant Grigson’s Response To

Appellees’ Joint Motion To Dismiss Appeal 6

action against Farmers where a litigation class has already been certified; 18 that the

settlement lacked class compensation for the lost time value of money; 19 and that

there were questions concerning the “representational conflict” of a single law firm

representing the exchanges and the corporation and “potential for unfairness to the

exchanges vis-a-vis the corporation.” The trial court told the State and Farmers

this issue would have to be addressed before the court could grant even preliminary

approval of a settlement in the case. 20

The trial court’s rejection of the 2013 settlement triggered its termination

clause, which provided that:

The Farmers Parties do not agree to certification of the

Settlement Classes for any purpose other than to effectuate this

Settlement Agreement. In the event that the Court were not to

approve and certify the Settlement Classes in all respects as

defined in this Settlement Agreement (1) any stipulations and

agreements made herein are null and void and (2) it is

understood that the Farmers Parties would challenge the

certification of a litigation class . . . . 21

On September 4, 2014, at the hearing on “Farmers Parties’ Motion to Strike

Grigson’s Intervention,” Farmers’ lawyer said he didn’t think the court had

actually rejected the 2013 settlement. The court disagreed.

04/29/2014 Tr. at 56. EXHIBIT 9.

Id. at 29-31.

Id. at 49-50.

2013 Settlement at 8, para. 2. (Emphasis added.) EXHIBIT 6.

Appellant Grigson’s Response To

Appellees’ Joint Motion To Dismiss Appeal 7

THE COURT: Well, I haven't approved this settlement

agreement. In fact, I rejected it. So you are now in a posture

where you don't agree with the class action. And in fact, you

were the party who wanted the class action 12 years ago. So it

seems to me we're back at square one with no settlement

agreement, no certified class . . . . 22

THE COURT: I thought I was pretty clear on April 29th I'm

declining to approve the second amended settlement agreement.

I thought that was pretty clear, and I thought that you and I had

that sort of meeting of the minds at the beginning of this

hearing, but I guess if I wasn't clear, I'm hopefully clear now. 23

On March 4, 2015—nearly 11 months after rejection of the 2013 settlement

on April 29, 2014, the State and Farmers filed the new 2015 settlement. To prop

up an argument that the trial court had not really rejected the 2013 settlement, and

therefore the 2013 settlement had not really terminated, and therefore the 2003

certification order really was still good, the State’s and Farmers crafted the 2015

settlement as a “Supplement” to the 2013 settlement, which they attached as an

exhibit along with all of its exhibits.

It is the 2015 Supplement that contains the State’s and Farmers’ agreement

to abrogate this Court’s jurisdiction. Under the heading “CERTIFICATION OF

SETTLEMENT CLASSES”, the State and Farmers agree that:

As to Section III of the [2013] Settlement Agreement on

“Certification of Settlement Classes,” the Parties acknowledge

and agree that the District Court has certified the Settlement

09/4/2014 Tr. at 55:9-15. (Emphasis added.) EXHIBIT 10.

Id. at 57:16-23.

Appellant Grigson’s Response To

Appellees’ Joint Motion To Dismiss Appeal 8

Classes in its Order of Preliminary Approval (June 27, 2003),

that was appealed to the Third Court of Appeals and the

Supreme Court, which affirmed the Order of Preliminary

Approval, and the case was ultimately remanded to the District

Court on March 9, 2010. Accordingly, the Parties have

satisfied the requirement of seeking certification of the

Settlement Classes for purposes of Paragraphs 1-4 of Section

III of the Settlement Agreement, although the other conditions

of Paragraph 2 still apply. 24

In other words, the State and Farmers agree in 2015 to change the 2013

settlement so that it says that “The State shall not file a motion for preliminary

approval that requests the Court to enter an Amended Order of Preliminary

Approval substantially in the form of Exhibits A” (which, it will be recalled,

contains the words “the Court hereby certifies”) and to say “[t]he parties do not

agree that the Court may enter an order conditionally certifying the settlement

classes and appointing the State, through the Attorney General, as class

representative and class counsel.”

Of course, the State’s and Farmers’ unlawful agreement to abrogate this

Court’s jurisdiction was not self-executing. To complete the deal, Farmers and the

State needed the trial court’s cooperation. First, they needed the trial court to

ignore the order that was a defined term in and part of the 2015 Settlement because

that order does contain the words “the court hereby certifies.” Next, they needed

the trial court to sign a new order that is not part of the 2015 settlement agreement

SUPPLEMENT TO THE SECOND SETTLEMENT AGREEMENT AND STIPULATION (March 4, 2015)

(the “Supplement”) at 2, para.III. (Emphasis added.) EXHIBIT 11.

Appellant Grigson’s Response To

Appellees’ Joint Motion To Dismiss Appeal 9

the court is approving, an order that removes the words “the court hereby

certifies.” Finally, they needed the trial court to stick with the plan and overrule

any objection that the new order did not comply with Rule 42. Farmers and the

State got all they wanted from the trial court, and the trial court gave all of it to

them knowingly and willingly, as the transcript of the hearing plainly shows.

MR. LONGLEY: I want to make an objection on the record

before we go off the record, Your Honor, regarding the form of

the order that you're about to sign. We object to the form.

THE COURT: Then tell me what the defect is in the form of the

order.

MR. LONGLEY: The defect is that, number one, we were just

handed this order. It was not attached as part of the moving

papers. The one that was attached to the moving papers in

Paragraph 2 says this Court hereby certifies classes, and this is

the first time we've seen an order that does not certify classes.

THE COURT: That's because their position, as you know, all

along in this joint motion has been that the class was previously

certified -- or the Court gave preliminary approval before, it's

come back to the Court and that the class has never been

decertified. That's -- has that been your argument?

MS. GREER [for Farmers]: Yes, Your Honor.

MR. GODBEY [ for the State]: Yes, Your Honor.

THE COURT: And so what you like about that other order is

that it suggests that I have to go back and recertify the class,

and that's what you'd like me to put in the order, right?

MR. LONGLEY: Either that or that you refuse to certify a class

in this particular order for the reason that you're adopting their

Appellant Grigson’s Response To

Appellees’ Joint Motion To Dismiss Appeal 10

view that it's already been certified and you're applying that

certification in 2003 to this new 2015 settlement.

THE COURT: No, I understand what they're doing in this

order, and I thought about that very thing as I read it, just as

you did, and I am going to sign the order as they've presented

it.25

* * *

MR. LONGLEY: I guess what I need to know is the Court not

going to entertain any alternative order to refuse with regard to

what we might want to submit?

THE COURT: I'm not going to entertain any substantive

differences, that's correct.

MR. LONGLEY: Such as the certification.

THE COURT: That's correct. That's exactly right.

MR. LONGLEY: We're addressing that right now.

THE COURT: Exactly, we are addressing that right now. And I

understood that from the briefing you gave me in advance of

this hearing that you were each trying to spin my prior

comments on the record to be a "oh, we need to recertify this

class" from your perspective and "no we don't" from their

perspective. I understood that completely.

MR. LONGLEY: And I think I do, too, Your Honor, that this

particular settlement that you're approving will not have a

separate certification or refusal to certify.

THE COURT: It's going to be the order they've proposed. 26

07-02-2015 Tr. pp. 116-136 at 122:5-123:12. EXHIBIT 12.

07-02-2015 Tr. at 133:20 – 134:18. EXHIBIT 12. In their haste to get their deal done,

Farmers and the State tendered the trial court an order that is missing its paragraphs 3 and 4.

Appellant Grigson’s Response To

Appellees’ Joint Motion To Dismiss Appeal 11

But the jurisdiction of the courts cannot be abrogated by agreement. Walls

Regional Hosp. v. Altaras, 903 S.W.2d 36, 40-41 (Tex. App.—Waco 1994, orig.

proc.). Nor can it be abrogated by a trial court. The State’s and Farmers’

agreement to suppress an order that says “hereby certifies” cannot oust this Court

of its jurisdiction to review an order that, despite their efforts and the complicity of

the trial court, is so clearly within its jurisdiction.

Indeed, the proper invocation of this Court’s interlocutory jurisdiction does

not require that an order say anything about classes, certifications or the myriad

other matters in Rule 42. Phillips Petroleum Co. v. Yarbrough, 405 S.W.3d 70, 80

(Tex. 2013); (holding appealable an order denying a motion to sever a new claim

made after a litigation class had been certified because “the new claim raises

concerns about the propriety of certification that, regardless of whether

certification is ultimately ordered or upheld, were not present or considered with

respect to” the class claim previously certified). The substantial changes the State

and Farmers made to the 2003 settlement; 27 the gross conflict between the State

These are paragraphs they excised from the order that is part of the settlement agreement where

the court appoints class counsel and “hereby certifies” the classes. In the trial court’s haste to

give Farmers and the State everything they wanted, the court signed it, providing graphic proof

of the trial court’s wholesale abandonment of its duty of “heightened scrutiny” and “rigorous

analysis.”

The changes in the 2003 settlement made by the 2013 settlement, are shown in redline

comparisons submitted by the State and Farmers as Exhibit 2 to the 2013 settlement. See

EXHIBIT 13. The changes in the 2013 settlement made by the 2015 Supplement require

reading the Supplement and then comparing the affected provisions in the 2013 settlement that is

Appellant Grigson’s Response To

Appellees’ Joint Motion To Dismiss Appeal 12

and the policyholder classes raised by the State’s decision to dump the millions of

dollars of undistributed settlement money into the State’s unclaimed property fund

in violation of last year’s decision by the Supreme Court in Highland Homes v.

State 28 that undistributed funds of a class settlement are “claimed” by the class

representative and hence may not be sent to the Comptroller’s “unclaimed property

fund”; 29 the State’s and Farmers’ outrageous and prohibited ex parte contact with

the trial court on the evening before the hearing on Grigson’s Motion to Disqualify

Farmers’ conflicted lawyers; 30 and the State’s and Farmers’ collusion in creating

attached to the 2015 Settlement and to the 2015 Joint Motion for Preliminary Approval. (“The

2015 Motion.”) EXHIBIT 14.

448 S.W.3d 403 (Tex. 2014).

In reality, there is no “fund” for unclaimed property. The State spends the money “the

moment it is received.” Clark v. Strayhorn, 184 S.W.3d 906, 908 (Tex.App.—Austin 2006),

cert. den. 549 U.S.995 (2006) (quoting testimony of the Comptroller’s office).

Grigson’s Opposition to Class Certification at 14-23. EXHIBIT 4. The claim of a conflict of

interest of the lawyers for the Exchanges and FGI was not addressed in 2003, as the trial court

recognized when rejecting the 2013 settlement on April 29, 2014.

THE COURT: . . . I don't remember in that trial what discussion there was

or evidence there was about the issues raised by Mr. Woods Intervenor

and now amplified and somewhat clarified by Mr. Longley's intervention

about the tension and even the representational conflict, they say, by a

single law firm representing the exchanges and the corporation. That was

-- that's really interesting to me, and I don't -- I was searching my memory

bank for whether that was touched upon at all in that week-long trial, and I

just couldn't remember anything. (04-29-2014 Tr. at 48:13-23).

THE COURT: . . . Here's my question. I don't remember anybody

challenging whether that was fair to the exchanges vis-a-vis the

corporation. I don't remember that issue of the tension between the

exchanges and the corporation being flushed out in that trial.

Appellant Grigson’s Response To

Appellees’ Joint Motion To Dismiss Appeal 13

the artifice of “no certification” just to avoid this Court’s jurisdiction—all occurred

years after the 2003 order was entered and, in the words of the Supreme Court in

Phillips Petroleum, “were not present or considered” then. But Grigson has no

need to urge Phillips Petroleum to uphold the jurisdiction of this Court. The 2015

Order is not a certification order disguised as something else. The 2015 Order is a

class certification order by virtue of its express terms, and the State and Farmers’

collusive agreement to make it seem otherwise must fail.

III. The Court must stay notice to protect its jurisdiction and avoid

irreparable harm to the policyholders whose money is to be used to

pay the costs of notice.

Section 51.014(b) of the Texas Civil Practice and Remedies Code

automatically stays the “trial” and “all other proceedings in the trial court” pending

resolution of an appeal of an interlocutory class certification order. In the class

action context, a reasonable construction of “trial” includes the final fairness

hearing, which the 2015 order sets for February 1, 2016.31 Likewise, a reasonable

construction of “other proceedings in the trial court” includes the sending of class

notice, which the 2015 order mandates be done by September 7, 2015. To construe

the statute any other way would permit the class to be notified of a hearing that

cannot happen, a plainly absurd result contrary to accepted rules of statutory

MR. MATTAX [for the State]: I would -- I would agree with your

recollection. (04-29-2014 Tr. at 49:10-16)

2015 Order at 4, para. 6. EXHIBIT 1.

Appellant Grigson’s Response To

Appellees’ Joint Motion To Dismiss Appeal 14

construction. Carreras v. Marroquin, 339 S.W.3d 68, 73 (Tex. 2011) (stating the

“absurd result” rule).

Anticipating that the State and Farmers would proceed with class notice

despite the statutory automatic stay—a conclusion confirmed by the postings of the

notice on several websites controlled by the State and by Farmers—Grigson has

moved for an emergency stay to protect the Court’s jurisdiction and prevent

irreparable harm to the policyholders caused by the expenditure of policyholder

money on the notice. The Court granted the same relief when this case was

appealed in 2003.32 And it should do so today. The class notice is only proper if

the certification order is proper, an issue that this appeal will decide.

As the Supreme Court said in McAllen Med. Ctr., Inc. v. Cortez, 33 “When a

trial court preliminarily certifies a settlement-only class action, the effect on the

course of the proceedings is immediate, significant, and perhaps irreparable if it is

later determined that the class cannot be maintained.”34 Just as in Cortez, the trial

court here has preliminarily certified a settlement class without performing the

“rigorous analysis” and “heightened scrutiny” required by Rule 42. Here, just as in

Cortez, the settling parties want to send notice bearing the “trial court’s

imprimatur” in order to prime the class to participate in a settlement that too has

EXHIBIT 15. (2003 Stay Order).

