See v. Gov't Emps. Ins. Co.

• Decision Date: 30 March 2023
• Docket Number: 21-CV-547 (PKC) (JMW)
• Parties: EVERETT SEE and SALVATORE CRISTIANO, on behalf of themselves and all others similarly situated, Plaintiffs, v. GOVERNMENT EMPLOYEES INSURANCE COMPANY d/b/a GEICO, and GEICO GENERAL INSURANCE COMPANY, Defendants.
• Court: U.S. District Court — Eastern District of New York

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EVERETT SEE and SALVATORE CRISTIANO, on behalf of themselves and all others similarly situated, Plaintiffs, v. GOVERNMENT EMPLOYEES INSURANCE COMPANY d/b/a GEICO, and GEICO GENERAL INSURANCE COMPANY, Defendants.

No. 21-CV-547 (PKC) (JMW)

United States District Court, E.D. New York

March 30, 2023

ORDER ADOPTING REPORT & RECOMMENDATION

PAMELA K. CHEN, United States District Judge

Plaintiffs Everett See and Salvatore Cristiano bring this class action lawsuit for breach of contract and violations of New York General Business Law Section 349 against Defendants Government Employees Insurance Company (“Government Employees”) and GEICO General Insurance Company (“GEICO General”). On June 16, 2021, Defendants moved to dismiss the lawsuit and to strike certain allegations. Before filing their motions, in January 2021 Defendants demanded appraisal pursuant to the subject insurance policies. Upon referral, the Honorable James M Wicks, Magistrate Judge, issued a Report and Recommendation (“R&R”) recommending denial of Defendants' motions and their demand for appraisal.^[1]Presently before this Court are Defendants' objections to the R&R. For the reasons stated herein, the Court adopts the R&R in its entirety and denies Defendants' motions.

BACKGROUND

The Court assumes the parties' familiarity with the facts and procedural history of the case and only recites the background relevant to Defendants' pending objections.

I. Allegations of the Amended Complaint^[2]

A. Parties

Defendant GEICO General is a subsidiary of Defendant Government Employees. (Am. Compl., Dkt. 21, ¶ 22.) Government Employees' headquarters is located at 5260 Western Avenue, Chevy Chase, Maryland. (Id. at ¶ 17.) GEICO General is also located at the same address. (Id. ¶ 22.) Both Defendants market collectively under the trademark “GEICO,” and Defendant GEICO General markets and sells insurance policies throughout the State of New York under that trademark. (Id. ¶¶ 22, 23.) Defendants also market using the same website: www.geico.com. (Id. ¶¶ 19, 23.)

Plaintiff Everett See was involved in a car accident that effectively totaled his car on September 18, 2020. (Id. ¶ 15.) At the time, See was insured by GEICO General. (Id.) After See made a claim for property damage under his policy, GEICO General assessed the “actual cash value” of his vehicle at the time of the accident to be $9,513, and paid out the claim after accounting for taxes, fees, and the deductible. (Id. ¶ 38.)

Plaintiff Salvatore Cristiano was involved in a car accident that effectively totaled his car on October 6, 2018. (Id. ¶ 16.) Cristiano also was insured by GEICO General at the time of his accident. (Id.) After Cristiano made a claim for property damage under his policy, GEICO General assessed the “actual cash value” of his vehicle at the time of the accident to be $11,885, and paid out the claim after accounting for taxes and fees. (Id. ¶ 39.)

The automobile insurance policies (the “Policies”) that Plaintiffs had with Defendants list both Defendants and two other related entities (GEICO Casualty Company and GEICO Indemnity Company) at the top of the Policies. (Id. ¶ 18, 25.) The four entities are listed again at the bottom of the Policies, along with the Maryland address shared by Defendants. (Id.) The Policies are signed by “O.M. Nicely” and “W.C.E. Robinson,” who were at the relevant time, the President and the Corporate Secretary respectively of Defendant Government Employees. (Id. at ¶ 26.)

B. CCC Valuation Methodology

Plaintiffs allege that Defendants breached the Policies and violated New York General Business Law (“GBL”) Section 349 by using the methodology of a third-party company-CCC Information Systems, Inc. (“CCC”)-to calculate the “actual cash value” of their totaled vehicles. (Id. ¶ 3.) CCC purports to calculate the “Base Vehicle Value” of the totaled automobile by first identifying “comparable vehicles recently sold or for sale in the claimant's geographic area.” (Id. ¶ 34.) Next, CCC adjusts the advertised prices of those comparable vehicles “to reflect differences in vehicle attributes, including [accrued] mileage and options[.]” (Id.) CCC then applies a weighted average^[3]of these adjusted values to arrive at the “Base Vehicle Value” of the claimant's totaled car. (Id. ¶ 35.)

Next, CCC applies a “condition adjustment” by determining the condition of the vehicle- either “average private condition” or the superior “dealer retail condition”-of a vehicle across nine components. (Id., ¶¶ 40-41.) Those components are mechanical, tires, paint, body, glass, seats, carpets, dashboard, and headliner. (Id. ¶ 41.) CCC does not change the Base Vehicle Value if all nine components of the totaled vehicle are deemed to be in “average private condition,” but it increases the Base Vehicle Value for each component that is deemed to be in “dealer retail condition.” (Id. ¶¶ 41-44.) Finally, CCC adjusts for taxes and any deductible under the car owner's insurance policy to arrive at the total market valuation of the vehicle. (Id. ¶ 32, Figure 1; see also id. ¶ 44, Figures 3 & 4.)

