Top Auto Insurance Companies Face Potentially Costly Lawsuits
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- How car insurance companies responded to pandemic
- Lawyer, consumer groups claim reduction wasn’t adequate
- Not the only lawsuit car insurance companies face
Many of the nation’s top insurance companies face a potentially costly lawsuit over what some attorneys say is a woefully inadequate response to the dramatic decline in miles driven and accidents because of the COVID-19 pandemic. Eglet Adams, a personal injury law firm in Nevada filed class-action lawsuits February 23, 2021, against 10 car insurance companies.
The lawsuits state that even though companies did offer refunds and discounts on car insurance, the companies still violated Nevada laws against excessive insurance premiums because of the dramatic drop in insurance claims. The companies targeted by the lawsuits—are State Farm, USAA, Geico, Acuity, Liberty Mutual, Farmers, Progressive, Travelers, Nationwide, and Allstate.
How car insurance companies responded to pandemic
In response to the lawsuits, the American Property Casualty Insurance Association (APCIA) told Forbes that auto insurers offered more than $14 billion in refunds and credits to customers in the months after the pandemic led to widespread stay-at-home orders beginning in March 2020.
The Chicago Tribune notes the lawsuits acknowledge a variety of discounts given to Nevada consumers, ranging from $50 to $100 one-time refunds from Acuity to a 15% credit from Geico, but only when consumers renewed their policies between April 8 and October 7, to a 25% reduction in bills from State Farm from March 20 to May 31.
In comments to Forbes, a Progressive spokesperson pointed out the company gave $1.1 billion in premium credits and rate reductions nationwide because of the pandemic, including some $25 million in annualized rate savings to Nevada drivers.
Lawyer, consumer groups claim reduction wasn’t adequate
Robert Eglet, lead counsel for Eglet Adams, says the refunds, credit and rate reductions to customers should have been more in the ballpark of 50% to 60%.
Eglet’s claims are backed up by the Consumer Federation of America (CFA), which has been calling for steeper refunds and credits since March 2020 and criticized companies for paying dividends to their shareholders when their customers were struggling through the pandemic.
The lawsuits cite statistics such as a 66% drop in traffic crossing the California-Nevada border in April 2020, compared to April 2019, and a 60% decline in auto accidents in southern Nevada in March 2020 versus the previous year.
Not the only lawsuit car insurance companies face
Though Eglet says he’s not aware of other class-action lawsuits filed against auto insurance companies, attorneys in Illinois filed lawsuits on behalf of consumers against six insurers in August 2020—Allstate, American Family Insurance, Progressive, Geico, Erie Insurance, and Travelers.
Both sets of lawsuits seek class-action status so they will apply to all policyholders within their respective states. If the lawsuits are successful in getting class-action status and in winning their claims, consumers could expect further refunds or rate reductions, though these types of civil lawsuits often drag out for years in the courts.
Because insurance companies generally are regulated on a state-by-state basis, these lawsuits so far will apply only to consumers in Nevada and Illinois. Eglet believes more lawsuits could arise in other states, especially if these two sets are successful.
CFA has been encouraging state regulators to take a closer look at auto insurance rates based upon their own states’ driving statistics during the pandemic. The lawsuits could have a ripple effect and touch consumers throughout the country.
Jerry offers consumers the opportunity at any time to compare car insurance rates to see if they could be getting a better deal.