66 S.W.3d 227 (Tex. 2001)

Cortez at 234.

Appellant Grigson’s Response To

Appellees’ Joint Motion To Dismiss Appeal 15

not been subjected to the stringent requirements of Rule 42. But here, unlike

Cortez, the Settling Parties want to use the policyholders’ own money to send the

notice, not only interfering with the jurisdiction of this Court but irreparably

harming the policyholders should the Court overturn the order.

The reasons for staying the sending of notice in this case are compelling.

The Court’s authority to issue the stay is clear. No persuasive reason has been

offered by the State and Farmers to support sending notice before deciding whether

notice should be sent at all. Grigson prays the Court enter the order granting the

stay.

WHEREFORE, PREMISES CONSIDERED, Grigson prays that the Court

enter an appropriate order denying the Appellees’ Motion to Dismiss Appeal for

Lack of Appellate Jurisdiction and granting Grigson’s Emergency Motion to Stay

Sending of Class Notice. Grigson further requests that this Court grant such other

relief to which he may show himself justly entitled.

Respectfully submitted,

CHARLES O. “CHUCK” GRIGSON

APPELLANT

LAW OFFICES OF JOE K. LONGLEY

_______/s/ Joe K. Longley__________

Joe K. Longley

State Bar No. 12542000

1609 Shoal Creek Blvd. #100

Austin, Texas 78701

Appellant Grigson’s Response To

Appellees’ Joint Motion To Dismiss Appeal 16

512-477-4444 PHONE

512-477-4470 FAX

LAW OFFICE OF PHILIP K. MAXWELL

Philip K. Maxwell

State Bar No. 13254000

1609 Shoal Creek Blvd #100

Austin, Texas 78701

512-947-5434 PHONE

ATTORNEYS FOR APPELLANT,

CHARLES O. “CHUCK” GRIGSON

CERTIFICATE OF COMPLIANCE WITH TEX. R. APP. P. 9.4(i)

I certify that the foregoing document contains 3,389 words and complies

with the word limit set forth in Texas Rule of Appellate Procedure 9.4(i).

_______/s/ Joe K. Longley__________

Joe K. Longley

Appellant Grigson’s Response To

Appellees’ Joint Motion To Dismiss Appeal 17

CERTIFICATE OF SERVICE

The undersigned hereby certifies that a true and correct copy of the above

and foregoing document was served on the following counsel of record by

eFile.TXCourts.gov electronic filing system on this the 31st day of July, 2015.

Joshua Godbey Marcy Greer

Office of the Attorney General of Alexander Dubose Jefferson &

Texas Townsend, LLP

P. O. Box 12548 515 Congress Ave., Suite 2350

Austin, TX 78711-2548 Austin, TX 78701

Sara Waitt Michael J. Woods

General Counsel 8620 N. New Braunfels, Ste. 522

Texas Department of Insurance San Antonio, TX 78217

P. O. Box 149104

Austin, TX 78714-9104 Joseph C. Blanks

PO Box 999

M. Scott Incerto Doucette, TX 75942

Norton Rose Fulbright

98 San Jacinto Blvd #1100

Austin, TX 78701

_______/s/ Joe K. Longley__________

Joe K. Longley

Appellant Grigson’s Response To

Appellees’ Joint Motion To Dismiss Appeal 18

VERIFICATION

THE STATE OF TEXAS §

COUNTY OF TRAVIS §

BEFORE ME, the undersigned authority, on this day personally appeared

Joe K. Longley, a person whose identity is known to me. After I administered an

oath to him, upon his oath, he said the following:

"My name is Joe K. Longley, and I am capable of making this verification,

and the facts in this verification are true and within my personal knowledge. I am

lead counsel for Appellant Charles 0 "Chuck" Grigson. All documents included in

the APPENDIX filed for this Response are true and correct copies of documents

filed or presented to the trial court in this action. I have read the Response and the

factual statements contained therein that are not otherwise established by this

record are within my personal knowledge and are true and correct."

"Further, Affiant sayeth not."

Joe K. Longley

VERIFICATION OF JOE K. LONGLEY 1

NO. 03-15-00436-CV

___________________________________________________

IN THE COURT OF APPEALS

THIRD JUDICIAL DISTRICT COURT

AUSTIN, TEXAS

___________________________________________________

CHARLES O. “CHUCK” GRIGSON,

APPELLANT

VS.

THE STATE OF TEXAS, THE TEXAS DEPARTMENT OF INSURANCE,

THE TEXAS COMMISSIONER OF INSURANCE; and FARMERS GROUP,

INC. ET AL.,

APPELLEES

___________________________________________________

On Appeal from the 261st Judicial District Court of Travis County, Texas

Cause No. D-1-GV-02-002501

___________________________________________________

APPELLANT GRIGSON’S APPENDIX IN SUPPORT OF RESPONSE TO APPELLEES’

JOINT MOTION TO DISMISS APPEAL FOR LACK OF JURISDICTION AND REQUEST

FOR EXPEDITED CONSIDERATION OF MOTION

___________________________________________________

EXHIBIT 1 7-6-2015 Order of Preliminary Approval

EXHIBIT 2 6-27-2003 Order of Preliminary Approval

EXHIBIT 3 5-15-2015 Intervenor Grigson’s Fourth Amended Plea in

Intervention

EXHIBIT 4 5-15-2015 Intervenor Grigson’s Response in Opposition to

Class Certification and Preliminary Approval of Class

Settlement

EXHIBIT 5 8-23-2013 State of Texas and Farmers Parties’ Joint Motion

for Preliminary Approval of Second Amended Settlement

Agreement and Stipulation and Class Notice

EXHIBIT 6 8-29-2013 Second Amended Settlement Agreement and

Stipulation

EXHIBIT 7 2013 Order of Preliminary Approval

EXHIBIT 8 4-28-2015 Charles O. “Chuck” Grigson’s Plea in

Intervention and Objection to Preliminary Approval of

Second Amended Settlement Agreement

EXHIBIT 9 4-29-2014 Hearing Transcript

EXHIBIT 10 9-4-2014 Hearing Transcript

EXHIBIT 11 3-4-2015 Supplement to the Second Amended Settlement

Agreement and Stipulation

EXHIBIT 12 7-2-2015 Hearing Transcript

EXHIBIT 13 8-29-2013 Redline Second Amended Settlement Agreement

and Stipulation

EXHIBIT 14 3-6-2015 State of Texas and Farmers Parties’ Joint Motion

for Preliminary Approval of Second Amended Settlement

Agreement and Stipulation, Supplement Thereto, and Class

Notice

EXHIBIT 15 7-7-2003 03-03-00374 Third Court of Appeals Order

Staying Sending of Class Notice

APPELLANT GRIGSON’S APPENDIX 2

EXHIBIT 1

TO APPELLANT GRIGSON’S RESPONSE TO

APPELLEES’ JOINT MOTION TO DISMISS APPEAL FOR

LACK OF APPELLATE JURISDICTION

Filed in The District Court

of Travis County, Texas

JUL -6 2015 ~

CAUSE NO. GV202501

At q·.S4 ~ - M.

Velva L. Price, District Clerk

THE STATE OF TEXAS, THE TEXAS § IN THE DISTRICT COURT

DEPARTMENT OF INSURANCE, and §

THE TEXAS COMMISSIONER OF §

INSURANCE, §

Plaintiffs, §

v. §

FARMERS GROUP, INC. , FARMERS §

UNDERWRITERS ASSOCIATION, FIRE § OF TRAVIS COUNTY, TEXAS

UNDERWRITERS ASSOCIATION, §

FARMERS INSURANCE EXCHANGE, §

FIRE INSURANCE EXCHANGE, TEXAS §

FARMERSINSURANCECONWANY, §

MID-CENTURY INSURANCE CONWANY §

OF TEXAS, MID-CENTURY INSURANCE §

CONWANY, FARMERS TEXAS COUNTY §

MUTUAL INSURANCE CONWANY, §

TRUCK INSURANCE EXCHANGE, and §

TRUCK UNDERWRITERS § 261ST JUDICIAL DISTRICT

ASSOCIATION,

Defendants.

ORDER OF PRELIMINARY APPROVAL

This matter came on for hearing on July 1 and 2, 2015, for preliminary approval of the

Second Amended Settlement Agreement and Stipulation of December 18, 2002, as amended on

June 13, 2003 , and as further amended on August 29, 2013 , and the Supplement to the Second

Amended Settlement Agreement and Stipulation of March 4, 2015 (collectively referred to as

" Second Amended Settlement Agreement" or " Settlement Agreement") between the State of

Texas, the Texas Department of Insurance, and the Texas Commissioner of Insurance, on behalf

of Texas policyholders of the Defendants in the classes defmed below (collectively, the " State")

and Fire Underwriters Association, Farmers Group, Inc. d/b/a Farmers Underwriters Association,

Farrp.ers Insurance Exchange, Fire Insurance Exchange, Texas Farmers Insurance Company,

Mid-Century Insurance Company of Texas, Mid-Century Insurance Company, Farmers Texas

County Mutual Insurance Company, Truck Insurance Exchange, and Truck Underwriters

Association (collectively, the "Farmers Parties"). The State and the Farmers Parties have moved

jointly, pursuant to Texas Rule of Civil Procedure Rule 42(e) and Texas Insurance Code

§ 541.266, for an Order of Preliminary Approval ("Order") (1) preliminarily approving the

settlement of all claims asserted in the above-captioned cause ("Action"), the terms of which are

set forth in the Second Amended Settlement Agreement, which has been filed with the Clerk of

the Court, and (2) approving the proposed notice to the Classes.

The Court having read and considered the Second Amended Settlement Agreement and

attached exhibits, including the proposed Notice of Proposed Class Settlement, the proposed

Claim Form, the proposed form of Final Judgment, exhibits, pleadings and record in this case,

the evidence and other materials presented at the hearing, and argument of counsel and

applicable authorities, fmds that there exists substantial and sufficient grounds for entering this

Order.

IT IS THEREFORE ORDERED, ADJUDGED, AND DECREED THAT:

1. The Court, for purposes of this Order, adopts all defmed terms as set forth in the

Settlement Agreement.

2. The Court has previously certified, only for purposes of effectuating the

Settlement Agreement, the following Settlement Classes ("Settlement Classes"):

(i) All of the Exchanges' Texas homeowners insurance policyholders

(a) whose homeowners insurance policy incepted (including renewals)

from December 28, 2001, through and including December 27, 2002, or

(b) who received a notice at any time after November 14, 2001, that their

HO-B policy would not be renewed ("Rate Class");

(ii) All of the Exchanges' Texas homeowners insurance policyholders who

according to Farmers' records were eligible to receive discounts for

FPRA, age of home, or territory from November 16, 2000, through and

including December 10, 2002 ("Discount Class"); and

(iii) All Texas homeowners or automobile insurance policyholders of the

Exchanges or the Automobile Insurance Providers who according to

Farmers ' records were provided or should have been provided a Credit

Usage Notice from October 1, 1999, through February 28, 2003 ("Credit

Usage Notice Class")

That certification decision has been affirmed in its entirety by the appellate courts of Texas.

Farmers Grp., Inc. v. Lubin, 222 S.W.3d 417, 420, 427-28 (Tex . 2007) (holding that "the

standard class action requirements must be applied generally to the claims asserted by Attorney

General, not the Attorney General himself," and directing court of appeals to address

intervenors ' remaining points of error on remand); Lubin v. Farmers Grp., Inc., No. 03-03-

00374-CV, 2009 WL 3682602, at *26-32 (Tex. App. -Austin Nov. 6, 2009, no pet.) (overruling

intervenors' other objections to certification).

5. The Court further finds that at no time during the course of this litigation has there

been any collusion whatsoever between the State and the Farmers Parties with respect to

negotiating the Settlement Agreement and that the State has represented, and will continue to

represent, the interests of the Farmers' policyholders fairly and adequately and without a conflict

of interests. Accordingly, the Court preliminarily approves : (a) the Second Amended Settlement

Agreement, including the terms and the releases contained in it, as being fair, just, reasonable,

and adequate as to the Settlement Classes; and (b) the Settlement Funds described in the

Settlement Agreement, including the Prospective Rate Reduction, Retrospective Rate Reduction,

Individualized Discount Adjustment, Credit Usage Notice Fund, and the proposed additional

consideration, subject to the right of any member of the Settlement Classes to exclude himself or

herself from the Settlement Classes in accordance with the terms set forth in the Settlement

Agreement, and to show cause, if any exists, why a Final Judgment should not be entered in

accordance with the terms of the Settlement Agreement.

6. A hearing ("Settlement Hearing") shall be held before this Court on February 1,

2016, at 9:00 a.m. in the 53rd Judicial District Court Room: (a) to determine whether the

proposed Second Amended Settlement Agreement is fair, reasonable, and adequate and should

be approved, and whether the Final Judgment should be entered as to claims asserted in this

litigation, or which could have been asserted, against the Released Parties on the merits; (b) to

determine whether the Settlement Classes members' right to adequate representation has been

satisfied; and (c) to reserve jurisdiction to effect and enforce the Settlement Agreement.

7. The Farmers Parties shall disseminate notice of the proposed Second Amended

Settlement Agreement and Settlement Hearing to putative members of the Settlement Classes

within sixty (60) days of the date of this Order. The Court approves Rust Consulting, an

independent third-party settlement administrator, as Farmers ' agent to carry out the notice

campaign and settlement administration as approved by the Court. A copy of the Notice of

Proposed Class Settlement (''Notice"), together with a copy of the Claim Form, substantially in

the forms attached as Exhibits 1 and 2, shall be mailed by first-class U.S . mail, postage prepaid,

to all members of the Settlement Classes at the address of each such person as set forth in the

records of the Released Parties or as otherwise may be identified through reasonable effort, as

more thoroughly explained in the March 28, 2014, Affidavit of Kimberly K. Ness and the May

29, 2015, Declaration of Joel K. Botzet of Rust Consulting. In addition, commencing within

seven (7) days of the date of this Order and continuing until the date of the Settlement Hearing,

the Office of the Attorney General, the Texas Department of Insurance, and the Farmers Parties

shall post on their respective Internet web-sites (www .texasattorneygeneral.gov,

www.tdi.texas.gov and www.fanners.com), as well as at www.TexasFannersSettlement.com, a

Summary Notice of Settlement, substantially in the form attached as Exhibit 3 ("Summary

Notice") (in both English and Spanish). The Court will permit the Parties to the Settlement

Agreement to additionally post the following items on the TexasFarmersSettlement.com website:

(a) a copy of the executed Second Amended Settlement Agreement (and exhibits) and

(b) Commonly Asked Questions and Answers that are either approved by the Parties or ordered

by the Court.

