In Re GEICO General Insurance Company

Background

Plaintiffs Cindy Ventrice-Pearson, Poonam Subbaiah, and Kristen Perez sought preliminary approval of a settlement in a consolidated class action against GEICO General Insurance Company. They alleged that GEICO breached private-passenger automobile insurance policies by failing to include sales tax when paying actual cash value for leased vehicles and by improperly calculating regulatory fees for total-loss vehicles.

The settlement classes cover: (1) insureds whose covered total-loss claims did not include the full regulatory fees allegedly owed, and (2) insureds with leased vehicles whose covered total-loss payments did not include actual-cash-value sales tax. People who retained their salvage vehicles, among others, are excluded from the settlement classes. The opinion states that the estimated class size was about 220,000 people, including approximately 218,023 regulatory-fees class members and 8,772 sales-tax class members.

Provisional Class Certification

For settlement purposes, the court found that the proposed classes satisfied Federal Rule of Civil Procedure 23. It found numerosity because joining the estimated 220,000 class members individually would be impracticable. It found commonality because the claims raised shared questions about the insurance-policy language, the calculation of regulatory fees under California Insurance Code § 2695.8(b)(1), and whether GEICO’s practices breached its contracts. It also found typicality and adequate representation.

The court further found that common issues predominated over individualized issues and that a class action was the superior method for resolving the dispute. The court appointed the named plaintiffs as class representatives and appointed Normand PLLC, Tycko & Zavareei LLP, Kirtland & Packard LLP, Shamis & Gentile, P.A., and Edelsberg Law, P.A. as class counsel.

Settlement Terms

The settlement is claims-made, meaning class members must submit valid claims to receive payments. A regulatory-fees class member who submits a valid claim will receive $6.88. A sales-tax class member who submits a valid claim will receive $6.88 in regulatory fees plus sales tax at the applicable state and county rate at the time of loss.

Subject to a change in statutory law or a contrary appellate decision, GEICO also agreed that, for future covered total-loss vehicles, it would pay sales tax at the applicable rate to leased-vehicle insureds and calculate regulatory fees by daily proration rather than by subtracting a monthly amount at the beginning of the month.

The settlement includes a release of specified known and unknown claims concerning covered total-loss claims during the class period, including breach-of-contract, bad-faith, statutory, common-law, equitable, and punitive-damages claims related to insufficient sales-tax or regulatory-fee payments. It does not release claims alleging that GEICO improperly calculated the base or adjusted value of total-loss vehicles, except to the extent those claims concern insufficient sales-tax or regulatory-fee payments.

Class counsel may seek up to $3,900,000 in attorneys’ fees and costs. The named plaintiffs may seek incentive awards of no more than $15,000 for Poonam Subbaiah, $10,000 for Cindy Ventrice-Pearson, and $5,000 for Perez. The court stated that it would evaluate the reasonableness of the fees and incentive awards at the final-approval stage.

Preliminary Approval Analysis

Under Rule 23(e), a court must approve a class settlement and determine that it is fundamentally fair, adequate, and reasonable. Because the settlement was reached before class certification, the court applied heightened scrutiny for possible collusion or conflicts of interest.

The court noted that GEICO agreed not to oppose requests for attorneys’ fees, costs, and incentive awards, and that the claims-made structure functioned similarly to a reversion because GEICO would pay only for submitted valid claims. The court nevertheless concluded that these concerns did not prevent preliminary approval, in part because the settlement provided substantial prospective changes and payments to eligible claimants. The court stated that it would examine the actual claim rate and other data more closely when considering final approval and the fee request.

The court found that the settlement fell within the possible range of approval given the litigation risks identified by the plaintiffs, including the absence of a California decision holding that leased-vehicle insureds are entitled to full sales-tax payments after a total loss. It also found no obvious deficiencies.

Notice and Disposition

The court found that the proposed notice plan was reasonably calculated to inform class members. A third-party administrator, KCC, will mail notices and claim forms to identifiable class members, use reasonable efforts to locate updated addresses for returned notices, and send email notices when email addresses are available. The notices will explain the class definition, settlement benefits, claim procedures, exclusion and objection procedures, the final fairness hearing, and the proposed fee and incentive-award requests.

The court GRANTS Plaintiffs’ motion for preliminary approval, preliminarily finds the settlement fair, reasonable, and adequate, and DIRECTS the parties to implement the proposed notice plan and submit a schedule for the required settlement events. This order provides preliminary approval; it does not state that the court granted final approval of the settlement.