America District Courtroom in Boston just lately denied a movement to dismiss a possible class motion lawsuit, permitting claims of unfair insurance coverage practices based mostly on army pay grades to proceed towards the United Providers Vehicle Affiliation (USAA) and USAA Basic Indemnity Firm (GIC).
United Providers Vehicle Affiliation (USAA) is a monetary providers firm that primarily serves energetic and retired members of the U.S. army and their households. To be eligible for USAA membership, people should be energetic, retired, or honorably separated officers or enlisted personnel of the U.S. army, cadets or midshipmen at a U.S. service academy, kids of a USAA member, or spouses or former spouses of a USAA member. USAA markets itself as offering aggressive charges and glorious customer support for its members.
USAA gives insurance coverage to present and former army personnel by 4 completely different insurers that function underneath frequent administration and management: United Providers Vehicle Affiliation, USAA Basic Indemnity Firm (GIC), USAA Casualty Insurance coverage Firm, and Garrison Property and Casualty Insurance coverage Firm (Collectively, “USAA”)
Class motion on insured’s firm placement based mostly on army pay grade
Plaintiffs Christopher Wright, Robert Manning, Elliot Chefitz, and Joshua Steiss, representing a category of equally affected people, filed a lawsuit underneath Massachusetts Basic Legal guidelines Chapter 93A. They allege that USAA and GIC engaged in unfair and deceptive practices by basing insurance policy placements on military pay grades.
The plaintiffs, who are firefighters and former military personnel, allege that USAA improperly relies on policyholders’ military pay grade to determine their placement in either USAA or its subsidiary, GIC.
According to the complaint, USAA places current and former military personnel with pay grades E-1 through E-6 in GIC, while those with pay grades E-7 and above are placed in USAA. The plaintiffs contend that this practice violates Massachusetts insurance regulations, prohibiting occupation and income as factors in determining policy placement within an insurance company group.
Low military pay grade allegedly gets higher premiums from USAA
The plaintiffs allege that USAA’s practice leads to E-1 to E-6 policyholders paying higher premiums than those with higher pay grades (E-7 and above) despite similar risk profiles. The complaint alleges the present automobile premium rate disparity for otherwise similar insureds is substantially higher for bodily injury, property damage, personal injury protection, and collision coverages between placement in USAA and GIC in premiums. To the plaintiffs, this disparity constitutes an unfair and deceptive practice under Massachusetts General Laws Chapter 93A, which entitles them and the class they seek to represent for damages and injunctive relief.
Court allows plaintiffs’ 93A unfair business practices claim to proceed
USAA’s motion to dismiss, which the Court denied, alleged that the plaintiffs failed to state a claim because their former military pay grade does not equate to income or occupation. USAA argued that the plaintiffs’ allegations did not demonstrate a violation of Massachusetts insurance regulations. In response, the plaintiffs maintained that USAA’s use of military pay grade as a proxy for income and occupation violates the spirit and intent of the regulations and that the motion to dismiss should be denied. The Court agreed with the plaintiffs, finding that they had presented a plausible claim under Chapter 93A, and allowed the case to proceed.
Plaintiffs claim They were placed in GIC because of their prior low military pay grade
The plaintiffs in this case, Christopher Wright, Robert Manning, Elliot Chefitz, and Joshua Steiss, are firefighters and former military personnel who have private passenger automobile insurance policies with GIC. According to the amended complaint, Manning’s highest pay grade in the military was E-3, while Wright, Chefitz, and Steiss’ highest pay grade was E-4. Because their pay grades were below E-7, the plaintiffs allege that USAA placed them in GIC rather than United Services Automobile Association.
Alleged rate disparity of up to 61% based on military ranking of E-6 or less
The plaintiffs contend that this placement in GIC, based on their military pay grade, results in them being charged higher premiums compared to policyholders with pay grades E-7 and above, who are placed in the United Services Automobile Association. The amended complaint alleges that GIC’s base rates for various types of coverage are significantly higher than the United Services Automobile Association’s base rates.
In paragraph 50 of the amended complaint, the plaintiffs allege specific examples of the disparity in base rates between GIC and the United Services Automobile Association. According to USAA’s most recent major rate filing, submitted on October 13, 2022, GIC’s base rate exceeded United Services Automobile Association’s base rate by 61% for bodily injury, 22% for property damage, 84% for personal injury protection, and 25% for collision coverage.
The plaintiffs argue that this disparity in premiums between the two companies for policyholders with similar risk profiles is an unfair and deceptive practice under Massachusetts General Laws Chapter 93A and Massachusetts insurance laws.
The insurance laws the plaintiffs claim USAA violated
The insurance regulatory provisions on which the plaintiffs base their claims against USAA are Massachusetts General Laws Chapter 175E, § 4(a) and Code of Massachusetts Regulations 211 CMR 79.04(12).
