A federal judge ruled on Monday that a lawsuit accusing Geico Corp of overcharging more than 2 million California car insurance policyholders during the COVID-19 pandemic may be heard as a class action.
Geico’s claim that a group lawsuit over the alleged inadequacy of its “Geico Giveback” program would create “insurmountable manageability problems” was rejected by U.S. District Judge Beth Labson Freeman in San Jose, California.
Geico, a subsidiary of Warren Buffett’s Berkshire Hathaway Inc, claimed that a class action would fail to account for differences among policyholders, such as the length of time they had insurance.
The Chevy Chase, Maryland-based insurer also stated that assessing damages, isolating pandemic costs, and retroactively adjusting rates would be difficult.
The judge, however, ruled that a class action was preferable to individual lawsuits, and that the plaintiffs’ damages model “could present an appropriate percentage refund over a sufficiently long time” to address manageability concerns.
Geico’s lawyers did not respond immediately to requests for comment. Similar requests were not immediately responded to by the plaintiffs’ lawyers.
Policyholders objected to Geico’s decision to provide $2.5 billion in credits, including 15% on renewals, beginning in April 2020, to reflect how people were driving and getting into accidents less frequently at the time.
They claimed Geico received a “windfall” because the credit fell “well short” of being adequate given the reduced risks, and accused the insurer of falsely claiming that its credits provided “substantial and complete relief.”
Some insurers, including State Farm and Allstate Corp, provided policyholders with pandemic-related refunds.
The class applies to California residents who purchased Geico car, motorcycle, or RV insurance between March 1, 2020 and the present.
Geico is fighting a similar federal lawsuit in Chicago, and in May convinced a Manhattan appeals court to uphold a judge’s dismissal of a similar lawsuit there.