Office of the Attorney General News Release Archive

Thursday, August 24, 2000

CORNYN WINS REFUNDS FOR USAA POLICYHOLDERS

Attorney General gets "Betterment" refunds on auto insurance claims

AUSTIN - Texas Attorney General John Cornyn today announced a settlement of a lawsuit against USAA, the nation's seventh largest insurer of private passenger automobiles. The settlement will result in nearly $479,000 in refunds, plus interest, to Texas consumers. The settlement concerns USAA's practice of reducing auto repair claims payments to its policyholders for "betterment"of the vehicle. Under the settlement, USAA agrees not to engage in the practice of deducting for betterment on its policyholders' claims, and will refund the amount charged for betterment, plus interest, to policyholders who had an auto repair claim from July 1, 1996 to the present. The settlement was approved today in Travis County District Court.

"USAA is to be commended for their willingness to do what is right for its Texas policyholders," said Attorney General Cornyn. "I hope other insurers follow USAA in giving policyholders what they deserve." In February of this year, Attorney General Cornyn sued 15 other major insurance companies regarding their betterment practices. Those suits are still pending.

"Betterment" is an insurance industry term for increasing the value of a vehicle by paying to repair it with better or newer parts. For example, if your engine is damaged in a collision and your insurance company decides to replace it with a newer engine, some companies deduct an amount for betterment or depreciation on the claim payment. A 1998 Austin Court of Appeals opinion, and a recent bulletin by the Texas Department of Insurance, state that these deductions are not permitted under the standard Texas auto policy.

The settlement requires USAA to pay an estimated $479,000 in refunds, plus interest, to over 3800 Texas policyholders who had an auto repair claim where betterment was applied during the period July 1, 1996 to present. USAA also agrees that this settlement will not affect its insurance rates. USAA will also pay $57,500 in attorneys' fees and other expenses to the Attorney General's office. The settlement does not require USAA to admit liability or wrongdoing of any kind.

This lawsuit was handled by Assistant Attorney General Jim Wenzel, in the Insurance Practices Section of the Attorney General's Office Consumer Protection Division.

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Contact Mark Heckmann, Heather Browne, or Tom Kelley at (512) 463-2050
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