In 2003, State Farm Lloyds (State Farm), a previously non-rate-regulated insurer in Texas that provided homeowners insurance to millions of Texas residents, became subject to a then-newly enacted temporary rate regulation regimen by the Texas Department of Insurance (TDI) in 2003. State Farm filed its rates in June 2003, and TDI shortly thereafter found the rates excessive, and (1) ordered a 12% rate reduction and (2) ordered State Farm to refund policyholders who had been over-charged. State Farm appealed the order in the Texas district court, which found TDI’s ruling unconstitutionally “confiscatory,” as it essentially would have put State Farm at risk of insolvency (the refunds would have amounted to approximately $1 billion). TDI appealed, but the Texas appellate court affirmed.

Thereafter, in late 2008, TDI noticed a public rehearing on the matter. The re-hearing took place between March and May of 2009. On November 16, 2009, TDI issued its order after re-hearing. Its order reduced the amount of the previously ordered reduction, resulting in a reduction of the refund TDI ordered to approximately $310 million. On December 7, 2009, State Farm timely appealed the order, which also included a provision noting that State Farm’s refund obligations under the order are stayed until the matter is resolved in the courts.