Cafe Says State Farm Premiums Led To Pandemic 'Windfall'

By Craig Clough
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Law360 (October 13, 2020, 8:49 PM EDT) -- A California cafe filed a proposed class action Friday against State Farm for allegedly violating state law by charging "excessive, unfair premiums" during the COVID-19 pandemic, generating "a windfall" in the process.

Boobuli's LLC runs a cafe located inside an office building in Walnut Creek and said in the lawsuit it is struggling to stay afloat amid the pandemic while operating at a reduced capacity that "rarely" reaches 25% of its pre-pandemic levels of business.

The cafe argues that State Farm is in violation of California's Business and Professions Code by charging it and other business in similar situations premium rates that do not acknowledge how COVID-19 has severely altered the landscape.

"While many industries and companies have been decimated by the COVID-19 pandemic, commercial property and casualty insurers like State Farm Fire and Casualty Company have experienced a windfall," Boobuli said.

The cafe added, "State Farms's premiums are calculated based on the risks associated with type, volume and location of certain business operations. As a result of the substantial reduction or elimination of business operations beginning in March 2020, the premiums charged by State Farm are well in excess of a fair rate of return."

State Farm touts a program to refund about 25% of the premiums its auto insurance customers paid from March through May and "claims" to be working on reducing future premiums for businesses by a "woefully inadequate" 7%, according to the lawsuit.

State Farm is the country's largest property and casualty insurance conglomerate in the country, with a net worth over more than $116 billion, according to the lawsuit.

California has "a long-standing general public policy" limiting insurance premiums and rates to a fair rate of return, but State Farm's refusal to fairly adjust its premiums due to COVID-19 violates California public policy, the cafe said. 

In particular, the cafe said State Farm is violating section 17200 of California's Business and Professions Code and seeks to restore the unfair funds the insurance company has collected and enjoin it from from continuing to charge any excessive premiums.

"We're just trying to help some of the small businesses that have been hurt by the pandemic and the shutdowns," Fredrick A. Hagen of Berding & Weil LLP, who represents Boobuli, told Law360. 

Hagen also represents another California coffee shop, Rejoice! Coffee Company, which filed a similar lawsuit in September against Hartford Financial Services Group Inc.

State Farm did not immediately respond to a request for comment.

Boobuli is represented by Fredrick A. Hagen of Berding & Weil LLP.

Counsel for State Farm could not immediately be identified.

The case is Boobuli's LLC v. State Farm Fire And Casualty Company, case number 3:20-cv-07074, in the U.S. District Court for the Northern District of California.

--Editing by Gemma Horowitz.

For a reprint of this article, please contact reprints@law360.com.

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