The judge ruled that car insurer Geico Corp., a unit of Warren Buffett’s Berkshire Hathaway Inc., is facing a class action lawsuit. It is claimed that it paid too much to the policyholders as the coronavirus pandemic led to less driving and fewer accidents.
In a ruling Thursday, U.S. District Judge Sharon Johnson Coleman in Chicago said Illinois executives could try to prove that Geico violated a state consumer fraud law by marketing its discount program “Geico Giveback” unfairly and misleadingly. She rejected breach of contract and unfair enrichment claims.
Neither Geico nor his lawyers responded immediately to requests for comment on Friday. Lawyers for the plaintiffs did not immediately respond to similar requests.
Geico offered $ 2.5 billion in credits last April, including 15% on renewals from April to October, averaging about $ 150 per policy.
Insurers led by Briana Siegal said it led them to renew and pay exorbitant premiums rather than buy around, as home orders and closures of businesses and schools resulted in less time on the road.
Siegal also said that Geico’s credits compared unfavorably with the repayments offered by other insurers.
She cites a report from the Consumer Federation of America and Center for Economic Justice awarding Geico’s program a ‘D-minus’ among the A and B grades given to State Farm and Allstate Corp, which offers refunds.
Without ruling on the merits, Coleman said the plaintiffs adequately allege that Geico misled them into thinking that he had passed on all his savings through reduced management, and did not disclose that his premiums’ are not based on a 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 the entire Geico since 1996. Geico is located in Chevy Chase, Maryland.
The case is Siegal v. Geico Casualty Co. et al., U.S. District Court, Northern District of Illinois, no. 20-04306.
(Report by Jonathan Stempel in New York Editing by Matthew Lewis)
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