A three-judge panel of the 3rd Court of Appeals in Austin took the case under advisement Wednesday.
A lower court in April ruled that then-Insurance Commissioner Mike Geeslin was within his authority to order the refund. The case involves about 1.2 million policyholders and what regulators say were excessive premiums between 2003 and 2008.
The Dallas Morning News reports a company attorney says the facts do not support refunds. Pete Schenkken also says the payout would threaten the ability of State Farm Lloyds to continue writing homeowners policies in Texas.
Lawyers for the state say customers who paid rates that were too high deserve refunds.