8. The Court approves the form of the class Notice, the Summary Notice, and the

Claim Form, and finds that the procedures established for mailing and distributing such notices

substantially in the manner and form set forth in paragraph 7 of this Order meet the requirements

of Rule 42 of the Texas Rules of Civil Procedure and§§ 541.261 and 541.267(b) of the Texas

Insurance Code, and due process, and constitute the best notice practicable under the

circumstances.

9. To effectuate the provision of notice provided in paragraph 7 above, the Farmers

Parties shall be responsible for the receipt of all responses from the members of the Settlement

Classes and, until further order of this Court, shall preserve all entries of appearance, Claim

Forms, requests for exclusion, and any and all other written communications from members of

the Settlement Classes or any other person in response to the Notice. The costs of notification of

the Settlement Classes as provided in this Order, including printing, mailing, and posting on the

Internet of the required notices shall be borne by the Party charged with the responsibility for

such actions in paragraph 7 this Order.

10. Three (3) days before the date fixed by this Court for the Settlement Hearing, the

State and the Farmers Parties shall cause to be filed with the Clerk of the Court affidavits or

declarations of the person or persons under whose general direction the mailing of the Notice and

the distribution of the Summary Notice by posting on the web-sites identified in paragraph 7

shall have been made, showing that such mailing and distribution have been made in accordance

with this Order.

11. Each member of the Settlement Classes will be bound by the proposed settlement

provided for in the Settlement Agreement, and by the Final Judgment or any other determination

by this Court affecting the Settlement Classes, unless such member shall mail, by first-class U.S .

mail, a written request for exclusion from the Settlement Classes, post-marked no later than

November 13, 2015, addressed to State of Texas v. Farmers Settlement Administrator, Rust

Consulting, Inc.; P.O. Box 9348; Minneapolis, MN, 55440-9348. Such request for exclusion

must state: (a) the name, address and telephone number of the person seeking exclusion;

(b) whether such person has a homeowners or automobile insurance policy from the Farmers

Parties, or both; (c) the date of inception of such policy(ies) and the most recent date of renewal

for such policy(ies), if available; (d) the policy number(s), if available; and (e) that the person

making the request wishes to be excluded from the Settlement Classes. Because the Settlement

Agreement is intended to be a resolution of all Released Claims, any person requesting exclusion

must either exclude himself or herself from the Settlement Agreement in its entirety, or submit to

the Settlement Agreement in its entirety. A request for exclusion shall not be effective unless it

is made in the manner and within the time set forth in this paragraph and in the Notice. If a

member of the Settlement Classes requests to be excluded, that person will not receive any

benefit from the Retrospective Rate Reduction, the Individualized Discount Adjustment, or the

Credit Usage Notice Fund provided for in the Settlement Agreement, in the event the Settlement

Agreement is approved by the Court. Nor will such person be permitted to participate further in

the Action. Any Class Member who does not request exclusion in the manner provided for in

this Order may, but need not, enter an appearance in this Action at his or her own cost through

counsel of his or her own choice. If a member of the Settlement Classes does not enter an

appearance, that person' s interests will be represented by the State in the Action.

12. Any member of the Settlement Classes who has not requested exclusion from the

Settlement Classes may appear at the Settlement Hearing, in person or through counsel, to object

and be heard in opposition to any of the matters to be heard at the Settlement Hearing, including

(a) the requested approval of the Settlement Agreement as fair, adequate, and reasonable, and/or

(b) the requested entry of the Final Judgment. A member of the Settlement Classes cannot

request exclusion from the Settlement Classes AND object to the Settlement Agreement. For

any objection to be considered by the Court, the objector must mail a valid written objection, and

it must be postmarked by no later than November 13, 2015. In order to be valid, the written

objection must set forth: (a) a reference, at the top, to "State of Texas v. Farmers, Cause No.

GV202501 ;" (b) a statement as to whether the objector intends to appear at the Settlement

Hearing, either in person or through counsel; (c) a detailed statement of the specific basis for the

objection; (d) the name that is set forth on the Notice that was sent to the objector; (e) the

objector' s current name, if different from the name set forth on the Notice; (f) the objector' s

current address; (g) the objector' s current telephone number and, if available, telecopier number;

(h) the objector' s type of policy and policy number; and (i) the objector's signature or that of his

or her authorized representative. Three copies of the written objection must be sent, the first

addressed to the District Clerk of Travis County, Texas, 1000 Guadalupe Street, Austin, Texas

78701 , the second addressed to Joshua R. Godbey, Assistant Attorney General, Financial

Litigation, Tax, and Charitable Trusts Division, Office of the Attorney General, P.O. Box 12548,

Austin, Texas 78711-2548, and the third addressed toM. Scott Incerto, Norton Rose Fulbright

US LLP, 98 San Jacinto Boulevard, Suite 1100, Austin, Texas 78701. If an objection does not

include all of the required information or if it is not timely mailed to the three correct addresses,

then it shall be invalid, and it will not be considered by the Court. Any member of the

Settlement Classes who does not object in the manner provided shall be deemed to have waived

such objection and shall forever be foreclosed from making any objection to the fairness,

adequacy, or reasonableness of the Settlement Agreement and the proposed Final Judgment.

Any replies to such objections shall be filed by December 15, 2015.

13. If the Court gives final approval to the Settlement Agreement and enters a fmal

judgment, in order to be entitled to participate in the Credit Usage Notice Fund portion of the

Settlement Agreement, a member of the Credit Usage Notice Class who has not requested

exclusion from the Settlement Classes must submit a Claim Form, substantially in the form

attached as Exhibit 2, to the Claims Administrator at the address set forth in the Notice. Such

Claim Form must be completed and postmarked on or before April 1, 2016. Any member of the

Credit Usage Notice Class who does not submit a completed Claim Form and follow the process

for certifying review of his or her individual credit report as provided for in section IV(4) of the

Settlement Agreement shall not be entitled to share in the Credit Usage Notice Fund, but

nonetheless shall be bound by the terms of the Second Amended Settlement Agreement and by

the Final Judgment and any other Order of this Court approving the Second Amended Settlement

Agreement, including all releases, and shall be barred and enjoined in this or any other action

from asserting any Released Claims.

14. Members of the Rate and Discount Classes shall automatically receive their share

of Settlement Funds within 30 days after the Effective Date of the Second Amended Settlement

Agreement, unless they file a written request for exclusion from the Settlement Classes as

provided in paragraph 11 above.

15. The Court expressly retains the power to adjourn the Settlement Hearing, without

any further notice other than an announcement at the Settlement Hearing of adjournment, and to

approve, modify, or disapprove the Second Amended Settlement Agreement without further

notice to members of the Settlement Classes. The Court retains jurisdiction over this Action to

consider all further applications arising out of or connected with the proposed settlement.

16. The administration of the Second Amended Settlement Agreement, and the

decision of all disputed questions of law and fact with respect to the validity of any claim or right

of any person to participate in the distribution of the Settlement Fund, shall be under the

authority of the Court. The Parties to this Second Amended Settlement Agreement, their counsel

in any capacity in which they may act in implementation and fulfillment of the Settlement

Agreement, and any employees or agents of such law firms or the Parties to the Second

Amended Settlement Agreement (including, without limitation, those employees who may

furnish services in connection with the proposed Settlement) shall not be liable for anything done

or omitted in connection with the Second Amended Settlement Agreement and its administration

except for their own willful misconduct.

17. The Parties to the Settlement Agreement are directed to carry out their obligations

under the Second Amended Settlement Agreement.

18. In the event that the Second Amended Settlement Agreement is not approved by

the Court, or the Court enters the Final Judgment and it is vacated or modified on appeal, or

otherwise altered in a material way, or the Effective Date for any other reason does not occur,

and if any Party to the Second Amended Settlement Agreement accordingly exercises its right to

terminate the Settlement Agreement pursuant to its terms, then the Second Amended Settlement

Agreement and any actions to be taken in connection with it shall be vacated and terminated and

shall become null and void for all purposes, and all negotiations, transactions and proceedings

connected with it (a) shall be without prejudice to the rights of any Party; (b) shall not be deemed

or construed as evidence or an admission by any Party of any fact, matter or thing; and (c) shall

not be admissible in evidence or used for any purpose in any subsequent proceeding in the

Action, or any other action or proceeding in this or any other forum, judicial, administrative, or

otherwise, except proceedings to enforce the Settlement.

SIGNED ~~ Z1Lr_ ,2015.

Exhibit 1

261 ST DISTRICT COURT OF TRAVI S COUNTY, TEXAS

If You Had Certain Home or Auto Insurance in Texas,

You May Be Eligible for Benef its from a Class Action Settlement.

A Texas court authorized this notice. This is not a solicitation from a lawyer.

• You have been identified from Farmers' records as someone who had a homeowners

or automobile insurance policy in Texas between October 1999 and February 2003.

• A Settlement has been reached with certain Insurance Exchanges and Providers ("the

Defendants," see Question I for a complete list) in a class action lawsuit about the

pricing and marketing of certain homeowners and automobile insurance policies.

Generally, the Settlement includes Texas homeowners or automobile insurance

policyholders who had certain types of insurance policies with the Defendants between

October l , 1999 and February 28, 2003 (see Questions 5 & 6).

• The Settlement provides payments to eligible policyholders for rate reductions or

discounts on past insurance premiums and free credit reports and payments of $35 for

not receiving adequate notice from the Defendants about their use of credit information

(see Question 9).

Your legal rights are affected even if you do nothing. Please read this notice

carefully.

YOUR LEGAL RIGHTS AND OPTIONS IN THIS SETTLEMENT

SUBMIT A CLAIM The only way to get a payment under the Credit Usage Fund (see Question

13).

ASK TO BE Get no benefits from the Settlement. This is the only option that allows

EXCLUDED you to sue the Defendants over the claims resolved by this Settlement.

OBJECT Write to the Court if you don ' t like the Settlement.

Go TO A HEARING Ask to speak in Court about the fairness of the Settlement.

Do NOTHING Receive payment (if eligible) as a member of the Rate Class or Discount

Class. Do not receive payment under the credit usage fund. Give up

rights to pursue your own lawsuit about the claims this Settlement

resolves.

• These rights and options-and the deadlines to exercise them-are explained in this

notice.

• The Court in charge of this case still has to decide whether to approve the Settlement.

Payments will only be made if the Court approves the Settlement and after any appeals

are resolved. Please be patient.

QUESTIONS? CALL 1-888-222-0691 OR VISIT WWW.TEXASfARMERSSETTLEMENT.COM

PARA UNA NOTIFICACION IN ESPANOL, LLAMAR 0 VISITAR NUESTRO WEBSITE.

What This Notice Contains

BASIC INFORMATION ...................................................................................................... 3

I. Why is there a notice?

2. What is this lawsuit about?

3. Why is this a class action?

4. Why is there a Settlement?

WHO IS PART OF THE SETTLEMENT? ........................................................................... 4

5. Who is incl uded in the Settlement?

6. What type of insurance policies are involved in the Settlement?

7. What is a Credit Usage Notice?

8. What if I am not sure whether I am included in the Settlement?

THE SETTLEMENT BENEFITS ......................................................................................... 5

9. What does the Settlement provide?

10. What can I get from the Settlement?

II. When will I receive my payment?

12. What am I giving up to stay in the Settlement Class?

HOW TO GET BENEFITS .................................................................................................. 6

13. How do I get benefits?

EXCLUDING YOURSELF FROM THE SETTLEMENT ...................................................... 7

14. How do I get out ofthe Settlement?

15. If I do not exclude myself, can I sue the Defendants for the same thing later?

16. If I exclude myself, can I still get benefits from this Settlement?

17. What about other cases involving the issues in this case?

WHO REPRESENTS ME IN THIS CASE? ........................................................................ 8

18. Who represents my interests in this case?

OBJECTING TO THE SETTLEMENT ................................................................................ 8

19. How do I tell the Court if I do not like the Settlement?

20. What is the difference between objecting and asking to be excluded?

THE SETTLEMENT HEARING .......................................................................................... 9

21. When and where will the Court decide whether to approve the Settlement?

22. Do I have to attend the hearing?

23. May I speak at the hearing?

GETTING MORE INFORMATION ...................................................................................... 9

24. How do I get more information?

QU ESTIONS? C ALL 1-888-222-0691 OR VISIT WWW.TEXASFARMERSSETTLEMENT.COM

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BASIC INFORMATION

II. Why is there a notice?

A Court authorized this notice because you have a right to know about a proposed Settlement of this class

action lawsuit and about all of your options before the Court decides whether to give final approval to the

Settlement. This notice explains the lawsuit, the Settlement, and your legal rights.

Judge Scott H. Jenkins of the 261"' Judicial District Court of Travis County, Texas is overseeing this case.

This litigation is known as State ofTexas v. Farmers Group, Inc., No. GV202501 . The people who sued

are called the " Plaintiffs." The Defendants are: Farmers Group, Inc., Farmers Underwriters Association,

Fire Underwriters Association, Farmers Insurance Exchange, Fire Insurance Exchange, Texas Farmers

Insurance Company, Mid-Century Insurance Company of Texas, Mid-Century Insurance Company,

Farmers Texas County Mutual Insurance Company, Truck Insurance Exchange, and Truck Underwriters

Association.

