State Farm may be illegally failing to reimburse its customers for automobile rental costs incurred by the policy holder when a third party insurance company pays State Farm for the rental costs.

Investigation and pending class action lawsuit against State Farm Mutual Automobile Insurance Company alleging State Farm is enriching itself with payments rightfully belonging to its insureds in violation of California law, particularly the "Make Whole Rule."

When a State Farm policyholder in Fresno, Calif., was rear-ended, his personal automobile insurance policy entitled him to a rental car while his car was being fixed. Under his auto policy, State Farm paid 80 percent of the $317.45. He was charged for his rental car, leaving him to pay 20 percent, or $63.49, in out-of-pocket expenses. State Farm then went to the other party's insurance company to collect the money it had paid out to State Farm's customer. That insurance company reimbursed State Farm $70 for the rental car.

The complaint alleges that pursuant to California's "Make Whole Rule," State Farm should have refunded Chandler from that amount the $63.49 for out-of-pocket expenses he incurred before it could retain any of those funds for itself. Instead, the complaint alleges, State Farm kept the full amount for itself, ignoring the fact that Chandler has not been fully compensated for his loss as required by law.