Class action lawsuit in California alleges GEICO owes policyholders millions in premium refunds

The class certification was granted by a federal judge for the Northern District of California in a lawsuit against GEICO alleging the airline engaged in unfair business practices by failing to provide adequate award refunds, although less so during the COVID-19 pandemic stay Miles driven and claims filed. Home orders.

The class includes “[a]ll California residents who have personal auto, motorcycle or RV insurance with GEICO covering any part of the period from March 1, 2020 to the present,” reads the Oct. 31 order signed by Judge Beth Labson Freeman . Plaintiff Jessica Day will serve as class representative. Her attorneys estimate the class will have more than 2 million members.

According to the complaint, California motorists drove 75% fewer miles between mid-March and late April 2020 compared to the January 2020 average, resulting in 50% fewer accidents. GEICO offered a 15% rebate on new and renewed policies under its “GEICO Giveback” program, according to the lawsuit.

“On April 13, 2020, the Consumer Federation of America awarded GEICO’s program a grade of ‘D-‘, placing GEICO at or near the bottom of insurers receiving grades,” the complaint reads. “The CEJ/CFA report stated that GEICO’s program ‘does not adjust the relief to the appropriate premium and policy’, ‘provides no relief to current policyholders’, ‘gives consumers no credit for the overpremium’. and ‘falsely attempts to account for future – and in most cases distant future – rate cuts as if it would actually provide relief to current policyholders today.’”

Day also complains that GEICO allegedly only grants the refund to customers who have renewed their policies, falsely claims that the program brought “significant and complete relief” and failed to disclose its excessive gains.

“While many companies, industries and individuals have suffered financially from the COVID-19 pandemic, auto insurers like GEICO have hit the jackpot,” the amended complaint reads. “Not surprisingly, as a result of nationwide social distancing and stay-at-home measures, there has been a dramatic decline in driving and a concomitant reduction in drive-related accidents. This drop in trips and accidents has significantly reduced the number of claims auto insurers like GEICO have paid, resulting in a drastic and unfair increase in GEICO’s profits at the expense of its customers. According to its parent company, Berkshire Hathaway, GEICO reported $3.428 billion in pre-tax income in 2020. That’s more than double GEICO’s earnings for the same period in 2019.”

According to the complaint, GEICO “engaged in unfair business acts and practices” in violation of California’s unfair competition law. A motion to dismiss an allegation contained in the complaint that GEICO breached a contract was granted by Freeman.

GEICO said it lacked “sufficient knowledge, information or belief to confirm or deny the allegations” set out in the preliminary statement of the amended complaint.

California Insurance Commissioner Ricardo Lara has also grappled with inflated profits by some airlines. In October, Lara directed 47 truckers to provide detailed information about their damage costs during the stay-at-home phase of the pandemic because he believes they still owe rebates to California drivers who were overcharged during this time .

And last year on Oct. 5, Lara ordered Allstate, Mercury and CSAA to return more of the excess profits they collected during the pandemic to drivers or take legal action. An analysis of new data by the California Department of Insurance (DOI) showed that these three companies “closed the largest gap between what they originally paid drivers and what they should have paid to provide their policyholders with reasonable premium relief since inception.” provide the COVID-19 pandemic,” the commissioner said at the time.

In a joint letter written earlier this year, the National Association of Mutual Insurance Companies (NAMIC), the Personal Insurance Federation of California (PIFC) and the American Property Casualty Insurance Association (APCIA) warned California Insurance Commissioner Ricardo Lara that he was taking risks crisis by refusing to approve price increases since the start of the coronavirus pandemic more than two years ago. S&P Global Market Intelligence reports that the CDI last week approved its first personal auto insurance rate increase in the state since 2020 for Allstate, which goes into effect next month. The airline requested a 6.9% increase, which is the maximum allowable increase under state law without triggering a public hearing, according to S&P.

Freeman ruled that Day’s complaint met the four requirements for receiving class certification – number, commonality, typicality and adequacy, and that damages on a class-wide basis can be sufficiently calculated using a model proposed by an expert, the one percentage refund would apply to each policyholder single premium in the same manner as the “GEICO Giveback” refund.

GEICO argues that the methodology is “inadequate because one cannot go back in time to revise fares, noting that it would be impossible to go back in time to revise the correct fares due to the uncertainty during the pandemic based on the knowledge we have today.” Freemann wrote. However, she ruled that it was “sufficiently complete” and that GEICO could contest its accuracy later in the case.

“The court finds persuasive the fact that GEICO itself made various data adjustments in a recent Massachusetts tax return to account for the impact of COVID-19,” Freeman wrote.

The lawsuit seeks recovery of the “wrongfully obtained profits that GEICO has acquired to the detriment of its customers,” as well as all available remedies, punitive damages, declaratory and injunctive relief, and any other available remedies that Day believes pertain to over addition will total 5 million dollars. A similar lawsuit was filed against USAA in April, alleging that the airline also owes Californians more than $5 million in refunds from “deadweight” profits the company made during the pandemic. That lawsuit was dismissed voluntarily and with prejudice on October 20.

The complaint argues that 30% is the average reimbursement benchmark “conservatively estimated as reasonable reimbursement only for the first two months of the pandemic” and that GEICO violates California’s Proposition 103’s prior approval of property-casualty insurance rates the CDI and state airlines must first consider driving safety records when setting fares, then the number of miles driven annually and the number of years of driving experience.


Photo credit: jetcityimage/iStock

Diagram of kilometers driven (screenshot from Day v. GEICO, Case No.: 5:21-cv-02103-BLF)

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