As Texas neared the end of a decade-long legal fight over homeowners’ insurance rates with Farmers Insurance Group in December, the company's employees PAC gave $50,000 to the gubernatorial campaign of Attorney General Greg Abbott — the top lawyer in the state’s case against the company.

The contribution took Abbott's receipts in his race to succeed Texas Gov. Rick Perry to more than $75,000 since 2013 from the PAC of his courtroom opponent — a company the state alleged in a 2002 lawsuit had deceived and discriminated against Texas homeowners.

Critics of Abbott and of a still-in-dispute settlement the AG's office offered Farmers that year under Abbott's predecessor, John Cornyn, say that Abbott, as he has renewed the suit, has not fairly represented homeowners in Texas. They say those homeowners were charged too much by the company whose employees' political arm has given generously to Abbott's campaign.

For Farmers, “it was a sweetheart deal when it was struck in 2002, and it’s only gotten sweeter since then,” said Alex Winslow, executive director of the consumer advocacy group Texas Watch.

Abbott and his campaign, along with Farmers, contend that the settlement agreement is fair. Abbott’s campaign said he does not treat donors differently when it comes to applying the law and that accepting the campaign money is not a conflict of interest. Luis Sahagun, a Farmers spokesman, said no one was available to comment about the contributions on Monday.

The accusations of preferential treatment are the latest in an ongoing debate over ethics in the gubernatorial race between Abbott and Democratic state Sen. Wendy Davis.

Meanwhile, the pending settlement has languished in various courtrooms for more than a decade.

In 2002, Farmers raised its homeowners’ insurance rates in Texas amid a surge in mold-damage claims from policyholders. It became a political issue in that year’s statewide elections, prompting Perry to launch an investigation. Later, the state filed a class-action lawsuit against Farmers, claiming “deceptive and discriminatory practices” by the company. Among the accusations were that Farmers had charged Texas policyholders for natural disasters in other states and that it had used credit history as a significant factor for setting premiums without disclosing to customers that the practice drove up prices. Then-Attorney General Cornyn estimated that the company owed policyholders as much as $140 million.

The insurance giant threatened to pull out of Texas, where it controlled about 20 percent of the home insurance market. The company said doing business in Texas would no longer be profitable and said it had lost more than $1 billion in Texas over two years.

Abbott’s ties to Farmers became an issue that year in his race to succeed Cornyn, as he campaigned against former Austin Mayor Kirk Watson, a Democrat who is now a state senator. When it was revealed that Farmers was among the hosts of a fundraiser for Abbott’s campaign, Abbott pledged to return all contributions from the company. Abbott said at the time that he was unaware of the state’s investigation into the company.

A Travis County judge approved a preliminary settlement between Farmers and the state in 2003, five months after Abbott took office. But consumer advocates appealed, arguing that the award was unfavorable to policyholders.

"Private individuals hired their own lawyers and did much, much better than the state did bringing suit against Farmers," said Joe Longley, an Austin lawyer who has represented policyholders in the case. Longley has given $3,500 to Davis since 2010.

The settlement is still pending, now back in Travis County district court. A transcript of an April hearing in the case sheds light on what consumer advocates claim is the settlement’s failure to adequately compensate policyholders.

Critics of the settlement say it is too lenient on Farmers because it does not make the company pay enough. At the April hearing, Travis County state District Judge Scott Jenkins, who approved the settlement in 2002, asked Deputy Attorney General David Mattax why the state was being “deferential” to Farmers by not insisting that the settlement — valued at $117 million — include interest that would have accrued while the case sat dormant for 11 years.

“You don’t just have to lay down to Farmers,” Jenkins said. “Farmers has had the benefit of all that money for more than a decade and the consumers haven't.”

Sahagun, the Farmers spokesman, called the proposed settlement “fair and reasonable.”

A political action committee affiliated with employees of the insurer resumed its contributions to Abbott after the 2002 election that he won. In total, the Farmers Employees PAC has given more than $100,000 to the sitting attorney general since then, state campaign finance records show.

Matt Hirsch, a spokesman for Abbott’s gubernatorial campaign, said private contributions do not affect the attorney general’s ability to remain impartial while enforcing the law.

“As his record illustrates, Greg Abbott has been able to retain the independence that allows him to investigate and even prosecute companies that gave him political contributions, showing that he is committed first to upholding the laws of the state of Texas,” Hirsch said.

Hirsch also took aim at Abbott’s Democratic opponent.

“Unlike Greg Abbott, Sen. Davis has personally profited off votes she cast in the Senate, although Texans don’t know to what extent because she refuses to release her full client list or latest tax returns,” Hirsch said.



In November, Abbott released a set of sweeping proposals for ethics reform that appeared targeted at Davis, who has been criticized for doing legal work for governmental or quasi-governmental agencies.

Davis, meanwhile, has called Abbott an “Austin insider” who takes campaign money from payday lenders and chemical companies. She accused Abbott of issuing rulings as attorney general that have been beneficial to those industries.

Those involved in the Texas litigation against Farmers say there is no resolution in sight. “The saga’s going to continue,” Longley said. “It’s like a Dickens novel. It just keeps going on.”

Below is a timeline of the lawsuit.