A class action lawsuit has been filed against CSAA, the subsidiary of the Northern California AAA Auto Club, for allegedly overcharging its customers since 2020 when the COVID-19 pandemic began and in doing so violated state law as well as Department of Insurance orders.
On March 4, 2020, Governor Gavin Newsom declared a state of emergency in California, followed by the issuance of a stay-at-home order on March 19 in response to the pandemic which was not lifted until March 15. June 2021. During this time, the complaint states that CSAA “continued to charge premiums based on pre-pandemic rates” even when “miles driven, vehicle accidents and auto insurance claims have falled”.
“He overbilled his policyholders at a time when many of them were struggling to pay their bills,” the lawsuit states.
Also during this time, California Insurance Commissioner Ricardo Lara issued four orders to carriers to provide partial refunds or other monetary relief, such as credits or dividends, to policyholders while the stay-at-home order was in effect “due to their low exposures to losses during the pandemic.
“Each bulletin warned CSAA and other auto insurance companies that their then-current rates were excessive,” the suit states.
Repairer Driven News has asked CSAA for comment on the lawsuit and the specific allegations it contains, including whether the allegations that CSAA collected several hundred million dollars in excess premiums from its policyholders and did not refunded that less than 100 million are true. A company spokesperson said CSAA “cannot comment on outstanding legal issues.”
The lawsuit claims that CSAA owes refunds of more than $150 million to plaintiff Shavonda Early and the proposed lawsuit class of more than 170,000 policyholders in California. The figure was reached “using the methodology of Bulletin 2021-03 and data that CSAA has publicly filed with the CDI [California Department of Insurance].”
Lara in October named CSAA as one of three carriers that failed to adequately reimburse policyholders, according to the complaint. RDN asked CDI if an investigation or appeal against CSAA is ongoing but did not receive a response by the publication deadline.
Plaintiff alleges that CSAA is in violation of California Insurance Code Section 1861.05(a) and the state’s unfair competition law through unlawful business practices as well as Proposition 103. Proposition 103 requires prior approval from the state DOI before carriers can apply P&C insurance rates. , according to the CDI. The proposal prohibits tariffs that are “excessive, inappropriate, unfairly discriminatory” or that violate the tariffs chapter.
An order for restitution of “excessive premiums withheld by CSAA” and pre- and post-judgment interest is sought.
“In providing partial refunds to its policyholders, however inadequate, CSAA recognized that it (a) could charge lower rates than rates approved under the Commissioner’s guidelines, and (b) could not continue to charge previously approved tariffs because
they had become and had been declared excessive by the commissioner and were therefore unlawful,” the lawsuit states.
According to lawsuit data obtained from public records, CSAA’s auto insurance loss ratio for 2020 decreased by more than 10
percentage points to 48.2%, which means the carrier paid 48.2 cents in claims on every premium dollar due to the pandemic.
“As a result, CSAA’s earnings on its auto insurance business increased 665% from their 2019 level, reaching $441.6 million in 2020. CSAA’s auto insurance loss ratio for 2021 was 55.9%, 2.6 points below its pre-pandemic level in 2019. On March 11, 2021, Commissioner Lara issued Bulletin 2021-03. Based on data that insurance companies had submitted in accordance with previous bulletins, he concluded that “the
the premium relief that insurance companies provided to their policyholders was insufficient, leaving consumers to pay inflated premiums while they continued to experience reduced risk of loss.
The bulletin also included the following bar charts that compare reimbursements given by the state’s top 10 insurers against what Lara calculated policyholders are owed, according to the complaint:
In Bulletin 2021-03, Commissioner Lara also directed companies to “[d]o further to return additional premium relief beginning in March 2020 and report such additional premium returns to the Department, based on continued reductions in loss exposure for particular lines of insurance,” the suit states. “The CSAA ignored Commissioner Lara’s order in Bulletin 2021-03. It did not refund more premiums to policyholders from March 2020 than it already did, and it did not include the required additional report on its additional premium refund plans for the March period. to December 2020.”
The nonprofit public interest organization Consumer Watchdog is one of three prosecutors in the trial and, in a press release, shared comments from attorneys on the case.
“California’s Insurance Commissioner has named CSAA one of the three companies that have most flagrantly violated its excessive premium refund orders. Our pre-filing investigation shows that his identification of CSAA was fully justified,” said Jay Angoff of Mehri and Skalet.
David Borgende Goldstein, Borgen, Dardarian & Ho, added, “So many Californians have suffered tremendously from COVID and its economic fallout, and large insurance companies like CSAA should not be allowed to profit during this historic pandemic.
Harvey Rosenfielda Consumer Watchdog attorney on the case and the author of Proposition 103 said: “California Insurance companies are required by law to maintain fair rates at all times. As a result of its pandemic-related profits, CSAA has reaped an astonishing financial windfall — money that belongs to its customers.
Consumer Watchdog also said recently that Lara should reject GEICO’s proposed $268 million rate hike and the $202 million hike by another AAA insurance arm, Auto Club. The non-profit organization claims that GEICO charges working-class policyholders such as caretakers, construction workers and catering workers 25% higher premiums than drivers in GEICO’s preferred “professional” occupations, including lobbyists, architects and financial analysts. And Auto Club, with its “discriminatory pricing system based on employment and education,” charges the working class premiums up to 9% higher.
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