I 2. What is this lawsuit about?

The lawsuit claims that, during 1999 to 2003, the Defendants:

• Charged rates that resulted in excessive premiums for its homeowners policies written on a

form approved by the Texas Department of Insurance ("TDI") called the HO-A and used unfair

or deceptive practices involving the determination of certain fees, discounts, and policy

offerings, and improper use of credit scoring and certain risk assessments.

• Failed to provide adequate notices that information on certain policyholders' credit reports may

have impacted their premiums or policy placement and used anticompetitive practices in the

sale and marketing of homeowners and automotive insurance policies.

• Improperly stopped offering a type of homeowners policy called the HO-B .

The Defendants deny these claims and maintain they did nothing wrong.

I 3. Why is this a class action?

In a class action, one or more people or entities sue on behalf of themselves and other people with similar

claims. All of these people together are the "class" or "class members." In this case, the representative

entities are the State of Texas, the TO!, and the Texas Commissioner of Insurance. One court resolves the

issues for all Class Members, except for those who exclude themselves from the Class.

I 4. Why is there a Settlement?

The Court has not decided in favor of the Plaintiffs or the Defendants. Instead, both sides have agreed to a

Settlement. By agreeing to the Settlement, the Parties avoid the costs and uncertainty of a trial, and Class

Members receive the benefits described in this notice. The proposed Settlement does not mean that any

law was broken or that the Defendants did anything wrong. The Defendants deny all legal claims in this

case. The TDI, the Texas Commissioner of Insurance, and the Attorney General of Texas think the

proposed Settlement is best for everyone who is affected.

QUESTIONS? CALL 1-888-222-0691 OR VISIT WWW.TEXASfARMERSSETTLEMENT.COM

-3-

WHO Is PART OF THE SETTLEMENT?

If you received this notice addressed to you in the mail (without requesting it), then you may be a member

of one or more Settlement Classes. But even if you did not receive a notice, you may be a Class Member,

as described below.

I 5. Who is included in the Settlement?

The Settlement includes three Classes. You may be member of more than one Class. You are included if

you are or were covered under an included Texas policy issued by one of the Defendants and you meet the

following criteria:

CLASS T YPE OF POLICY CLASS DEFINITION

Policy began (or was renewed) from December 28,

Rate Class Homeowners policy 200 I through November 10, 2002, or you received a

notice at any time after November 14, 200 I, that your

HO-B policy would not be renewed (see Question 6).

Policy where, according to Defendants' records, you are

Discount Class Homeowners policy eligible under the Settlement to receive recalculated

discounts on your premiums from November 16, 2000

through December I 0, 2002.

Policy where, according to Defendants' records, you

Credit Usage Homeowners or were provided or should have been provided a Credit

Notice Class automobile insurance Usage Notice from October I, 1999 through February

policy 28, 2003.

I 6. What types of insurance policies are involved in the Settlement?

The Settlement includes Farmers homeowners policies written on TDI-endorsed forms described as HO-A

(including TDP-1), HO-B (including HO-Protector Plus, H0380 endorsement, TDP-2, TDP-3, DF-B uilders

Risk, and HO-A with H0- 170 endorsement), HO- B-CON, and HO-B-T, and all endorsements approved by

TDI for use with such forms during the time periods described above. It also includes Farmers private

passenger automobile insurance policies during the same time.

I 7. What is a Credit Usage Notice?

A Credit Usage Notice is a notice of "adverse action" under the Fair Credit Reporting Act ("FCRA"), a

U.S . federal law. Adverse action could mean bei ng denied credit, receiving substandard terms from a

lender, or, as in this case, receiving higher insurance rates or being placed with a different insurer because

of your credit information.

As part of the claim process (see Question 13), Credit Usage Notice Class Members will have the

opportunity to access and review a copy of their cred it reports.

QUESTIONS? C ALL 1-888-222-0691 OR VISIT WWW.TEXASFARMERS5ETTLEMENT.COM

-4-

I 8. What if I am not sure whether I am included in the Settlement?

If you are not sure whether you are included in the Settlement, you may call 1-888-222-0691 with questions

or visit www.TexasFarmersSettlement.com. You may also write with questions to Texas Farmers

Settlement, P.O. Box 9348, Minneapolis, MN 55440-9348.

THE SETTLEMENT BENEFITS

I 9. What does the Settlement provide?

If the Settlement is approved and becomes final , it will provide certain cash benefits to eligible Class

Members. There are approximately 1.8 million members of the Settlement Classes, but not all Class

Members are eligible to receive cash payments for rate reductions or discounts. The Defendants will pay a

total of$84.38 million to those members ofthe Rate Class and Discount Class who are eligible to receive

a payment from the Settlement. The Defendants w ill also provide payments of$35 to eligible Credit Usage

Notice Class Members who timely file proofs of claim and follow the process outlined in the Claim Form

and in section IV(4) of the Settlement Agreement (see Question 13).

Policyholders who renewed or received a new HO-A insurance policy from the Defendants after November

II , 2002 and before September 1, 2003, have already received an additional reduction in premiums.

More details are in a document called the Settlement Agreement, which is available at

www. TexasFarmersSettlement.com.

Ito. What can I get from the Settlement?

Not every Class Member will receive a payment. The amount of your payment will depend on which Class

you are in and whether you are eligible to receive a payment under the terms of the Settlement Agreement.

Depending upon your eligibility, you may receive payments under one or more of the Settlement Classes.

Class Members may receive the following:

CLASS B ENEFITS NEED TO FILE A CLAIM?

Rate Class Payments for rate reductions on No, payments for rate reductions

HO-A prem iums (amounts wi ll will be automatic for all eligible

vary). Rate Class Members.

Discount Class Compensation for eligible Class No, payments to eligible

Members based on negotiated Discount Class Members will be

discounts (amounts will vary). automatic.

Credit Usage Notice Class Free access to policyholder Yes (see Question 13).

credit report from Equifax and

$35 payment if you complete the

Claim Form process.

The Defendants also agreed to replace their Credit Usage Notice forms for Texas homeowners and

automobile insurance policies with forms approved by the Texas Department oflnsurance (TDI) and agreed

to change certain marketing practices.

Q UESTIONS? C ALL 1-888-222-0691 OR VISIT WWW.TEXASFARMERS5ETTLEMENT.COM

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I 11. When will I receive my payment?

Class Members who are entitled to payments will receive them after the Court grants final approval to the

Settlement and after any appeals are resolved (see "The Settlement Hearing" below). If there are appeals,

resolving them can take time. Please be patient.

I 12. What am I giving up to stay in the Settlement Class?

If the Settlement becomes final , you will give up your right to sue the Defendants for the claims being

resolved by this Settlement unless you exclude yourself from the case. The specific claims you are giving

up against the Defendants are described in Section I of the Settlement Agreement. You will be "releasing"

the Defendants and all related people as described in Section I of the Settlement Agreement. The Settlement

Agreement is availab le at www.TexasFarmersSettlement.com.

The Settlement Agreement describes the "Released Claims" with specific descriptions, so read it carefully .

If you have any questions about what this means, you can write to the Office of the Attorney General,

Consumer Protection Division, P.O. Box 12548, Austin, TX 78711 -2548. You can also talk to your own

lawyer, if you have one.

Note: The release does not include individual claims or complaints about claims, payments, handling or

processi ng made by individual po licyholders or the TD I. The release also does not include certain claims

made in two other class action lawsuits:

• Geter v. Farmers Group, Inc., No. E-0167872-a class action relating to homeowners' insurance

requesting a non-monetary j ud icial statement that Farmers acted improperly in not renewing HO-

B policies for the class members, as was certified for a class action in the 172nd District Court of

Jefferson County, Texas.

• State of Texas v. Texas Farmers Insurance Company, No. GV000271-a class action relating to

automobile insurance in the 2001h Judicial District Court of Travis County, Texas.

How To GET BENEFITS

I 13. How do I get benefits?

If you are a member of the Rate Class or Discount Class eligible to receive benefits under the Settlement

Agreement, you will receive your payment automatically once the Settlement is finally approved. To file

a claim as a member of the Credit Usage Notice Class, you must complete and submit a Claim Form . If

you did not receive a Claim Form in the mail, you can request a Claim Form at

www.TexasFarmersSettlement.com or by calling 1-888-222-0691. Please read the instructions carefully,

fill out the Claim Form and mail it postmarked no later than Month 00, 2015 to:

Texas Farmers Settlement

P.O. Box 9348

Minneapolis, MN 55440-9348

QU ESTIONS? CALL 1-888-222-0691 OR VISIT WWW.TEXASFARMERSSETILEMENT.COM

-6-

EXCLUDING YOURSELF FROM THE SETTLEMENT

If you don ' t want benefits from this Settlement, and you want to keep the right to sue the Defendants about

the issues in thi s case, then you must take steps to get out of the Settlement. This is called excluding

yourself--or it is sometimes referred to as "opting out" of the Classes.

I 14. How do I get out of the Settlement?

To exclude yourself from the Settlement Classes, you must mail a letter that says you want to be excluded

from the Settlement in State of Texas v. Farmers Group, Inc., No. GV20250 I. Your request must include:

• Your name, address, and telephone number;

• Whether you have or had a homeowners or automobile insurance policy from the Defendants,

or both;

• The date the policy(ies) began and the most recent date of renewal (if known) ;

• The policy number(s); and

• Your signature.

You must mail your exclusion request, postmarked no later than Month 00,2015, to:

Texas Farmers Settlement Exclusions

P.O. Box 9348

Minneapolis, MN 55440-9348

You cannot ask to be excluded on the phone, by email, or at the website.

Its. If I do not exclude myself, can I sue the Defendants for the same thing later?

No. Unless you exclude yourself, you give up the right to sue the Defendants for the claims that this

Settlement resolves.

lt6. If I exclude myself, can I stiU get benefits from this Settlement?

No. You will not get the benefits provided if you exclude yourselffrom the Settlement. However, if you

renewed an HO-A homeowners policy with the Defendants, the prospective Rate Reduction was reflected

in your premiums between November 10, 2002 and September I, 2003.

lt7. What about other cases involving the issues in this case?

You may have received or seen other notices about other class actions about insurance policy options,

premium rates, and/or credit usage, including:

• Fogel v. Farmers Group, Inc., No. BC 300142, a nationwide class in the Superior Court for the

State of California for the County of Los Angeles (the " Fogel Action");

• Geter v. Farmers Group, Inc., No. E-0 167872 in the 172"d District Court in Jefferson County, Texas

(the "Geter Action"); and

• In re: Farmers Insurance Co. , Inc. FCRA Litigation, No. ClV-03-158-F, a nationwide class that

includes all cases consolidated and coordinated in MDL No. 1564 in the U.S. District Court for the

Western District of Oklahoma (often referred to as the " Mobbs Action").

Q UESTIONS? C ALL 1-888-222-0691 OR VISIT WWW. TEXASFARMERSSETTLEMENT.COM

-7-

If you were a Class Member in the Fogel Action, you are eligible to participate in this Settlement as well.

If you do not exclude yourse lf from this Settlement, you can receive benefits here and also participate in

the Geter Action by seeking a judicial statement that Farmers acted improperly in not renewing HO-B

homeowners policies to the class members. However, except as provided in the Settlement Agreement,

you will give up all other claims, incl uding any claims for monetary damages, related to the Geter Action.

If you filed a claim in the Mobbs Action (which was also FCRA-related), you are eligible to participate in

the Rate Class and Discount Class benefits, but you are not eligible to receive a payment under the Credit

Usage Fund.

WHO REPRESENTS ME IN THIS CASE?

I 18. Who represents my interests in this case?

Your interests wi II be represented by the State of Texas through the Office of the Attorney General. You

will not be charged for their services. By law, the Office of the Attorney General cannot represent you

individually. If you want to be represented individually by your own lawyer, you are free to hire one at

your own expense. You may write with any questions you may have about the information in this Notice

to:

Office of the Attorney General

Consumer Protection Division

P.O. Box 12548

Austin, TX 78711-2548

OBJECTING T o THE SETTLEMENT

119. How do I tell the Court if I do not Uke the Settlement?

If you are a member of the Settlement C lasses (and do not exclude yourself), you can object to any part of

the Settlement or the Settlement as a whole. To object, you must mail a letter that includes the fo llowi ng:

• A reference at the top to: State of Texas v. Farmers Group, Inc. , No. GV20250 I;

• Whether you intend to appear at the Settlement Hearing in person or through a lawyer (see

Question 22);

• A detailed statement of the reasons you object to the Settlement;

• Your name (and your previous name if the name on the notice you were mailed was different),

address, telephone number, and fax number (if you have one);

• Your type ofpolicy(ies) and the policy number(s); and

• Your signature (or the signature of your authorized representative).

The requirements to object to the Settlement are described in detail in the Settlement Agreement in section

VII . You must mail your objection to each of the fo llowing three addresses, and your objection must be

postmarked by Month 00, 2015:

QUESTIONS? C ALL 1-888-222-0691 OR VISIT WWW.TEXASFARMERS5ETTLEMENT.COM

- 8-

COURT A TTORNEY GENERAL DEFENSE COUNSEL

District Court Clerk of Travis Joshua R. Godbey M. Scott lncerto

County, Texas Assistant Attorney General Norton Rose Fulbright US LLP

1000 Guadalupe Street Office of the Attorney General 98 San Jacinto Blvd., Suite

Austin, TX 7870 l P.O. Box 12548 1100

Austin, TX 78711-2548 Austin, TX 7870 I

I 20. What is the difference between objecting and asking to be excluded?

Objecting is simply telling the Court that you don't like something about the Settlement. You can object

only if you don ' t exclude yourselffrom the Classes. Excluding yourself is telling the Court that you don ' t

want to be part of the Classes. If you exclude yourself, you have no basis to object because the case no

longer affects you.

THE SETILEMENT HEARING

The Court will hold a hearing to decide whether to approve the Settlement. You may attend and you may

ask to speak (see Questions 22 & 23), but you do not have to.

I 21. When and where will the Court decide whether to approve the Settlement?

