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Law360 (July 22, 2020, 10:34 PM EDT ) Geico has been unfairly profiting off of the COVID-19 pandemic by continuing to charge "unconscionably excessive" premiums at a time when people are driving — and getting into auto accidents — far less, according to a proposed class action filed in Illinois federal court Wednesday.
Since states began adopting strict social-distancing measures in March, school and business closures and stay-at-home orders have prevented most individuals from leaving their homes for extended periods of time, Geico driver Briana Siegal said in her complaint.
Unsurprisingly, this means people are getting behind the wheel a lot less frequently and file far fewer claims, Siegal added.
Siegal pointed to reports from the Center for Economic Justice and Consumer Federation of America, which found that at least a 30% minimum average premium refund would be needed to correct the "unfair windfall" insurers like Geico saw between mid-March and the end of April.
"Despite full knowledge of these facts, Geico has continued to charge and collect excessive premiums and has failed to issue adequate refunds," she said.
The insurer does have a "Geico Giveback" program that Siegal called "woefully inadequate" to compensate for the excessive premiums that customers have paid as a result of COVID-19. That program applies a 15% discount on new and renewal auto insurance policies only, according to the suit. It doesn't apply to premiums that customers have already paid or will continue to pay on policies already existing at the start of the pandemic, Siegal said.
Even with respect to new and renewal policies, the 15% credit falls well short of what is needed to adequately cover the disproportionate premiums, she said.
Siegal is looking to represent a class of all Illinois drivers who purchased personal auto, motorcycle or RV insurance from Geico covering any portion of time between March 21, 2020, and the present.
She's seeking unspecified damages, injunctive relief, attorney fees, court costs and "disgorgement of the ill-gotten gains obtained by Geico to the detriment of its customers," according to the suit.
Insurers have faced a wave of litigation over COVID-19 coverage in recent months. Earlier this month, a poll in the U.K. showed that six in 10 insurance professionals have been contacted by customers who can no longer afford their premiums. The Chartered Insurance Institute said that the poll showed that 61% of 221 people it surveyed in the insurance sector had heard from consumers who were struggling to pay for their cover. Policyholders said they are struggling with the financial fallout of the coronavirus outbreak and the associated lockdown.
In May, New Jersey's Department of Banking and Insurance directed insurers to provide premium refunds, credits and reductions to the state's policyholders in light of the COVID-19 pandemic.
Geico didn't immediately return a request for comment late Wednesday.
Siegal is represented by Ryan R. Stephan, James B. Zouras and Teresa M. Becvar of Stephan Zouras LLP and Matthew H. Morgan, Robert L. Schug and Charles A. Delbridge of Nichols Kaster PLLP.
Counsel information for Geico wasn't immediately available Wednesday.
The case is Briana Siegal v. Geico Casualty Co. et al., case number 1:20-cv-04306, in the U.S. District Court for the Northern District of Illinois.
--Additional reporting by Lucia Osborne-Crowley and Bill Wichert. Editing by Rebecca Flanagan.
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