Geico Facing More Class Action Litigation Over ‘Unconscionably Excessive’ Premiums Charged During COVID-19 Pandemic

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Yet another proposed class action alleges Geico has unfairly profited from the COVID-19 pandemic by way of the insurer’s failure to issue refunds commensurate with the drastic drop in driving and accidents last year. 

The 20-page breach-of-contract lawsuit alleges Geico is among the auto insurers who “scored a windfall” amid the pandemic by continuing to charge “unconscionably excessive” monthly premiums despite a steep reduction in driving and accidents stemming from state and nationwide stay-at-home and social distancing orders. 

“Although businesses across the United States have almost uniformly suffered as a result of COVID-19, state-wide stay-at-home orders, and other social distancing measures, the auto insurance industry has benefited,” the complaint alleges. “In fact, auto insurance—a $250 billion industry—stand to secure a windfall from COVID-19.” 

At the center of the lawsuit is the defendants’ “Geico Giveback” program, which the plaintiffs, two New York drivers, say has been “woefully inadequate” in compensating consumers for the “excessive” monthly premiums they paid as a result of the coronavirus crisis. Although the “Geico Giveback” program applies a 15-percent discount on new and renewal auto insurance policies only, it does not apply to the premiums customers already paid or will continue to pay on policies that already existed at the start of the COVID-19 pandemic, the lawsuit says. Even with respect to new and renewal policies, the 15-percent credit, the plaintiffs argue, falls “well short of an adequate return on premiums”:

“Under the program, GEICO will give customers a 15% credit on their personal auto insurance premiums, but only if they are new customers, or existing customers who renew their policy during the applicable time period. Specifically, the credit is given for six-month policies renewed or newly purchased between April 8, 2020 and October 8, 2020 and twelve-month policies renewed or newly purchased between April 8, 2020 and October 7, 2021.” 

Starting in mid-March 2020, the number of miles driven by consumers, and thus the number of automobile accidents, began to drop dramatically, the suit says. Per the case, the number of vehicle miles driven in New York dropped by as much as 81 percent by April 2020 and hovered around there as the month progressed. In light of the circumstances, Geico customers’ premium rates should have dropped as well, the lawsuit argues, given monthly rates are calculated as intended to cover the claims and expenses the company “expect[s]” to occur in the future, as “extrapolated from historical data.” 

According to the lawsuit, however, Geico generated a pre-tax underwriting gain of $984 million for the first quarter of 2020 alone as a result of charging “excessive premiums” not based on an accurate assessment of risk. In the second quarter of 2020, Geico, according to parent company Berkshire Hathaway, made even more money, pulling in pre-tax underwriting earnings of $2.1 billion, which the case says marks an “increase of 434% compared to the second quarter of 2019.”

The complaint claims Geico has been aware “at all relevant times” of the excessive premiums it’s charged and collected from New York policyholders as a result of the COVID-19 pandemic and its excessive profits from such.  

“Despite this, Geico has failed to adequately return these profits to its customers,” the suit alleges.

The case looks to represent all New York residents who had an automobile, motorcycle, or RV insurance policy from Geico in place and all New York residents who bought auto, motorcycle or RV insurance policies from the defendant covering any portion of time between March 1, 2020 and the present. 

The lawsuit, filed April 1 in New York’s Southern District Court, echoes the allegations in a case filed two days prior that alleged the “Geico Giveback” program is falsely advertised as passing the company’s COVID-19-related savings onto customers.

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