Day v. GEICO Cas. Co.

• Citation: 580 F.Supp.3d 830
• Decision Date: 20 January 2022
• Docket Number: Case No. 21-cv-02103-BLF
• Parties: Jessica DAY, Plaintiff, v. GEICO CASUALTY COMPANY, et al., Defendants.
• Court: U.S. District Court — Northern District of California

580 F.Supp.3d 830

Jessica DAY, Plaintiff,

v.GEICO CASUALTY COMPANY, et al., Defendants.

Case No. 21-cv-02103-BLF

United States District Court, N.D. California, San Jose Division.

Signed January 20, 2022

Matthew C. Helland, Nichols Kaster, LLP, San Francisco, CA, Melody L. Sequoia, The Sequoia Law Firm, Menlo Park, CA, Robert Loren Schug, Chloe A. Raimey, Pro Hac Vice, Matthew H. Morgan, Nichols Kaster & Anderson, PLLP, Minneapolis, MN, Teresa Becvar, Catherine Mitchell, Pro Hac Vice, James Zouras, Ryan F. Stephan, Pro Hac Vice, Stephan Zouras, LLP, Chicago, IL, Blake Garrett Abbott, Pro Hac Vice, Roy T. Willey, IV, Pro Hac Vice, Anastopoulo Law Firm LLC, Charleston, SC, for Plaintiff.

Damon N. Vocke, Pro Hac Vice, Ronald M. Lepinskas, Pro Hac Vice, Duane Morris, LLP, Chicago, IL, Daniel B. Heidtke, Duane Morris LLP, Los Angeles, CA, for Defendants.

ORDER GRANTING IN PART WITH LEAVE TO AMEND IN PART AND DENYING IN PART MOTION TO DISMISS

[Re: ECF No. 25]

BETH LABSON FREEMAN, United States District Judge

This lawsuit concerns a premium credit program run by Defendants GEICO Casualty Company, GEICO General Insurance Company, and GEICO Indemnity Company ("GEICO").¹ At the beginning of the COVID-19 pandemic in April 2020, GEICO announced the "GEICO Giveback," a program that provided a 15% discount on new and renewed insurance policies. Plaintiff Jessica Day alleges that GEICO made misrepresentations about the program and withheld information that the true amount of GEICO's savings during the pandemic—due to fewer claims from fewer miles driven and fewer vehicle accidents—was not being truly passed on to new and renewing policyholders. GEICO has moved to dismiss, arguing that Plaintiff's claims (1) invade the exclusive jurisdiction of the California Department of Insurance and (2) each fails individually for claim-specific reasons. ECF No. 25 ("MTD"); see also ECF No. 38 ("Reply"). Plaintiff opposes, stating that her claims are outside of the scope of the Department of Insurance's exclusive jurisdiction and arguing that each of her claims is sufficiently pled. ECF No. 33 ("Opp."). The Court vacated the hearing on this motion, ECF No. 59, and requested and received supplemental briefing. ECF Nos. 61 ("GEICO Supp."); 62 ("Pl. Supp."). For the reasons explained below, the Court GRANTS IN PART WITH LEAVE TO AMEND IN PART and DENIES IN PART the motion to dismiss.

I. BACKGROUND

As alleged in the Complaint, there has been a "dramatic reduction in driving, and an attendant reduction in driving-related accidents" as a result of the COVID-19 stay-at-home orders that forced many people to stay home. ECF No. 1 ("Compl.") ¶¶ 2–3. Compared to the January 2020 average, California motorists drove approximately 75% fewer miles between mid-March and late April 2020, resulting in approximately 50% fewer crashes. Id. ¶¶ 18–19. This decrease in driving and accidents dramatically reduced the number of claims paid by auto insurance companies, resulting in an alleged increase in their profits. Id. ¶¶ 3, 20. At least one published report estimates that a 30% refund of premiums to insured drivers would be required to make up for the excess premiums paid over that same mid-March to late April time period. Id. ¶ 22.

In response, GEICO instituted the "GEICO Giveback." Compl. ¶ 24. Under the program, GEICO gave new or renewing customers a 15% credit on their personal auto insurance premiums for six-month policies between April 8, 2020 and October 8, 2020, or for twelve-month policies between April 8, 2020 and April 7, 2021. Id. ¶ 24. In connection with the program, GEICO stated that "shelter in place laws have reduced driving, and we are passing these savings on to our auto, motorcycle, and RV customers." Id. ¶ 26.

Plaintiff renewed her GEICO policy in February 2020 and August 2020 and was charged a premium of $871.20. Compl. ¶ 28. With the Giveback credit of $130.68, she paid $740.52 in premiums for the policy renewed in August 2020. Id. Her insurance policy contained the following provision:

3. CHANGES

The terms and provisions of this policy cannot be waived or changed, except by an endorsement issued to form a part of this policy.

We may revise this policy during its term to provide more coverage without an increase in premium. If we do so, your policy will automatically include the broader coverage when effective in your state.