The Court will hold a Settlement Hearing at XX:OO x.m. on Month 00, 2015, at the District Court of Travis

County, Texas, 1000 Guadalupe Street, Austin, TX 7870 I. The hearing may be moved to a different date

or time without additional notice, so it is a good idea to check www.TexasFarrnersSettlement.com or call

1-888-222-0691. At this hearing, the Court will consider whether the Settlement is fair, reasonable, and

adequate. If there are objections, the Court will consider them and will listen to people who have asked to

speak at the hearing. After the hearing, the Court will decide whether to approve the Settlement. We do

not know how long these decisions will take.

I 22. Do I have to attend the hearing?

No. The Office of the Attorney General will answer any questions the Court may have. But you or your

own lawyer are welcome to attend at your expense. If you send an objection, you do not have to come to

Court to talk about it. As long as you mailed your written objection on time, the Court will consider it.

You may also have your own lawyer attend, but it is not necessary.

I 23. May I speak at the hearing?

You may ask the Court for permission to speak at the Settlement Hearing.

GETTING MORE INFORMATION

I 24. How do I get more information?

This notice summarizes the proposed Settlement. More details are in the Settlement Agreement. You can

get a copy of the Settlement Agreement at www.TexasFarmersSettlement.com. You also may write with

questions to Texas Farmers Settlement, P.O. Box 9348, Minneapolis, MN 55440-9348 or call the toll-free

QUESTIONS? C ALL 1-888-222-0691 OR VISIT WWW.TEXASFARMERSSETTLEMENT.COM

-9-

number, 1-888-222-0691. You can also request a C laim Form at the website, or by calling the toll free

number.

You may also write with any questions you may have about the information in this Notice to: Office of the

Attorney General, Consumer Protection Division, P.O. Box 12548, Austin, TX 78711 -2548. You can also

get a copy of the Settlement Agreement at that address or at www.tdi.state.tx.us. Please do not contact the

Court with any questions about the Settlement Agreement.

QUESTIONS? CALL 1-888-222-0691 OR VISIT WWW.TEXASFARMERSSETILEMENT.COM

- I0 -

Exhibit 2

Must Be Texas Farmers Settlement Administrator

Postmarked P.O. Box 9348

No Later Than Minneapolis, MN 55440-9348

Month 00, 2015

NAME I ADDRESS CORRECTIONS

CLAIM FORM

TEXAS FARMERS SETTLEMENT

TO: <PREPRINT NAME>

If you are a member of the Rate Class or Discount Class, you will receive your payment automatically once the

Settlement is finally approved. To file a claim as a member of the Credit Usage Notice Class, you must complete and

submit this Claim Form providing the information requested below.

More information is available at the official Settlement website, www.TexasFarmersSettement.com or call 1-888-222-

0691. Please print clearly in blue or black ink. This Claim Form must be mailed and postmarked by Month 00, 2015.

1. CLASS MEMBER INFORMATION.

Name of Class Member:

----------------------------

Address: ---------------------------------------------------------------------

Telephone Number: ' - - - - - - - - - - - - - - - - - - - 1 ___________________________

2. INSURANCE P OLICY INFORMAT ION.

Homeowners' Policy Information (if applica ble):

Name(s) of Insured(s), if different from above:

Policy Number(s): _ _ _ _ _ _ _ _ _ _ __ Starting Date ofPolicy(ies): _ _ _ _ _ _ _ _ __ __

Address of Insured Premises: ------------------------------------------------------

Name of Agent:

Automobile Policy Information (if applica ble):

Name(s) oflnsured(s), if different from above: ____.:.___ _ _ _ _ _ _ __

Policy Number(s): _ _ _ _ _ _ _ _ _ ____ Effective Date ofPolicy(ies): _ _ _ _ _ _ _ _ _ _ __

Q UESTIONS? C ALL T OLL-F REE 1-888-222-0691 OR V iSIT WWW .T EXAS FARMERS S ETTLEMENT.COM

Address( es) of Insured(s ), if different from above:

Name of Agent:

Vehicle Identification Number (YIN) of Insured Vehicle: _ _ _ _ _ _ _ _ _ _ _ _ __

3. SIGN AND DATE YOUR CLAIM FORM.

I declare under penalty of peijury that:

0 I have not opted out of the Settlement Classes in this case and will not request exclusion from the Settlement

Classes;

0 I did not submit a claim form in the settlement in In re Farmers Insurance Co, Inc. FCRA Litigation. (also called

the "Mobbs Action"), No. CIV-03-158-F, including all cases consolidated and coordinated in MDL No. 1564, in

the U.S. District Court for the Western District of Oklahoma, which was finally approved on September 29, 2011;

0 I have read and understand the contents of this Claim Form; and

0 I am voluntarily submitting to the jurisdiction of the 261 st Judicial District Court of Travis County, Texas for the

purposes of this claim.

Signature

I I

Print Name Month/Day!Year

4. MAIL YOUR CLAIM FORM.

This Claim Form must be postmarked by Month 00, 2015 and mailed to: Texas Farmers Settlement Administrator, P.O.

Box 9348 , Minneapolis, MN 55440-9348.

QUESTIONS? CALL TOLL-FREE 1-888-222-0691 OR VISIT WWW.TEXASFARMERSSETTLEMENT.COM

Exhibit 3

Legal Notice

If You Had Home or Auto Insurance in Texas,

You Could Benefit From A Class Action Settlement

A Settlement has been reached with certain Insurance additional sum to be paid to Rate Class and Discount

Exchanges and Providers ("the Defendants") in a Class Members with eligible claims proportionally.

class action lawsuit about the pricing and marketing The Defendants will also provide payments of $35

of homeowners and automobile insurance policies. to eligible Credit Usage Notice Class Members for

A complete list of Defendants is available at not receiving adequate notice about the Defendants'

www.TexasFarmersSettlement.com. The Settlement use of their credit information. Policyholders who

provides payments to eligible policyholders. renewed or received a new HO-A insurance policy

from the Defendants after November II , 2002 and

What Is This About? before September 1, 2003, have already received an

The State of Texas claims that, during 1999 to additional reduction in premiums.

2003, the Defendants charged rates that resulted in

excessive premiums for its HO-A homeowners policy How to Get Benefits.

and used unfair or deceptive practices involving the Payments to the Rate and Discount Classes will be

determination of certain fees, discounts, and policy made automatically. You must submit a Claim Form

offerings, and improper use of credit scoring and by Month 00, 2015 to get benefits as a Credit Usage

certain risk assessments. Notice Class Member. If you did not receive one

in the mail, you may request a Claim Form at the

The lawsuit also claims that, during the same time website or by calling 1-888-222-0691.

frame, the Defendants: I) failed to provide adequate

notices that information on certain policyholders' Your Other Rights.

credit reports may have impacted their premiums or If you don ' t want a payment from this Settlement and

policy placement, 2) used anticompetitive practices in you don' t want to be legally bound by it, you need

the sale and marketing of homeowners and automotive to exclude yourself in writing by Month 00, 2015 or

insurance policies, and 3) improperly stopped offering you won't be able to sue the Defendants about the

HO-B homeowners policies. The Defendants deny claims in this case. If you ask to be excluded, you

these claims and maintain they did nothing wrong. can ' t get a payment from the Settlement. If you stay

in the Settlement, you may object to it by Month 00,

Who's Included? 2015, but will be bound by the terms of the Settlement

Generally, the Settlement includes Texas homeowners if it is approved by the Court.

or automobile insurance policyholders who had

certain types of insurance policies with the Defendants You may have received or seen other notices about

between October I, 1999 and February 28, 2003 . The other class actions about insurance policy options,

Settlement includes three Classes: Rate, Discount, and premium rates, and/or credit report usage. The

Credit Usage Notice. You may be member of more website has more information about how these cases

than one Class. More information about included affect your eligibility to participate in this Settlement.

policies is available at the website.

The Court will hold a hearing on Month 00, 2015

What Can You Get? to consider whether to approve the Settlement. You

The Defendants will pay rate reductions or discounts can appear at the hearing, but you don't have to. You

to the Rate Class and Discount Class Members can hire your own attorney, at your own expense, to

(calculated on a case-by-case basis) and provide an appear or speak for you at the hearing.

For complete information: Visit: www.TexasFarmersSettlement.com

Call: 1-888-222-0691

EXHIBIT 2

TO APPELLANT GRIGSON’S RESPONSE TO

APPELLEES’ JOINT MOTION TO DISMISS APPEAL FOR

LACK OF APPELLATE JURISDICTION

·{~o-

CAUSE NO. GV202501

THE STATE OF TEXAS, THE TEXAS § IN THE DISTRJCT COURT

DEPARTMENT OF INSURANCE, and §

THE TEXAS COMMISSIONER OF §

INSURANCE, §

Plaintiffs, §

v. §

FARMERS GROUP, INC., FARMERS §

UNDERWRITERS ASSOCIATION, FIRE § OF TRAVIS COUNTY, TEXAS

l UNDERWRITERS ASSOCIATION,

FARMERS INSURANCE EXCHANGE,

FIRE INSURANCE EXCHANGE, TEXAS

FARMERS INSURANCE CO:rvt:PANY, §

1 MID-CENTURY INSURANCE COMPANY §

OF TEXAS, MID-CENTURY IN"SURANCE §

COMPANY, FARMERS TEXAS COUNTY §

MUTUAL INSURANCE CO:rvt:P ANY, §

TRUCK INSUR.A_NCE EXCHANGE, and §

TRUCK UNDERWRITERS § 261ST JUDICIAL DISTRICT

ASSOCIATION,

Defendants.

ORDER OF PRELIMINARY APPROVAL

This matter came on for hearing May 19-22, 2003, for preliminary approval of the

Settlement Agreement and Stipulation of December 18, 2002, as amended on June 13, 2003,

("Settlement Agreement") between the State of Texas, the Texas Department of Insurance, and

'l the Texas Commissioner of Insurance, on behalf of Texas policyholders of the Defendants in the

classes defined below (collectively, the "State") and Fire Underwriters Association, Farmers

Group, Inc. d/b/a Fanners Underwriters Association, Fanners Insurance Exchange, Fire

Insurance Exchange, Texas Farmers Insurance Compaf!Y~ ~i.~tw.y ~surance Company of

Texas, Mid-Century Insurance Company, Farmers ~lW~tYPf1-UW.al Insurance Company,

(._• 04

-J 30491649.1

Truck Insurance Exchange, and Truck Underwriters Association (collectively, the "Fann~rs

Parties"). The State and the Farmers Parties have moved jointly, pursuant to Texas Rule of Civil

Procedure Rule 42( e) and Texas Insurance Code article 21.21 § 18(g), for an Order of

Preliminary Approval (the "Order") (1) preliminarily approving the settlement of all claims

asserted in the above-captioned cause (the "Action"), the terms of which are set forth in the

Settlement Agreement which has been filed with the Clerk of the Court, and (2) approving the

proposed notice to the Classes.

,] The Court having read and considered the Settlement Agreement and attached exhibits,

including the proposed Notice of Proposed Class Settlement, the proposed Claim Form, the

l proposed form of Final Judgment, exhibits, pleadings and record in this case, the evidence and

other materials presented at the hearing, and argument of counsel and applicable authorities,

finds that there exists substantial and sufficient grounds for entering this Order.

IT IS THEREFORE ORDERED, ADJUDGED, AND DECREED THAT:

. l

1. The Court, for purposes of this Order, adopts all defined terms as set forth in the

Settlement Agreement.

2. Pursuant to Rule 42 and Texas Insurance Code article 21.21 §§ 17 & 18, this

Court hereby certifies, only for purposes of effectuating the Settlement Agreement, the following

Settlement Classes (the "Settlement Classes"):

J (i) All of the Exchanges' Texas homeowners insurance policyholders (a)

whose homeowners insurance policy incepted (including renewals) from

December 28, 2001, through and including December 27, 2002, or (b)

who received a notice at any time after November 14, 2001, that their HO-

B policy would not be renewed (the "Rate Class");

(ii) All of the Exchanges' Texas homeowners insurance policyholders who

according to Farmers' records were eligible to receive discounts for

FPRA, age of home, or territory from November 16, 2000, through and

including December 10, 2002 (the "Discount Class"); and

30491649.1

-2-

(iii) All Texas homeowners or automobile insurance policyholders of the

Exchanges or the Automobile Insurance Providers who according to

Farmers' records were provided or should have been provided a Credit

Usage Notice from October 1, 1999, through February 28, 2003 (the

"Credit Usage Notice Class").

3. The Court hereby acknowledges and confirms the State, through the Office of the

. l

I Attorney General, to fulfill the role of the Settlement Classes' Counsel. The Court finds that the

Attorney General's office is authorized to bring this class action by the parens patn·ae authority

granted in section 17 of article 21.21 of the Insurance Code and Rule 42 of the Texas Rules of

. 1

Civil Procedure.

4. Alternatively, if the requirements of Rule 42(a) & (b) and article 21.21 § 18(a) &

(b) must be satisfied, then, with respect to the Settlement Classes, this Court finds and concludes

that each of those requirements has been met, specifically: (a) each of the Settlement Classes is

so numerous that joinder of all members is impracticable; (b) there are questions of law or fact

common to the Settlement Classes which predominate over any individual questions; (c) the

claims or defenses brought by the State on behalf of Fanners'. policyholders are typical of the

claims or defenses of the Settlement Classes and the State is authorized to bring claims on behalf

of the Settlement Classes; (d) in negotiating and entering into the Settlement Agreement, the

State has fairly and adequately represented and protected the interests of the Settlement Classes;

(e) the questions of law or fact common to the Settlement Classes predominate over any

'j questions affecting only individual members; and (f) certifying this Action as a class action is

superior to other available methods for the fair and efficient adjudication of the controversy.