Massachusetts General Laws Chapter 175E, § 4(a) states that insurance rates “shall not be excessive or inadequate, as herein defined, nor shall they be unfairly discriminatory.” To the plaintiffs, this provision prohibits the disparity in premium rates for insureds with similar risk profiles but different military pay grades between GIC and United Services Automobile Association as unfairly discriminatory.
The plaintiffs also argue that the Code of Massachusetts Regulations 211 CMR 79.04(12), which specifically prohibits insurers from using certain factors, including occupation and income, to determine placement in a particular affiliate within an insurance company group, applies to their situations.
The relevant sections of this regulation state:
“No Insurer or Insurance Company Group shall refuse to issue, renew or execute as surety a private passenger motor vehicle liability policy or bond, or any other insurance based on the ownership or operation of a motor vehicle because of any of the following factors, or otherwise use such factors to determine placement in a particular affiliate within an Insurance Company Group: . . . (h) occupation; (i) income[.].”
The plaintiffs argue that USAA’s use of army pay grade as a proxy for occupation and earnings violates this regulation, because it successfully determines placement in both GIC or USAA based mostly on these prohibited components.
The claimed unfair and misleading enterprise practices of USAA
The plaintiffs’ current sole reason for motion towards USAA and GIC is a declare underneath Massachusetts Basic Legal guidelines Chapter 93A, which prohibits unfair or misleading acts or practices within the conduct of commerce or commerce.
The plaintiffs allege that USAA and GIC violated Chapter 93A by three distinct unfair or misleading practices:
- Violating Massachusetts insurance coverage laws, particularly 211 CMR 79.04(12)(h) and (i), by inserting E-1 to E-6 policyholders and E-7 and above policyholders into separate associates based mostly on their earnings and occupation;
- Charging E-1 to E-6 policyholders greater premiums than they’d have been charged had USAA and GIC complied with 211 CMR 79.04;
- Falsely stating in filings with the Commissioner of Insurance coverage that they adjust to 211 CMR 79.05(12) provisions by not contemplating occupation and earnings of their coverage placement choices.
The plaintiffs’ amended criticism seeks injunctive aid, precise damages, a number of damages, and attorneys’ charges.
The plaintiffs additionally search to characterize as class representatives that portion of the 21,000 USAA insured who might have been positioned in GIC due to a army pay grade of E-6 or much less.
The Courtroom’s Evaluation and ruling on USAA’s movement to dismiss
In its evaluation of USAA’s movement to dismiss, america District Courtroom in Boston utilized the usual of overview for a movement to dismiss underneath Federal Rule of Civil Process 12(b)(6). The Courtroom should settle for as true all well-pled information, analyze them within the mild most favorable to the plaintiff, and draw all cheap inferences in favor of the plaintiff. A criticism should include adequate factual matter to state a declare for aid that’s believable on its face to outlive a movement to dismiss.
The Courtroom centered its evaluation on the plaintiffs’ Chapter 93A declare alleging that USAA and GIC engaged in unfair and misleading practices by violating Massachusetts insurance coverage laws. The Courtroom thought of three components in figuring out whether or not the conduct rises to the extent of an unfair or misleading act underneath Chapter 93A:
- Whether or not the conduct is inside no less than the penumbra of some common-law, statutory, or different established idea of unfairness;
- Whether or not it’s immoral, unethical, oppressive, or unscrupulous;
- Whether or not it causes substantial damage to customers.
In making use of these components, the Courtroom discovered that the plaintiffs plausibly alleged that USAA’s follow of categorizing policyholders by army pay grade fell throughout the penumbra of the prohibitions underneath 211 CMR 79.04(12), even when pay grade will not be explicitly equal to earnings or occupation. The Courtroom famous that precise equivalence will not be required at this stage of the proceedings.
The Courtroom additionally discovered that the plaintiffs sufficiently alleged precise damages within the type of greater premiums paid by policyholders in GIC in comparison with these within the United Providers Vehicle Affiliation.
The court docket denies USAA’s argument that the “Filed Charge Doctrine” barred the plaintiffs’ claims
Along with the Chapter 93A declare, the Courtroom addressed USAA’s argument that the filed-rate doctrine precludes the plaintiffs’ motion. The filed-rate doctrine is a fancy algorithm that typically present that filings with regulatory companies prevail over unfiled contracts or different claims in search of completely different charges or phrases. Nevertheless, the Courtroom declined to dismiss the case on this foundation, discovering that no less than a few of the plaintiffs’ requested cures, corresponding to injunctive aid and damages for Chapter 93A violations, don’t immediately problem the charges authorized by the Commissioner of Insurance coverage.
Based mostly on its evaluation, the Courtroom denied USAA’s movement to dismiss, concluding that the plaintiffs had plausibly alleged a violation of Chapter 93A and that the criticism acknowledged a declare upon which aid may very well be granted.
Movement to dismiss denied, however plaintiffs should nonetheless show the validity of their claims
The Courtroom famous that its resolution merely permits the case to maneuver ahead to the invention section, the place additional proof shall be examined to substantiate or contest the plaintiffs’ claims.
Company Checklists will proceed to observe and report on developments on this vital case.
