GEICO Faces Class Claims Over Pandemic-Related Windfall
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.
In the complaint, named plaintiff Jessica Day alleges that while many companies, industries and individuals suffered financially as a result of the COVID-19 pandemic, auto insurers like GEICO brought in significant profits. The plaintiff explains how during the height of the COVID-19 pandemic, state-wide social distancing and stay-at-home orders caused a dramatic reduction in vehicles on the roads and therefore resulted in a decrease in driving-related accidents. The complaint argues that this resulted in a drastic reduction in the number of claims that auto insurers, including GEICO, paid out. Plaintiff claims the outcome is an unfair increase in the defendant’s profits at the expense of its customers. For example, GEICO’s reported pre-tax earnings in 2020 were $3.428 billion, more than double its 2019 earnings.
The plaintiff proposes that in order to correct GEICO’s unfair windfall, a customer refund of around 30% of paid premiums would need to take place. The complaint points out that GEICO’s short-lived “GEICO Gives Back” program was woefully inadequate to compensate customers for overpayments resulting from COVID-19 shutdowns—the program applied a 15% discount on new and renewed auto insurance policies from April to October 2020. It did not, however, apply any discount to the premiums that customers had already paid, or continued to pay, for policies pre-existing at the start of the COVID-19 pandemic.
The plaintiff is seeking to represent a class made up of all California residents who purchased personal automobile, motorcycle or recreational vehicle insurance from GEICO covering any portion of time from March 1, 2020 to the present. The suit brings causes of action for breach of contract and violation of the covenant of good faith and fair dealing, unjust enrichment/quasi- contract, frustration of purpose, violation of the California False Advertising Law and violation of the California Unfair Competition Law.
The case is: Day v. GEICO Casualty Company et al., Case No.: 5:21-cv-02103, in the U.S. District Court for the Northern District of California.
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