Galveston insurance company sues auto dealer over terminated policies

John Suayan, Galveston Bureau Nov. 4, 2009, 9:34am

GALVESTON - Two insurance companies, including Galveston-based American National Insurance Co., have filed suit against the San Antonio-based Red McCombs automotive family in an effort to retrieve reimbursements for numerous clients who terminated their policies early.

ANICO and Springfield, Mo.-based American National Property and Casualty Co. claim the defendants refused to return a significant amount of unearned insurance commissions in violation of agency agreements.

The suit was filed Oct. 28 in Galveston County District Court.

Court papers show ANICO sold credit insurance and ANPAC guaranteed auto protection coverage, and the plaintiffs maintained contracts focusing their products and services with the defendants.

Under the agreements, the defendants were paid approximately half of the premium on the sale of a policy as their commission, they state.

The original petition further explains that if the insured exits their loan early, an unearned portion of the premium would be refunded.

"Because the parties anticipated that refunds might have to be paid to costumers who terminate their loans early, the parties expressly agreed that the defendants would return their portion of any unearned commission in the event that a refund was made," the original petition says.

ANICO and ANPAC issued policies to thousands of costumers who purchased automobiles from Red McCombs-affiliated dealerships, some of whom terminated their policies early and were entitled to a refund.

The plaintiffs can only hand out refunds if they informed about the policyholder's decision, according to documents.

The suit alleges various cancellations, however, went through without any word to both complainants thus those clients who executed terminations did not receive refunds.

"The defendants already pocketed the vast majority of the pre-paid premiums on these policies as commissions," it says. "Pursuant to the contracts and the commission assignment agreements, the plaintiffs demanded that the defendants return their unearned commissions."

"The defendants ignored the fact that some of the defendants themselves potentially possessed information indicating that certain customers' loans did terminate early and they never shared that information with the plaintiffs."

"The defendants absolutely disregarded their own responsibility and role in creating problems with unearned premium funds."

ANICO invokes a 2005 class action lawsuit in which the company was ordered afterwards to compensate for missing refunds, claiming the process was extremely costly and time-consuming.

Consequently, ANICO sues for up to $1,800,000 in damages while ANPAC seeks more than $80,000 for its grievances.

Both seek a jury trial.

League City attorneys Joseph R. Russo, Roni S. Mihaly, and Angela Olade are representing the plaintiffs.

Galveston County 212th District Court Judge Susan Criss is presiding over the case.

Case No. 09CV2023

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