Law360 (March 26, 2021, 6:59 PM EDT) -- A proposed class of California consumers hit Geico with a suit in federal court, alleging the auto insurer has wrongly refused to pay back overcharged premiums when fewer people drive on the roads and submit car accident claims during the pandemic.
Jessica Day of Salinas, California, said Thursday she wanted to bring the proposed class action to end Geico's practice of "unfairly profiting." She is seeking to represent all California residents who have held a Geico auto policy from March 1, 2020, to the present.
"While many companies, industries, and individuals have suffered financially as a result of the COVID-19 pandemic, auto insurers like GEICO have scored a windfall," she said.
The proposed class action arrived after California's regulator ordered auto insurers to report by April 30 on how they will repay drivers for overcharged premiums during the pandemic. The state's insurance commissioner Ricardo Lara said car insurers overcharged by 8% from last March through September, pointing out that carriers collected $220 million in excess premiums in April 2020 alone.
"While millions of us stayed home helping to fight the spread of the virus and reducing the risk of accidents for our essential workers, insurance companies continued to collect inflated premiums," Lara said in a March 11 statement. "The bottom line: Insurance companies overcharged consumers and need to do more to make it right and help Californians recover."
California traffic accidents dropped by half after the Golden State issued a stay-at-home order last year, according to the Road Ecology Center at the University of California, Davis.
On Thursday, Day said Geico achieved drastic profit increases "at consumers' expense" and reported pretax earnings of $3.428 billion in 2020, more than double its earnings over the same period in 2019.
Consumers deserve at least a 30% refund on their premiums paid for last March to April, the California resident said, citing one report from the Center for Economic Justice & Consumer Federation of America.
According to the suit, the Consumer Federation of America gave Geico's program a "D-" grade last April, stating that it "doesn't provide relief for current policyholders, fails to credit consumers for the current premium that has become excessive" and is "wrongly attempting to take credit for future – and in most cases distant future – rate reductions."
Day said Geico only temporarily carried out a "giveback program" that applied a 15% discount on new policies and policy renewals from April to October last year. Yet, the program did not apply any discounts to policies already signed at the start of the pandemic.
"Despite the inadequacy of its refund program, GEICO falsely advertised to consumers that it was 'passing [its COVID-related] savings on' to its customers," the proposed class representative said.
Day said she bought a renewal auto insurance policy from Geico last February. She paid $871.20 in premiums and got a $130.68 discount when she renewed the policy last August, according to the complaint.
The consumer brought claims against Geico Casualty Co., Geico Indemnity Co. and Geico General Insurance Co, alleging violation of good faith, California false advertising and unfair competition law, and unjust enrichment. She is seeking damages with the exact amount to be determined in a jury trial.
Representatives for the parties couldn't be immediately reached for comment on Friday.
Day is represented by Melody L. Sequoia of The Sequoia Law Firm and Matthew C. Helland of Nichols Kaster PLLP.
Counsel information for Geico was not immediately available.
The case is Day v. GEICO Casualty Company et al., case number 5:21-cv-02103, in the U.S. District Court for the Northern District of California.
--Editing by Ellen Johnson.
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