The premium for each auto is based on the information we have in your file. You agree:

(a) that we may adjust your policy premiums during the policy term if any of this information on which the premiums are based is incorrect, incomplete or changed.

(b) that you will cooperate with us in determining if this information is correct and complete.

(c) that you will notify us of any changes in this information.

Any calculation or recalculation of your premium or changes in your coverage will be based on the rules, rate and forms on file, if required, for our use in your state.

Id. ¶ 30.

Plaintiff alleges that GEICO falsely claimed to its policyholders that it was "passing these savings" on to its policyholders when it was in fact only partially passing on those savings, and that it misrepresented to them the amount of its excess profits as a result of COVID-19 and the fact that premiums during COVID-19 were not based on an accurate assessment of risk during COVID-19. Compl. ¶ 26. Plaintiff also alleges that GEICO improperly exercised the discretion granted to it by paragraph 3 of the policy by failing to issue fuller refunds of the excessive premiums. Id. ¶ 32. She seeks to represent a class of "[a]ll California residents who purchased personal automobile, motorcycle, or RV insurance from GEICO covering any portion of the time period from March 1, 2020 to the present." Id. ¶ 36. She brings claims for unjust enrichment/quasi-contract, frustration of purpose, and violation of the covenant of good faith and fair dealing, California's False Advertising Law ("FAL"), and the unlawful, unfair, and fraudulent prongs of California's Unfair Competition Law ("UCL"). Id. ¶¶ 46–92.

II. LEGAL STANDARD

"A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted tests the legal sufficiency of a claim." Conservation Force v. Salazar , 646 F.3d 1240, 1241–42 (9th Cir. 2011) (internal quotation marks and citation omitted). While a complaint need not contain detailed factual allegations, it "must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ " Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). A claim is facially plausible when it "allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. When evaluating a Rule 12(b)(6) motion, the district court must consider the allegations of the complaint, documents incorporated into the complaint by reference, and matters which are subject to judicial notice. Louisiana Mun. Police Employees’ Ret. Sys. v. Wynn , 829 F.3d 1048, 1063 (9th Cir. 2016) (citing Tellabs, Inc. v. Makor Issues & Rts., Ltd. , 551 U.S. 308, 322, 127 S.Ct. 2499, 168 L.Ed.2d 179 (2007) ).

III. DISCUSSION

A. Exclusive Jurisdiction

GEICO first argues that Plaintiff's claims are within the exclusive jurisdiction of the California Department of Insurance. MTD at 4–8. GEICO characterizes Plaintiff's claims as seeking a recalculation of the premiums approved by the Department of Insurance. Id. But GEICO says that the California Insurance Code sets forth an exclusive statutory scheme for rate-making that was created by popular referendum. Id. That scheme, GEICO says, invests the California Department of Insurance with exclusive jurisdiction over setting insurance rates, subject only to judicial review within an administrative process set out in the statute. Id. This lawsuit, GEICO claims, would subvert that process by allowing Plaintiff to change through a civil lawsuit the rate that she is charged for insurance during the pandemic. Id. Allowing those lawsuits would result in the "explosion" of insurance class actions over allegedly excessive rates and undermine the exclusive jurisdiction of the Insurance Commissioner over these matters, GEICO says. Id.

Plaintiff disputes that her claims are precluded by California's insurance rate approval process. Opp. at 5–9. Plaintiff says she is challenging GEICO's premium credit through its Giveback Program, not the rate that was approved by the Insurance Commissioner. Id. Plaintiff further argues that the Insurance Code expressly allows lawsuits challenging allegedly unfair business practices and premium refunds or credits. Id.

On October 6, 2021, after the conclusion of briefing, Plaintiff filed a notice of supplemental authority informing the Court of Judge Orrick's decision in Boobuli's LLC v. State Farm Fire & Cas. Co. , No. 20-cv-07074-WHO, 562 F.Supp.3d 469 (N.D. Cal. Oct. 5, 2021), in which Judge Orrick found that claims regarding allegedly insufficient refunded premiums during COVID-19 were not within the exclusive jurisdiction of the Department of Insurance. ECF No. 54 (" Boobuli's "). Finding that decision potentially instructive, the Court asked for supplemental briefing on that case. ECF Nos. 59. In particular, the Court asked the parties to address the Insurance Commissioner's submission in another similar case—Rejoice! Coffee Co. LLC v. The Hartford Fin. Serv. Grp. , No. 20-cv-6789-EMC (N.D. Cal.)—which addressed the exclusive jurisdiction issue and on which Judge Orrick relied in his decision in Boobuli's . Id. Unsurprisingly, Plaintiff argues that the Court should adopt the reasoning in Boobuli's (and, by extension, the Insurance Commissioner's reasoning in its submission in Rejoice! ), ECF No. 62, and GEICO argues that the case and the Insurance Commissioner's opinion should not be applied...