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Policyholder Sues State Farm Over Campaign Contributions

August 16, 1988

LOS ANGELES (AP) _ A motorist sued State Farm Mutual Insurance Cos., demanding that the insurer stop spending policyholders’ money on an industry campaign to bring no-fault insurance to California.

The suit, filed in state court Monday by Benjamin G. Barnes, also asks that the company return to policyholders money already contributed in support of the ballot issue.

State Farm spokesman Jim Stahly said the contributions, which amounted to $1.4 million through June, were a legitimate use of the funds.

″It is our opinion that it is entirely proper for State Farm to participate in elections in California,″ Stahly said.

The insurance industry expects to spend up to $43 million promoting the November ballot issue, spokesman have said.

At a news conference announcing Barnes’ suit, his attorney, William Shernoff, was accompanied by a spokesman for the Insurance Consumer Action Network, a Ralph Nader-affiliated group backing a rival initiative that would cut rates 20 percent.

State Farm is required under law to return any surplus to its customers, the suit charges.

The suit also alleges that the use of policyholders’ premiums violates First Amendment guarantees of free speech by, in effect, forcing them to contribute to a political campaign against their will.

″The point is that you don’t use policyholder money on political issues,″ Shernoff said.

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