By Jonathan Stempel
The car insurer Geico Corp, a unit of Warren Buffett’s Berkshire Hathaway Inc, must face a proposed class action claiming to have overcharged policyholders if the coronavirus pandemic led to less driving and fewer accidents, a judge ruled.
In a decision on Thursday, US District Judge Sharon Johnson Coleman said in Chicago that Illinois drivers could try to prove that Geico violated a state consumer fraud law by unfairly and deceitfully marketing its “Geico Giveback” rebate program. She rejected claims of breach of contract and unjustified enrichment.
Neither Geico nor her lawyers immediately responded to requests for comment on Friday. Plaintiffs’ attorneys did not immediately respond to similar requests.
Geico had offered policyholders $ 2.5 billion in credits last April, including 15% for April to October renewals, averaging about $ 150 per policy.
But policyholders led by Briana Siegal said this prompted them to renew and pay outrageous premiums instead of shopping around, as stay-at-home orders and business and school closures resulted in less time on the road.
Siegal also said Geico’s credits were unfavorable compared to reimbursements from other insurers.
She quoted a report from the Consumer Federation of America and Center for Economic Justice in which Geico’s program awards a “D-minus,” among the “A” and “B” numbers given to State Farm and Allstate Corp, which offered refunds. .
Without judging merits, Coleman said the plaintiffs claimed enough that Geico had misled them into thinking it was spending all of its savings on driving less, and did not disclose that its premiums were “ not based on an accurate risk assessment during COVID-19
Geico’s “loss ratio,” or the percentage of premiums paid to cover claims, fell to 74.1% in 2020 from 81.3% a year earlier, and was the lowest since 2007.
Berkshire, based in Omaha, Nebraska, has owned Geico since 1996. Geico is based in Chevy Chase, Maryland.
The case is Siegal v Geico Casualty Co et al, US District Court, Northern District of Illinois, No. 20-04306.