In Re GEICO General Insurance Company

Background

Plaintiffs brought a consolidated class action against GEICO General Insurance Company. They alleged that GEICO breached private-passenger automobile insurance policies by failing to properly include or calculate sales tax for leased vehicles and regulatory fees for all vehicles after covered vehicles were declared total losses.

The policies allegedly required GEICO to pay the vehicle’s actual cash value, defined as replacement cost minus depreciation. Plaintiffs argued that the policies required GEICO to include sales tax when paying claims involving leased vehicles. They also argued that California law required regulatory fees to be calculated on an end-of-month or daily-proration basis rather than by deducting the monthly amount at the beginning of the month.

The cases brought by Cindy Ventrice-Pearson, Poonam Subbaiah, and Kristin Perez were transferred to the court and consolidated for settlement purposes. After discovery, depositions, motion practice, and mediation, the parties reached a settlement. The court preliminarily approved it on July 28, 2022, and held a final fairness hearing on December 15, 2022.

Settlement Terms

The settlement created two groups. The Regulatory Fees Class covered eligible insureds whose covered vehicles were declared total losses and for whom GEICO did not pay the full regulatory fees. The Sales Tax Class covered eligible insureds whose leased vehicles were declared total losses and for whom GEICO did not include sales tax in the total-loss payment.

The settlement required GEICO to pay $6.88 to each qualifying Regulatory Fees Class member who submitted a valid claim. A qualifying Sales Tax Class member would receive $6.88 in regulatory fees plus sales tax at the applicable state and county rate at the time of loss. Payments were claims-made, meaning class members generally had to submit a valid claim form.

The agreement also required GEICO, subject to specified future legal developments, to pay applicable sales tax to eligible leased-vehicle insureds and calculate regulatory fees by daily proration for qualifying total-loss vehicles. Class members would release claims related to GEICO’s alleged failure to pay sufficient sales tax or regulatory fees for covered total-loss claims during the class period.

Notice and Final Settlement Approval

The settlement administrator mailed notice to 201,240 class members and emailed notice to 182,116 class members for whom GEICO had email addresses. The court found that the notice plan was properly implemented and provided the best practicable notice required by the applicable class-action rules.

The court found the settlement fair, adequate, and reasonable. It considered the risks of continued litigation, including plaintiffs’ acknowledgment that no California court had held that insureds who leased vehicles were entitled to full sales-tax payment after a total loss. The court also considered the completed discovery, the parties’ mediation efforts, the estimated recovery, and the class response.

The estimated cash benefit was $6.2 million. The Sales Tax Class was expected to receive approximately $5.8 million, with valid claimants receiving 100% of the sales tax at issue on average claims exceeding $2,000. The Regulatory Fees Class was expected to receive approximately $402,824, with each qualifying member receiving $6.88, described as 50% of the potential recovery under plaintiffs’ theory. Plaintiffs estimated that one year of future practice changes could be worth approximately $4.8 million.

Of the 201,240 class members, 61,265 submitted valid claims. Five class members opted out, and no objections or comments were submitted. The court therefore granted the motion for final approval of the class action settlement.

Attorneys’ Fees, Costs, and Service Awards

Class counsel requested $3,852,553.39 in attorneys’ fees and $47,446.61 in costs. Because this was a claims-made settlement, the court used the lodestar method, which calculates fees by multiplying reasonable hours by reasonable hourly rates. Counsel’s records showed a base lodestar of $2,266,047.20 for 3,378.8 hours.

The court found that the billing records included some inefficient or unreasonable time. It noted that five firms and 32 timekeepers worked on the case and that the records reflected substantial time spent on communications among counsel. The court also questioned time spent on disputes among firms before the cases were consolidated. It applied a 5% reduction to the base lodestar.

Although counsel requested a 1.7 multiplier, the court applied a 1.2 multiplier because of the excellent class result while accounting for the billing inefficiencies. The court awarded $2,583,293.81 in attorneys’ fees. It separately granted the requested $47,446.61 in costs.

The named plaintiffs requested service awards of $15,000 for Poonam Subbaiah, $10,000 for Cindy Ventrice-Pearson, and $5,000 for Kristin Perez. The court found that the plaintiffs, particularly Subbaiah, meaningfully contributed to the litigation, but found Subbaiah’s requested award too high. It awarded $10,000 to Subbaiah, $7,500 to Ventrice-Pearson, and $5,000 to Perez, for a total of $22,500.

Disposition

Judge Haywood S. Gilliam, Jr. granted the motion for final approval of the class action settlement. He granted in part and denied in part the motion for attorneys’ fees, costs, and incentive awards. The court awarded $2,583,293.81 in attorneys’ fees, $47,446.61 in costs, and $22,500 in service awards. The parties and settlement administrator were directed to implement the settlement, and the parties were directed to file a short stipulated final judgment within seven days of the order.