GEICO Won’t Face Class-Action Suit in Illinois Overcharging Case

The lawsuit claimed the insurer overcharged policyholders during the early stages of the COVID-19 pandemic.


A federal judge has determined GEICO, the car insurer owned by Warren Buffett's Berkshire Hathaway, will not be subjected to class-action claims in a lawsuit alleging it overcharged policyholders during the early stages of the COVID-19 pandemic, Reuters reported.

U.S. District Judge Sharon Johnson Coleman in Chicago said Illinois policyholders could not sue as a group, as the intricacies involved in calculating damages for individual drivers would overshadow the commonalities within the proposed class. Additionally, Coleman said there was no "common injury" stemming from GEICO's announcements about its "GEICO Giveback" program, which was introduced as a response to decreased driving due to shelter-in-place orders.

The lawsuit was initiated by Illinois residents who purchased car, motorcycle or RV insurance from GEICO since March 21, 2020. The plaintiffs pointed to a reduction in driving and subsequent accidents during the pandemic, arguing that GEICO's premiums were excessively high compared to competitors like State Farm and Allstate, who provided refunds to their policyholders.

Despite offering $2.5 billion in credits to its policyholders in April 2020, GEICO's approach was deemed insufficient by the plaintiffs, who accused the insurer of violating Illinois consumer protection laws by maintaining high premium rates.

GEICO's financial performance during the pandemic included a significant drop in its loss ratio -- a measure of premiums paid against claims -- which reached a 13-year low in 2020. However, the insurer faced underwriting losses in the following periods, prompting strategic adjustments to bounce back, evidenced by a substantial pre-tax underwriting profit in 2023.

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