5. The Court further finds that there has been no collusion between the State and the

Farmers Parties with respect to negotiating the Settlement Agreement and that the State has

represented, and will continue to represent, the interests of the Farmers' policyholders fairly and

J adequately and without a conflict of interests. Accordingly, the Court preliminarily approves:

30491649.1 -3-

(a) the Settlement Agreement, including the terms and the releases set forth therein, as being f~r,

just, reasonable, and adequate as to each of the parties thereto, and (b) the Settlement Funds

described therein, including the Prospective Rate Reduction, Retrospective Rate Reduction,

Individualized Discount Adjustment, and Credit Usage Notice Adjustment Fund, and the

proposed additional consideration, subject to the right of any member of the Settlement Classes

to exclude himself or herself from the Settlement Classes in accordance with the terms set forth

in the Settlement Agreement, and to show cause, if any exists, why a Final Judgment should not

j be entered in accordance with the terms of the Settlement Agreement.

6. A hearing (the "Settlement Hearing") shall be held before this Court on

September 29, 2003, at 9:00 a.m. in the 53rd Judicial District Court Room: (a) to determine

whether the proposed Settlement Agreement is fair, reasonable, and adequate and should be

approved, and whether the Final Judgment should be entered as to claims asserted therein, or

which could have been asserted, against the Released Parties on the merits; (b) to determine

whether the Settlement Classes members' right to adequate representation has been satisfied; and

7. The Fanners Parties shall disseminate notice of the proposed Settlement

Agreement and Settlement Hearing to putative members of the Settlement Classes within thirty

(30) days of the date of this Order. A copy of the Notice of Proposed Class Settlement (the

(

... "Notice"), together with a copy of the Claim Form, substantially in the form attached hereto as

1 Exhibit A, shall be mailed by first-class U.S. mail, postage prepaid, to all members of the

-j

Settlement Classes at the address of each such person as set forth in the records of the Released

Parties or as otherwise may be identified through reasonable effort. In addition, commencing

l within seven (7) days of the date of this Order and continuing until the date of the Settlement

30491649.1 -4-

Hearing, the Office of the Attorney General, the Texas Department of Insurance, and the

Farmers Parties shall post on their respective Internet web-sites (www.oag.state.tx.us,

l www.tdi.state.tx.us and www.farmers.com) the Notice and a Summary Notice of Settlement,

substantially in the form attached hereto as Exhibit B ("Summary Notice").

8. The Court approves the form of Notice, the Summary Notice, and the Claim

Form, and finds that the procedures established for mailing and distributing such notices

substantially in the manner and form set forth in paragraph 7 of this Order meet the requirements

of Rule 42 of the Texas Rules of Civil Procedure, article 21.21 § 18 of the Texas Insurance

Code, and due process, and constitute the best notice practicable under the circumstances.

9. To effectuate the provision of notice provided in paragraph 7 hereof, the Fanners

Parties shall be responsible for the receipt of all responses from the members of the Settlement

Classes and, until further order of this Court, shall preserve all entries of appearance, Claim

Forms, requests for exclusion, and any and all other written communications from members of

the Settlement Classes or any other person in response to the Notice. The costs of notification of

the Settlement Classes as provided herein, including printing, mailing, and posting on the

Internet of all required notices, shall be borne by the party charged with the responsibility for

such actions in paragraph 7 of this Order.

10. Three (3) days before the date fixed by this Court for the Settlement Hearing, the

j State and the Fanners Parties shall cause to be filed with the Clerk of the Court affidavits or

declarations of the person or persons under whose general direction the mailing of the Notice and

the distribution of the Surtrmary Notice by posting on the web-sites identified in paragraph 7

shall have been made, showing that such mailing and publication have been made in accordance

with this Order.

30491649.1

-5-

11. Each member of the Settlement Classes will be bound by the proposed settlement

provided for in the Settlement A~eement, and by the Final Judgment or any other determination

by this Court affecting the Settlement Classes, unless such member shall mail, by first-class U.S.

mail, a written request for exclusion from the Settlement Classes, post-marked no later than

August 29, 2003, addressed to "Exclusion Requests", c/o Rust Consulting, Inc.; P.O. Box 9348;

Minneapolis, MN 55440-9348. Such request for exclusion must state (a) the name, address and

telephone number of the person seeking exclusion; (b) whether such person has a homeowners or

l automobile insurance policy from the Farmers Parties, or both; (c) the date of inception of such

policy(ies) and the most recent date of renewal for such policy(ies), if available; (d) the policy

l number(s), if available; and (e) that the person making the request wishes to be excluded from

the Settlement Classes. Because the Settlement Agreement is intended to be a resolution of all

Released Claims, any person requesting exclusion must either exclude himself or herself from

the Settlement Agreement in its entirety, or submit to the Settlement Agreement in its entirety. A

request for exclusion shall not be effective unless it is made in the manner and within the time set

forth in this paragraph and in the Notice. If a member of the Settlement Classes requests to be

excluded, that person will not receive any benefit from the Retrospective Rate Reduction, the

Individualized Discount Adjustment, or the Credit Usage Notice Adjustment Fund provided for

in the Settlement Agreement, in the event the Settlement Agreement is approved by the Court,

nor will such person· be permitted to participate further in the Action. Any Class Member who

does not request exclusion in the manner provided for herein may, but need not, enter an

appearance in this Action at his or her own cost through counsel of his or her own choice. If a

member of the Settlement Classes does not enter an appearance, that person's interests will be

.J represented by the State in the Action .

30491649.1 -6-

, ...J

12. Any member of the Settlement Classes who has not requested exclusion from ti:e

Settlement Classes may appear at the Settlement Hearing, in person or through counsel, to object

and be heard in opposition to any of the matters to be heard at the Settlement Hearing, including

- l

(a) the requested approval of the Settlement Agreement as fair, adequate, and reasonable, and/or

(b) the requested entry of the Final Judgment. A member of the Settlement Classes cannot

request exclusion from the Settlement Classes AND object to the Settlement Agreement. For

any objection to be considered by the Court, the objector must mail a valid written objection, and

it must be postmarked by no later than August 29, 2003. In order to be valid, the written

objection must set forth (a) a reference, at the top, to "State of Texas v. Farmers, Cause No.

GV20250 1," (b) a statement as to whether the objector intends to appear at the Settlement

Hearing, either in person or through counsel, (c) a detailed statement of the specific basis for the

objection, (d) the name that is set forth on the Notice that was sent to the objector, (e) the

objector's current name, if different from the name set forth on the Notice, (f) the objector's

current address, (g) the objector's current telephone number and, if available, telecopier number,

(h) the objector's type of policy and policy number, and (i) the objector's signature or that of his

or her authorized representative. Three copies of the written objection must be sent, the first

addressed to the District Clerk of Travis County, Texas, 1000 Guadalupe Street, Austin, Texas

78701, the second addressed to David C. Mattax, Chief, Financial Litigation Division, P.O. Box

J 12548, Austin, Texas 78711-2548, and the third addressed to Richard N. Carrell, Fulbright &

Jaworski L.L.P ., 1301 McKinney, Suite 5100, Houston, Texas 77010-3095. If an objection does

not include all of the required information or if it is not timely mailed to the three correct

addresses, then it shall be invalid and it will not be considered by the Court. Any member of the

Settlement Classes who does not object in the manner provided shall be deemed to have waived

30491649.1

-7-

such objection and shall forever be foreclosed from making any objection to the fairnes.s,

adequacy, or reasonableness of the Settlement Agreement and the proposed Final Judgment.

13. If the Court gives final approval to the Settlement Agreement and enters a final

judgment, in order to be entitled to participate in the Credit Usage Notice Adjustment Fund

portion of the Settlement Agreement, a member of the Credit Usage Notice Class who has not

requested exclusion from the Settlement Classes must submit a Claim Form, substantially in the

form attached as Exhibit C hereto, to the Farmers Parties at the address set forth in the Notice.

Such Claim Form must be completed and postmarked on or before May 15, 2004. Any member

of the Credit Usage Notice Class who does not submit a completed Claim Form shall not be

entitled to share in the Credit Usage Notice Adjustment Fund but nonetheless shall be bound by

the terms of the Settlement Agreement and by the Final Judgment and any other Order of this

Court approving the Settlement Agreement, including all releases therein, and shall be barred

and enjoined in this or any other action from asserting any Released Claims.

14. Members of the Rate and Discount Classes shall automatically receive their share

of Settlement Funds upon final approval of the Settlement Agreement and entry of final

judgment, unless they file a written request for exclusion from the Settlement Classes as

provided in paragraph 11 herein.

15. The Court expressly retains the power to adjourn the Settlement Hearing, without

any further notice other than an announcement at the Settlement Hearing of adjournment thereof,

and to approve, modify, or disapprove the Settlement Agreement without further notice to

members of the Settlement Classes. The Court retains jurisdiction over this Action to consider

all further applications arising out of or connected with the proposed settlement herein.

30491649.1

-8-

16. The administration of the Settlement Agreement, and the decision of all disput~d

questions of law and fact with respect to the validity of any claim or right of any person to

participate in the distribution of the Settlement Fund, shall be under the authority of the Court.

The parties to this Settlement Agreement, counsel herein in any capacity in which they may act

hereunder, and any employees or agents of such law firms or the parties to the Settlement

Agreement (including, without limitation, those employees who may furnish services in

connection with the proposed Settlement) shall not be liable for anything done or omitted in

l connection with the Settlement Agreement and the administration thereof except for their own

willful misconduct.

l 17. The parties to the Settlement Agreement are directed to carry out their obligations

under the Settlement Agreement.

18. In the event that the Settlement Agreement is not approved by the Court, or the

Court enters the Final Judgment and it is vacated or modified on appeal, or otherwise altered in a

material way, or the Effective Date for any other reason does not occur, and if any party to the

Settlement Agreement thereafter exercises its right to terminate the Settlement Agreement as

provided therein, then the Settlement Agreement and any actions to be taken in connection

therewith shall be vacated and terminated and shall become null and void for all purposes, and

all negotiations, transactions and proceedings connected with it (a) shall be without prejudice to

J the rights of any party hereto; (b) shall not be deemed or construed as evidence or an admission

by any party of any fact, matter or thing; and (c) shall not be admissible in evidence or used for

any purpose in any subsequent proceeding in the Action, or any other action or proceeding in this

or any other forum, judicial, administrative, or otherwise, except proceedings to enforce the

Settlement.

J 30491649.1 -9-

. 1

SIGNED 0UJu 21 '2003.

30491649.1 -10-

' \

CAUSE NO. GV20250 1

THE STATE OF TEXAS, THE TEXAS § IN THE DISTRICT COURT

DEPARTMENT OF INSURANCE, AND §

THE TEXAS COMMISSIONER OF §

.. 1 INSURANCE, §

! §

Plaintiffs, §

v. §

FARMERS GROUP, INC., FARMERS §

'l UNDERWRITERS ASSOCIATION, FIRE

UNDERWRITERS ASSOCIATION,

OF TRAVIS COUNTY, TEXAS

FARMERS INSURANCE EXCHANGE, §

] FIRE INSURANCE EXCHANGE, TEXAS

FARMERS INSURANCE COMPANY,

MID-CENTURY INSURANCE COMPANY §

OF TEXAS, MID-CENTURY INSURANCE §

COMPANY,FARMERSTEXASCOUNTY §

!vfUTUAL INSUR.A.1'-1CE COMP.A.NY, §

TRUCK INSURANCE EXCHANGE, AND §

TRUCK UNDERWRITERS §

ASSOCIATION, § 261 ST ruDICIAL DISTRICT

l Defendants .

NOTICE OF PROPOSED CLASS SETTLEMENT

THIS NOTICE AFFECTS YOUR RIGHTS.

PLEASE READ THE COMPLETE NOTICE CAREFULLY.

TO: ALL FARMERS INSURANCE EXCHANGE OR FIRE INSURANCE EXCHANGE

TEXAS HOMEOWNERS POLICYHOLDERS (A) WHOSE HO-A POLICIES

(INCLUDING TDP-1) INCEPTED OR WERE RENEWED AT ANY TIME DURING

THE PERlOD OF DECE11BER 28, 2001 THROUGH AND INCLUDING DECEMBER

27, 2002, OR (B) WHO RECEIVED A NOTICE AT ANY TIME AFTER NOVEMBER

14, 2001, THAT THEIR HO-B POLICY (INCLUDING HO-PROTECTOR PLUS (PTP),

H0380 ENDORSEMENT, TDP-2, TDP-3, DF-BUILDER'S RlSK, AND HO-A WITH

H0-170 ENDORSEMENT (COLLECTIVELY REFERRED TO HEREIN AS "HO-B"))

WOULD NOT BE RENEWED.

ALL FARMERS INSURANCE EXCHANGE OR FIRE INSURANCE EXCHANGE

..J TEXAS HOMEOWNERS POLICYHOLDERS WHO ACCORDING TO FARMERS

_,.a1 30491674.1 -1-

' 1

RECORDS WERE ELIGIBLE TO RECEIVE DISCOUNTS FOR F ARlv1ERS

PROPERTY RISK ASSESSMENT (FPRA"), AGE OF HO:tv1E, OR TERRJTORY

FROM NOVEMBER 16,2000 THROUGH AND lNCLUDING DECEMBER 10,2002.

ALL TEXAS HOMEOWNERS OR AUTO INSURANCE POLICYHOLDERS OF

FA.RM:ERS INSURANCE EXCHANGE, FIRE INSURANCE EXCHANGE, MID-

CENTURY INSURANCE COMPANY OF TEXAS, MID-CENTURY INSURANCE

COMPANY, FARMERS TEXAS COUNTY MUTUAL INSURANCE COMPANY, OR

TRUCK INSURANCE EXCHANGE WHO ACCORDING TO FARlv1ERS RECORDS

WERE PROVIDED OR SHOULD HAVE BEEN PROVIDED A NOTICE OF

ADVERSE ACTION BASED ON CREDIT HISTORY AT ANY TIME FROM

OCTOBER 1, 1999 THROUGH FEBRUARY 28,2003.

