A federal judge has allowed a lawsuit against Geico Corp. to proceed as a class action. The claim is that Geico overcharged more than two million California drivers for car insurance in the early months of the COVID-19 pandemic.
At the start of the pandemic, some of the most severe lockdowns went into place. This led to forced behavioral changes of Americans throughout the country. For drivers, it meant leaving a car sitting in the garage, used only for occasional trips to the grocery store.
This lack of activity significantly lowered the risk of collision. Even during the times a person was on the road, there was very little traffic. Insurers are expected to provide discounts or refunds in cases like these. In fact, there are a number of car insurance discounts available to low-risk drivers in normal times as well.
Geico did in fact offer some relief. They provided $2.5 billion to policyholders. However, they provided this in the form of credits, including discounts on renewals. The class action lawsuit claims that what they provided fell well short, based on what they reaped due to the drastic reduction in payouts.
What has Geico said?
For its part, Geico is fighting back against this class action. Previously, the firm had contended that a group lawsuit would create insurmountable manageability problems. The U.S. District Judge who allowed the class action to proceed – Beth Labson Freeman of San Jose – rejected this claim.
Freeman asserted that a class action would be better than individual lawsuits, with the damages model provided by the plaintiffs potentially “[presenting] an appropriate percentage refund over a sufficiently long time” to address manageability concerns.
Geico has also made other claims as to the validity of the class action. They have said it cannot account for differences among policyholders. There is a basis for this, considering that different parties have been insured for vastly different periods of time. They have also stated that there would be major difficulties in retroactively assessing damages, isolating pandemic costs, and adjusting rates.
Can they win?
A major challenge that Geico faces is in their own promises made during the early days of the pandemic. They claimed that their credits program would provide “substantial and full relief.” While the terms used are vague, that may work in favor of the plaintiffs. It is difficult for a company to claim to have provided this relief if such a large number of policyholders reject it.
That being said, Geico may be able to win this lawsuit. Similar lawsuits have been brought against them in Chicago and Manhattan. While the Chicago lawsuit is ongoing, an appeals court upheld a judge's dismissal of the lawsuit in Manhattan.
Who is Geico?
If you're unfamiliar with Geico’s roots, the company is a part of Warren Buffett’s Berkshire Hathaway Inc. Berkshire has owned Geico in its entirety since 1996. Berkshire is based in Omaha, Nebraska, while Geico is based in Chevy Chase, Maryland.
FAQs
March 12 (Reuters) - Geico, the car insurer owned by Warren Buffett's Berkshire Hathaway (BRKa. N) , opens new tab, will not face class-action claims as it defends against a lawsuit alleging it overcharged policyholders early in the COVID-19 pandemic, a federal judge ruled on Tuesday.
Is GEICO overcharging? ›
A federal judge has determined GEICO, the car insurer owned by Warren Buffett's Berkshire Hathaway, will not be subjected to class-action claims in a lawsuit alleging it overcharged policyholders during the early stages of the COVID-19 pandemic, Reuters reported.
Is there a class action lawsuit against GEICO insurance? ›
On March 25, 2021, class claims were filed in California federal court in the Northern District of California San Jose Division, against insurance giant GEICO General Insurance Company (“GEICO”) alleging that GEICO unfairly profited from the COVID-19 pandemic.
What is the GEICO controversy? ›
GEICO, one of the largest auto insurance companies in the United States, has settled allegations by the National Labor Relations Board (NLRB) that it engaged in illegal anti-union activities, including threatening and interrogating employees in upstate New York about their unionization efforts.
Has anyone ever sued GEICO? ›
The most commonly filed lawsuits against Geico in relation to auto accidents include: Personal injury lawsuit: The purpose of a personal injury lawsuit is to seek compensation for losses and damages in a car accident, such as pain and suffering and medical expenses.
Why is my GEICO insurance all of a sudden so much higher? ›
Geico may have raised your rates because of changes to your policy or circ*mstances. Examples include adding a new type of coverage, becoming eligible for an additional type of discount, being involved in an accident, or buying a new car.
Is it wise to join a class action lawsuit? ›
And since class action cases may take years, even to obtain a court-approved settlement, “sometimes it's easier to settle an individual case than the entire case,” Feldman says. However, if an eligible member does not plan on filing an independent lawsuit, there's no obvious downside to being a member, he says.
What would be considered a class action lawsuit? ›
JF: A class action is a type of legal action where one or more people sue on their own behalf individually, and also on behalf of a group — or a class of individuals — who have similar claims.
Is GEICO in trouble financially? ›
Warren Buffett has a soft spot for auto insurer Geico, as he invested in the company at $2 a share back in 1976. Geico is going through a rocky patch, suffering a $1.9 billion pretax underwriting loss in 2022. Competitor Progressive is also snapping up market share, according to an analysis from UBS.
Why is GEICO closing? ›
The Chronicle reports that insurance industry magazines linked Geico's decision to close California sales offices to its failure to raise insurance prices in compliance with Sacramento regulations and other market forces.
Geico is so cheap because it sells directly to the consumer. Geico also offers many discounts that help customers save even more on top of its already-low premiums.
What is the GEICO lizard? ›
The GEICO Gecko is a bipedal anthropomorphic gold dust day gecko, with large black eyes.
How much will I get from a GEICO class action lawsuit? ›
Members in the class action lawsuit against Geico can receive payment for unpaid regulatory fees and unpaid sales taxes. As listed on the settlement website, individual payments may be $2,051.98 on average, with some members receiving higher or lower payments.
Why do people sue insurance companies? ›
Some common violations by insurance companies include failure to pay claims on time, making bad faith claims, and refusal to pay correctly filed claims.
Is GEICO insurance losing money? ›
Geico generated an underwriting profit of $3.6 billion last year, compared with a loss of $1.9 billion in 2022. But that higher profit came at a cost. Geico had the largest decline in market share among the top 10 U.S. auto insurers. It appears to have shed unprofitable business.
Why is my bill higher in Geico? ›
Generally, the more time and miles you put on your vehicle, the higher the chance you may be involved in an accident. Other items that may be considered include how long you have been driving, your driving record, and your claims history.
Are Geico premiums going up? ›
Auto insurance rates are going up
Across the country, Geico increased its average auto insurance premiums by 25.9% from 2022-2023.
Is Geico in trouble financially? ›
Warren Buffett has a soft spot for auto insurer Geico, as he invested in the company at $2 a share back in 1976. Geico is going through a rocky patch, suffering a $1.9 billion pretax underwriting loss in 2022. Competitor Progressive is also snapping up market share, according to an analysis from UBS.
Is Geico the most expensive car insurance? ›
Geico is one of the most popular insurance companies in the country, and its average car insurance premiums are 24% cheaper than the national average.