A lawsuit is pending in the 261 st Judicial District Court of Travis County, Texas (Cause

No. GV202501) (the "Action") in which the Attorney General of the State of Texas has brought

suit in the name of the State of Texas, the Texas Department of Insurance, and the Texas

Commissioner of Insurance (hereafter collectively defined as the "State"), and has filed a class

action claiming that one or more of Fire Underwriters Association, Farmers Group, Inc. d/b/a

Farmers Underwriters Association, Farmers Insurance Exchange, Fire Insurance Exchange,

Texas Fanners Insurance Company, Mid-Century Insurance Company of Texas, Mid-Century

Insurance Company, Farmers Texas County Mutual Insurance Company, Truck Insurance

Exchange, and Truck Underwriters Association (collectively, "Farmers Parties") failed to

disclose information with respect to their calculation of premiums, committed unfair and

deceptive acts or practices in the business of insurance, and unfairly discriminated against Texas

1 policyholders of the Farmers Parties in the business of insurance. The State also alleges

anticompetitive practices with respect to the Fanners Parties' sale and marketing of their

homeowners and automobile insurance policies.

J 30491674.1 -2-

The Fanners Parties have denied the State's allegations and alleged numerous affirmative

defenses. The Fanners Parties have also counterclaimed, seeking declaratory relief that its

practices do not violate Texas law.

The Court has conditionally ruled that this Action may be maintained on behalf of three

classes (collectively, the "Settlement Classes") defined as:

(1) Rate Class: All of the Exchanges' (Farmers Insurance Exchange and Fire

Insurance Exchange) Texas homeowners insurance policyholders (a)

whose homeowners insurance policy incepted (including renewals) from

:J December 28, 2001, through and including December 27, 2002, or (b)

who received a notice at any time after November 14, 2001, that their HO-

B policy would not be renewed;

]

(2) Discount Class: All of the Exchanges' Texas homeowners insurance

policyholders who according to Farmers records were eligible to receive

discounts for FPRA, age of home, or territory from November 16, 2000,

through and including December 10, 2002; and

(3) Credit Usage Notice Class: All Texas homeowners or automobile

insurance policyholders of the Exchanges or the Automobile Insurance

Providers (Texas Farmers Insurance Company, Mid-Century Insurance

Company of Texas, Mid-Century Insurance Company, Farmers Texas

1 County Mutual Insurance Company, and Truck Insurance Exchange) who

according to Farmers records were provided or should have been provided

a notice of adverse action based on credit history ("Credit Usage Notice")

from October 1, 1999, through February 28, 2003.

The purpose of this Notice of Proposed Class Settlement is to advise persons included in

the Settlement Classes of the filing and status of the Action and of your rights with respect to a

1 proposed settlement of the Action (including certain rights which you can lose if not protected).

If this notice is addressed to you, you are according to Farmers' records a member of one or

more of these classes. If this notice is not personally addressed to you and you believe that you

may be a class member, or have any questions, then you can contact Rust Consulting, Inc. at 1-

888-222-0691.

30491674.1 -3-

. \

The rights of class members include the right to be excluded from the Settlement Classes.

If you do not request exclusion from the settlement, you will become a "Settlement Class

Member." Please read this entire Notice of Proposed Class Settlement carefully to

understand your rights and options.

TERMS OF PROPOSED SETTLEMENT

1. Subject to the Court's final ~pproval, on December 18, 2002, the State and the

Fanners Parties signed a Settlement Agreement and Stipulation, and subsequently signed an

·j

Amended Settlement Agreement and Stipulation, ("Settlement Agreement") which provides that

l Settlement Class Members within the Rate Class ("Rate Class Members") shall be eligible to

receive or participate in the following:

Retrospective Rate Reduction. Rate Class Members who were insured under an

HO-A policy form issued by the Exchanges at any time during the period

commencing on December 28, 2001 up to and including November 10, 2002 (the

"Credit Period"), shall receive a Retrospective Rate Reduction in the amount of

6.8% of the HO-A base premium earned by the Exchanges during those policies'

actual term .For the above referenced Rate Class Members whose policy is no

J longer in effect or is not renewed at the next renewal date after the 30th day

following the Effective Date (as defined in the Settlement Agreement), the

Retrospective Rate Reduction shall be paid by means of a refund check based on

) each individual HO-A policy's base rate premium earned during the Credit

Period. For the above referenced Rate Class Members whose policy is renewed at

the next renewal date after the 30th day following the Effective Date (as defined

in the Settlement Agreement), the Retrospective Rate Reduction shall be applied

as credit. Unearned policy premiums that may be returned to the policyholder

shall not include the credit. YOU DO NOT HAVE TO DO ANYTHING TO

QUALIFY AND RECEIVE THE RETROSPECTIVE RATE REDUCTION.

2. In addition, the Settlement Agreement provides that Settlement Class Members

within the Discount Class ("Discount Class Members") shall be eligible to receive or participate

in the following:

Individualized Discount Adjustment. Discount Class Members who did not

.J ~ receive discounts for FPRA, age of home, and territory at the level agreed to by

... J 30491674.1 -4-

the State and the Farmers Parties as defined in the Settlement Agreement

("Agreed Discounts") shall receive an "Individualized Discount Adjustment"

payment. The Individualized Discount Adjustment payment for each Discount

Class Member shall equal the amount by which the premium actually charged for

the Discount Class Member's HO-A policy exceeded the premium that would

have been charged if the Farmers Parties had adopted discounts for FPRA, age of

home, and territory elements at the Agreed Discounts on a revenue neutral basis

("IDA Eligibility").

The amount of the Individual Discount Adjustment, if any, will be different for

each policyholder depending on insurance score, age of home and the territory in

which the home is located. As a result, the Individualized Discount Adjustment

will not be calculated until you renew your policy, or, if your policy is no longer

in effect or you choose not to renew your policy, until your refund check is due.

IF YOU ARE ELIGIBLE YOU DO NOT HAVE TO DO ANYTHING TO

RECEIVE THE INDIVIDUALIZED DISCOUNT ADJUSTMENT.

3. In addition, the Settlement Agreement provides that Settlement Class Members

within the Credit Usage Notice Class ("Credit Usage Notice Class Members") shall be eligible to

receive or participate in the following:

a) Revised Credit Usage Notice. For new and renewed Texas homeowners

and automobile policies, the Farmers Parties shall replace the existing

Credit Usage Notice with a new Credit Usage Notice, the terms of which

have been agreed upon jointly between the State and the Farmers Parties.

The new notice must be in a minimum of 12 point type and clearly marked

as "IMPORTANT INSURANCE INFORMATION." The text will be on

a separate piece of paper of any other writing and the notice will not be

attached to or incorporated into any other document.

b) Credit Usage Notice Adjustment Fund. Credit Usage Notice Class

Members are also eligible to assert a claim against the Credit Usage

j Notice Adjustment Fund. The Credit Usage Notice Adjustment Fund is a

fund established by the Farmers Parties for the purpose of reimbursing any

overcharges that may have occurred to homeowners or automobile

insurance policyholders whose policies were issued by the Farmers Parties

in Texas and who paid a premium for automobile or homeowners

insurance that would have been less, but for erroneous credit information

on the individual's credit history maintained at the credit bureau which led

the Farmers Parties to provide premium discounts lower than would have

resulted from correct credit information or to assignment to a company

I affiliated with the Fanners Parties having a higher premium structure. If

.J you believe that you are eligible for recovery from the Credit Usage

30491674.1 -5-

Notice Adjustment Fund, you must submit the Claim Form attached to tills

Notice of Proposed Class Settlement as Exhibit A postmarked by May

15, 2004. .

\VITH REGARD TO THE INDIVIDUALIZED DISCOUNT

ADJUSTMENT AND THE CREDIT USAGE NOTICE

ADJUSTMENT FUND, RELEASED PARTIES HAVE

COMMITTED TO A PAYMENT OR CREDIT OF 100°/o OF ANY

PREMIUM DIFFERENTIAL RESULTING FROM THE

ADJUSTMENT PROCESS SET FORTH IN THE IMMEDIATELY

PRECEDING PARAGRAPHS 2 AND 3. IT IS NOT FEASIBLE TO

CALCULATE IN ADVANCE THE AMOUNT, IF ANY, TO BE

PAID TO EACH CLASS MEMBER. THESE CALCULATIONS,

WHICH WILL REQUIRE INDIVIDUALIZED CALCULATIONS,

WILL BE MADE BY RELEASED PARTIES AND REPORTED TO

THE OFFICE OF THE ATTORNEY GENERAL AND THE TEXAS

1 DEPARTMENT OF INSURANCE, AND WILL BE SUBJECT TO

VERIFICATION BY THE TEXAS DEPARTMENT OF

INSURANCE.

4. Prospective Rate Reduction. In addition, the Settiement Agreement provides that

the Exchanges' Texas homeowners insurance policyholders who renew or receive a new

homeowners insurance policy with the Fanners Parties after November 10, 2002 and prior to

September 1, 2003 shall pay premiums (or are paying premiums) calculated based on a 6.8%

reduction in the statewide average base rate indications for all classes in effect as of

November 10, 2002. This reduction, however, may be reduced and may not occur if legislation

or regulation subsequently requires rate reductions or rollbacks, but in no event will there be less

than a 6.8°/o base rate reduction through either the Settlement, legislation or a combination of the

two. The Fanners Parties also have agreed to refrain from any increase in those base rates that

would take effect prior to midnight on August 31, 2003, provided, however, that rates can be

changed to include charges for any existing endorsement or any new endorsements approved by

TDI or for coverage changes requested by policyholders. This 6.8o/o reduction in the base rate

will .not necessarily result in a 6.8o/o reduction in each policyholder's premium upon renewal,

.J 30491674.1 -6-

' l

because each policy's premium depends on a number of variables, including the coverages ·a

policyholder may choose, an increase or decrease in the value of the home insured, and other

factors. However, the 6. 8% reduction in the base rate will reduce the amount of the premium

that otherwise would have been charged by the Exchanges. The Exchanges shall adopt

discounts, applicable through August 31, 2003, based on FPRA, age of home, and territory

elements in consultation with the State and consistent with sound actuarial principles. The effect

of the new discount will vary from one policyholder to another. Because some policyholders

who do not receive the Individualized Discount Adjustment benefited from the way the

] Exchanges calculated rates under the previous system, they may see a net increase in their

premium under the new adopted discounts at their next policy renewal. Collectively, the relief

described in this paragraph is referred to as the Prospective Rate Reduction.

5. Any policyholder whose HO-B policy was non-renewed by Farmers Insurance

Exchange and who accepted an HO-A policy from Fire Insurance Exchange between December

.J 28, 2001 and March 20, 2002, upon request, will be offered an HO-A policy from Farmers

Insurance Exchange, if they qualify.

6. Pursuant to the Settlement Agreement, the Farmers Parties also agree, for the

benefit of all Settlement Class Members, (a) not to require that individuals desiring to purchase

homeowners insurance from the Farmers Parties also purchase automobile insurance from the

Fanners Parties, or vice versa, and not to refuse to deal in good faith with any homeowners

l insurance customer who purchases automobile insurance from another carrier, or vice versa; (b)

not to enter into any contracts, combinations, or conspiracies in restraint of trade to boycott

homeowners insurance consumers or competitors, whether directly or by artificially reducing and

. constricting the vmting of mold and water-damage-related homeowners insurance coverages;

30491674.1 -7-

and (c) not to enter into any contracts, combinations, or conspiracies in restraint of trade to raise,.

standardize or otherwise fix prices by artificially reducing and constricting the writing of mold

and water-damage-related homeowner's coverages. The agreements by the Farmers Parties

described in this paragraph are collectively referred to as the "Injunctive Relief."

7. In addition to these settlement terms, the Fanners Parties have agreed to pay a

total of $2 million to the State for its attorneys' fees, expenses, and costs of investigation.

. '\ 8. Under the terms of the Settlement Agreement, the State ofTexas, the Office of the

Attorney General, the Texas Department of Insurance, the Texas Commissioner of Insurance,

l and the Settlement Class Members, on behalf of themselves and their heirs, assigns and

successors, FULLY RELEASE AND FOREVER DISCHARGE the following entities

("Released Parties"):

Farmers Group, Inc., individually and d/b/a Fanners Underwriters Association,

and Fire Underwriters Association, Farmers Insurance Exchange, Fire Insurance

Exchange, Texas Fanners Insurance Company, Mid-Century Insurance Company

of Texas, Mid-Century Insurance Company, Fanners Texas County Mutual

Insurance Company, Truck Insurance Exchange, and Truck Underwriters

Association, as well as their affiliates, officers, employees, agents, directors or

governors, representatives, attorneys, predecessors, successors and assigns,

from any and all "Released Claims," which is defined in the Settlement Agreement as follows:

"Released Claims" means and includes, with respect to homeowners insurance

offered or sold by the Released Parties, all existing, known and unknown claims,

demands and causes of action against the Released Parties, whether pending or

threatened, suspected or unsuspected, contingent or non-contingent, for all

existing, known and unknown damages and remedies that arise out of or relate to

the acts and/or occurrences alleged in the AG Lawsuit, or in the Cease and Desist

Order or the Administrative Proceedings, or in the OAG CIDs to the extent any

such acts or occurrences took place prior to November 30, 2002 including but not

limited to issues concerning or related to a management fee or fees, the placement

of policyholders in a particular insuring entity, the age of home discount, the

unfunded catastrophe load, the decision to no longer offer HO-B policies

(including HO-Protector Plus (PTP), H0380 endorsement, TDP-2, TDP-3, DF-

.J Builder's Risk, and HO-A with H0-170 endorsement (collectively referred to

herein as "HO-B")), the offering of HO-A policies in place of HO-B policies,

... J 3049\674.1 -8-

territorial discounts, credit scoring, the use of the Farmers Property Risk

Assessment, or the rates that the Released Parties have charged for homeowners

policies and endorsements and all notices and statements that the Released Parties

have made or issued in connection with the above, including but not limited to the

notices of non-renewal of the HO-B policies and notices issued pursuant to the

. 1

Fair Credit Reporting Act. The State's release of claims against Texas Farmers

Insurance Company related to credit scoring is expressly based on Texas Fanners

Insurance Company's representation that it does not and has not used credit

scores, insurance scores, credit reports or any other method of calculating

premiums based on credit history. "Released Claims" also include any claims,

demands, or causes of action to the effect that the discounted rates adopted by the

Exchanges from November 11, 2002 through and including August 31, 2003, are

unfair, unreasonable, discriminatory, misleading or excessive. With respect to the

automobile insurance offered or sold by the Released Parties, "Released Claims"

includes all existing claims, demands, and causes of action related only to the

disclosure or nondisclosure of consumer credit information or the disclosure or

nondisclosure of the use or effect of using consumer credit information, including

claims under the Fair Credit Reporting Act. ''Released Claims" does not include

individual claims or complaints about claims payments, handling or processing

pursued by individual claimants directly or such individual claims or complaints

about claims payments, handling or processing as may be pursued by TDI under

Article 21.55, Texas Insurance Code, which are identified in a schedule which has

been provided by TDI to the Fanners Parties. Remedies for any such scheduled

claims or complaints, if pursued by the TDI, shall be limited to the payment of

interest under article 21.55, section 6, of the Texas Insurance Code (which interest

is not part of the total value of this settlement), as the result of non-compliance

with that statute, and may not include fines or penalties or any other relief, except

relief may include corrective action respecting procedures. "Released Claims"

also does not include claims that have been asserted in Cause No. GV000271,

State of Texas v. Texas Farmers Insurance Company, et al., which is pending in

the 200th Judicial District Court of Travis County, Texas, and which relates to

betterment in the context of automobile insurance in the Texas market.

The Prospective Rate Reduction, the Retrospective Rate Reduction, the Individualized

J Discount Adjustment, the Revised Credit Usage Notices, the Credit Usage Notice

Adjustment Fund, the Injunctive Relief, and the payment of costs and fees to the State, as

described above, are the only consideration, fees, costs, or expenses that the Farmers

Parties or the Released Parties shall be obligated to give to any Settlement Class Member,

the State, or counsel for the State or any Settlement Class Member, or other attorney in

... J 30491674.1 -9-

connection with the settlement and release of the Released Claims and/or the payment of

attorneys' fees and expenses.

The Released Parties do not admit any wrongdoing or liability. The proposed

settlement is a compromise of disputed claims and does not mean that the Released Parties are

guilty of the charges made by the State. The terms of the settlement and the Settlement

Agreement itself are matters of public record and are not confidential. Any terms used in this

Notice of Proposed Class Settlement that are not defined herein shall have the meaning specified

in the Settlement Agreement.

'.J

30491674.1 -10-

RIGHTS AND OPTIONS OF CLASS MEMBERS

As a Class Member, you have the following rights and options:

1. You may become a Settlement Class 1\'Iember. If you do not request exclusion

from the Settlement Classes, you will become a Settlement Class Member. Your interests will

be represented by the State, through the Office of the Attorney General. You will not be charged

for their services. The Office of the Attorney General cannot by law represent you individually,

but you are free to seek legal advice from a private attorney at your own expense. As a

Settlement Class Member, you will be bound by the -Final Judgment or other disposition of this

Action.

A. Rate and Discount Class Members. If the settlement is approved by the Court

and the Final Judgment becomes final, and if you are a Rate or Discount Class

Member, you will be entitled to receive the benefits described above for which

you qualify, including the Prospective Rate Reduction, the Retrospective Rate

Reduction, and the Individualized Discount Adjustment, without doing anything.

B. Credit Usage Notice Class Members. If the settlement is approved by the Court

and the Final Judgment becomes final, you may be entitled to benefits from the

Credit Usage Notice Adjustment Fund. To determine whether you are entitled to

benefits, you must:

1. Contact Trans Union Corp. by calling 1-800-736-5808, or by writing to

Trans Union Corp. at P. 0. Box 400, Woodlawn, PA 19094, and request a

copy of your consumer report. The Farmers Parties have arranged for

Trans Union Corp. (hereafter "Trans Union") not to charge you a fee if

you make your request through the special procedures in this Notice,

established in connection with the Settlement. Please note that if you

make your request by telephone, you will need to provide the

following identifying information: the name, Social Security number,

date of birth, and numeric address information for the policyholder

.J whose credit is in issue, plus the identifying number from the mailing

.J 30491674.1 -11-

' l

label on this Notice. The identifying number also appears on th~e

Claim Form itself. If you make your request in writing, you must

include the name, Social Security number, date of birth, and complete

address for the policyholder whose credit is in issue, plus the

identifying number from the mailing label on this Notice. By

requesting a copy of your credit report, you are giving Trans Union

permission to notify the Fanners Parties that you have made this request

and to provide the Fanners Parties with a copy of your current credit

report. The Farmers Parties will need this information to assist in

processing any claim that you may have under the Credit Usage Notice

Adjustment Fund. The Farmers Parties will keep this information

confidential.

2. Review your consumer report carefully.

3. (a) If your consumer report does not contain any errors, then you

are not entitled to any benefits from the Credit Usage Notice Adjustment

Fund and you do not need to do anything else.

(b) If you believe your consumer report contains errors that may

have worked against you, you should:

(i) Contact Trans Union to resolve the errors, following the

procedures that accompany the consumer report. By making this

request, you are authorizing Trans Union and the Fanners Parties to

review and reconsider your credit report. After Trans Union has

processed your request for correction, Trans Union will send you a

new consumer report;

(ii) If your new consumer report from Trans Union indicates

that the information in your original consumer report was correct

and that no changes or corrections have been made, you need do

nothing further, as you do not qualify to .make a claim under the

Credit Usage Notice Adjustment Fund. However, if you disagree

with Trans Union's conclusion and establish thereafter that your

original consumer report was incorrect, then you may proceed to the

next step;

(iii) If you receive a new consumer report from Trans Union

indicating that corrections have been made to your original credit

report and believe that the new consumer report corrects errors that

may have worked against you, then complete the attached Claim

Form, attach a copy of the new consumer report that you received

from Trans Union, and mail the Claim Form and attached consumer

report to Personal Lines Credit Usage Notice Administrator,

,] Fanners Insurance, P.O. Box 149199, Austin, Texas 78714-9199,

30491674.1 -12-

postmarked no later than May 15, 2004. The Fanners Parties will

recalculate your premium based upon the new credit report and

send you a refund check from the Credit Usage Notice Adjustment

Fund, if you qualify.

(iv) If you fail to complete and send in the Claim Form,

postmarked by the date indicated, you will lose your right to make

a claim under the Credit Usage Notice Adjustment Fund. As a

Settlement Class Member, you will be bound by the Final

Judgment or other disposition of this Action, even lf you do not

mail in a Claim Form .

. ]

_.J 30491674.1 -13-

. l

2. You may request exclusion from the Settlement Classes. If you request

exclusion from the Settlement Classes, you will not be bound by any judgment or settlement of

this Action, and you will not receive the benefits of the settlement provided, however, that if you

renew your homeowners policies with either of the Exchanges, the Prospective Rate Reduction

will be reflected in your premium if the Settlement Agreement is approved. If you wish to be

excluded from the Settlement Classes, you must send in a request for exclusion by first-class

U.S. mail stating: (I) your name, address, and telephone number; (2) whether you have or had a

homeowners or automobile insurance policy from the Farmers Parties, or both; (3) the date of

inception of your policy(ies), an~ the most recent date on which the policy(ies) was renewed, if

you know; (4) that you wish to be excluded from the Settlement Classes; and (5) the policy

number(s), if you know. The Settlement Agreement is intended to be a final resolution of all

disputes, and thus you must either exclude yourself from the Settlement Agreement in its

entirety, or submit to the Settlement Agreement in its entirety. Requests for exclusion must be

J sent to "Exclusion Requests", c/o Rust Consulting, Inc.; P.O. Box 9348; Minneapolis, 1v1N

55440-9348, by first-class U.S. mail, postmarked on or before August 29, 2003. Requests will

]

not be accepted if made verbally, by fax, e-mail, or other means. Failure to follow these

instructions for requesting exclusion will result in waiver of your right to exclude yourself

from the Settlement Classes. Even if you provide written notice of your election to opt out of

J the class by August 29, 2003, you have the right to revoke that request for exclusion in writing

up to September 21,2003.

3. You may object to the Settlement. Settlement Class Members may appear, in

person or through counsel, to object and be heard in opposition to any of the matters to be heard

l at the Settlement Hearing, including (a) the requested approval of the Settlement Agreement as

J 30491674.1 -14-

fairt adequate, and reasonable, andJor (b) the requested entry of the Final Judgment. You cannot

request exclusion AND object to the settlement. Only Settlement Class Members may

object to the settlement For his or her objection to be considered by the Court, the objecting

Settlement Class Member must mail by U.S. first-class mail a valid written objection, and it

must be postmarked by no later than August 29, 2003. In order to be valid, the written objection

must set forth (a) a reference, at the top, to "'State of Texas v. Farmers, Cause No. GV202501 ,"

(b) a statement as to whether the objecting Settlement Class Member intends to appear at the

Settlement Hearing, either in person or through counsel, (c) a detailed statement of the specific

basis for the objection, (d) the name that is set forth on the notice that was sent to the objecting

Settlement Class Member, (e) the objecting Settlement Class Member's current name, if different

from the name set forth on the notice, (f) the objecting Settlement Class Member's current

j address, (g) the objecting Settlement Class Member's current telephone number and, if available,

telecopier number, (h) the objector's type of policy and policy number, and (i) the objecting

Settlement Class Member's signature or that of his or her authorized representative. Three

copies of the written objection must be sent, the first addressed to the District Court Clerk of

Travis County, Texas, 1000 Guadalupe Street, Austin, Texas 78701, the second addressed to

David C. Mattax, Chief, Financial Litigation Division, P.O. Box 12548, Austin, Texas 78711-

2548, and the third addressed to Richard N. Carrell, Fulbright & Jaworski L.L.P., 1301

McKinney, Suite 5100, Houston, Texas 77010-3095. All such objections must be postmarked

on or before August 29, 2003. IF AN OBJECTION DOES NOT INCLUDE ALL OF THE

REQUIRED INFORMATION OR IF IT IS NOT TIMELY MAILED BY U.S. FIRST-

CLASS MAIL TO THE THREE CORRECT ADDRESSES, THEN IT SHALL BE

j ·INVALID AND IT WILL NOT BE CONSIDERED BY THE COURT. ANY MEMBER

l 30491674.1 -15-

OF THE SETTLEMENT CLASSES WHO DOES NOT OBJECT IN THE MANNER

PROVIDED SHALL BE DEEMED TO HAVE WAIVED SUCH OBJECTION AND

SHALL FOREVER BE FORECLOSED FROM MAKING ANY OBJECTION TO THE

FAIRNESS, ADEQUACY, OR REASONABLENESS OF THE SETTLEMENT

AGREE1VIENT AND THE PROPOSED FINAL JUDGI\'IENT TO BE ENTERED

APPROVING THE SETTLEMENT.

SETTLEMENT HEARING

The Court has g1ven its preliminary approval to the proposed settlement and has

conditionally certified the Settlement Classes. The Court will hold a hearing in the District Court

of Travis County, Texas, 1000 Guadalupe Street, Austin, Texas, on the 29th day of September,

2003, at 9:00 o'clock a.m. to determine whether, as recommended by the Parties, it should give

final approval to the proposed settlement.

Any objections to the proposed settlement by Settlement Class Members will be

L .l considered by the Court, but only if such objections are filed in writing with the Clerk

postmarked on or before the 29th day of August, 2003, and mailed to the individuals at the

:I addresses stated herein. Attendance at the hearing is not necessary; however, any Settlement

Class Member wishing to be heard orally in opposition to the proposed settlement must indicate

this intention in his or her objection. Settlement Class Members who support the proposed

settlement do not need to appear at the hearing or take any other action to indicate their approval.

SETTLEMENT DISTRIBUTION

If the settlement is approved by the Court, and if you are a Rate or Discount Class

Member, you will receive any benefits to which you are entitled as follows: (a) you will receive

the Prospective Rate Reduction at the time of renewal of any HO-A homeowners policy from

30491674.1 -16-

November 11, 2002 through August 31, 2003, inclusive; (b) if you choose to renew your HO-A

policy at the next time that it comes up for renewal, you will receive the Retrospective Rate

Reduction as a credit at the next renewal date after the 30th day following the Effective Date

(described below); (c) if you choose not to renew your HO-A policy at the next time that it

comes up for renewal, or if you do not currently have an HO-A policy provided. by the Farmers

Parties, you will receive a refund check on the later of: (1) 45 days after the end of the original

annual term covered by the policy in question, which schedule will apply even if the policy is

l terminated prior to the end of the policy period, or (2) 30 days after the date by which all of the

I following have occurred: (i) an Order of Preliminary Approval has been entered by the Court in

the Action; (ii) the Court has approved the settlement in all respects; (iii) an order and final

judgment shall have been entered by the Court and not vacated, stayed, or modified in any

material way, upon appeal or otherwise; and (iv) either the time to appeal or otherwise seek

review of the order and final judgment has expired without any appeal having been taken or

review sought, or if an appeal is taken or review sought, the expiration of five days after such an

appeal or review shall have been finally determined by the highest court before which appeal or

review is sought and is not subject to further judicial review ("Effective Date"); and (d) credits

and payment of the Individualized Discount Adjustment shall be made in the same manner and at

the same time as the Retrospective Rate Reduction listed above.

If the settlement is approved by the Court, and if you are a Credit Usage Notice Class

Member, any payments you are entitled to from the Credit Usage Notice Adjustment Fund shall

be made by means of a refund on the later of (1) thirty (30) days after the receipt of a completed

Claim Form, or (2) thirty (30) days after the Effective Date.

:.1 30491674.1 -17-

In the event that the settlement, or the terms provided by the Settlement Agreement, is

not approved by the Court, or if the Effective Date for any other reason does not occur, and if

any Party to the Settlement Agreement exercises their rights to terminate the Settlement

This text is long and has been trimmed here. Open the source document for the complete record.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.