Plaintiffs' claims focus on “a further adjustment” that CCC purportedly makes “in arriving at the base vehicle value based on an unfounded, undocumented, and unexplained assumption that the condition of each comparable vehicle” is “better than ‘average private condition.'” (Id. ¶ 37.) By accepting CCC's application of across-the-board reductions based on “condition adjustment” for the comparable vehicles, Plaintiffs allege that Defendants are adopting a valuation methodology which “systematically misrepresent[s] and undervalue[s] the actual cash value of claimants' loss vehicles.” (Id. ¶ 3; see also id. ¶ 53.)

C. Plaintiffs' CCC Reports

The first page of the CCC Report for Plaintiff See indicates a positive condition adjustment of $216. (Id. ¶¶ 42, 44 & Figure 3.) See also received a document from Defendants dated September 22, 2020, entitled “Total Loss Settlement Explanation,” which reflects a $216 increase in Base Vehicle Value based on the condition of See's totaled vehicle. (Id. ¶¶ 31-32 & Figure 1.) Yet, Plaintiffs allege that CCC “deducted $706 from the advertised price of each comparable vehicle” for See's car due to CCC's methodology of “set[ting] comparable vehicle to Average Private Condition.” (Id. ¶ 47 (quoting See CCC Report, Dkt. 21-7, at 8-9), ¶ 49.) This $706 deduction for all three comparator vehicles was only disclosed at the bottom and in the margins of a chart in the middle of the CCC Report for See. (See See CCC Report, Dkt. 21-7, at 9.)

Plaintiff Cristiano's CCC Report also displays a positive “Condition Adjustment” that increases the Base Vehicle Value of Cristiano's totaled vehicle by $505. (Am. Compl., Dkt. 21, ¶¶ 43, 44 & Figure 4.) Yet, Plaintiffs allege that CCC “deducted $986 from the advertised price of each comparable vehicle” for Cristiano's car (id. ¶ 51) by using CCC's methodology of “set[ting] [each] comparable vehicle to Average Private Condition” (id. ¶ 53 (quoting Cristiano CCC Report, Dkt. 21-8, at 8-9)). This $986 deduction for all three comparator vehicles was only disclosed at the bottom and in the margins of a chart in the middle of the CCC Report for Cristiano. (See Cristiano CCC Report, Dkt. 21-8, at 9.)^[4]

II. Undisputed Facts Related to Defendants' Demand for Appraisal^[5]

The parties do not dispute that the Policies for both Plaintiffs contain the following appraisal provisions:

If we [i.e., GEICO General] and the insured do not agree on the amount of loss, either may, within 60 days after proof of loss is filed, demand an appraisal of the loss. In that event, we and the insured will each select a competent appraiser. The appraisers will select a competent and disinterested umpire. The appraisers will state separately the actual cash value and the amount of the loss. If they fail to agree, they will submit the dispute to the umpire. An award in writing of any two will determine the amount of loss. We and the insured will each pay his chosen appraiser and will bear equally the other expense of the appraisal and umpire.

We will not waive our rights by any of our acts relating to appraisal.

(See Declaration of Kevin Costigan in Support of Defendants' Response to Plaintiffs' Statement of Facts (“Costigan Decl.”), Dkt. 77, Ex. 1, Ex. 3 (emphasis in original).)

Shortly after the filing of this lawsuit,^[6]counsel for Defendant GEICO General wrote to Plaintiffs' counsel on January 19, 2021, demanding appraisal of Plaintiff See's loss. (See Dkt. 73, at ¶ 2; Dkt. 76, at 5.) On February 3, 2021, Plaintiffs' counsel rejected the appraisal demand on the basis that it “f[ell] well outside the time period [Defendants] chose to include in [their] contracts.” (See Costigan Decl., Dkt. 77, Ex. 2.) On March 15, 2021, GEICO General's counsel sent a similar letter to Plaintiffs' counsel demanding appraisal of Plaintiff Cristiano's loss. (See Dkt. 73, at ¶ 4; Dkt. 76, at 6.) Plaintiffs' counsel rejected the appraisal demand by letter dated March 19, 2021, again on the basis that it “f[ell] well outside the time period [Defendants] chose to include in [their] contracts.” (See Costigan Decl., Dkt. 77, Ex. 4.)

III. Procedural History

As mentioned (see supra note 6), this action was initiated by removal complaint filed by Defendants on February 2, 2021. (Notice of Removal, Dkt. 1.) Plaintiffs thereafter filed an Amended Complaint on March 8, 2021. (Am Compl., Dkt. 21.) On April 1, 2021, the Court granted Defendants leave to file a combined motion to dismiss the Amended Complaint and a motion to strike certain allegations. (4/1/2021 Docket Order.) Defendants' motion was fully briefed on June 16, 2021. (See Defendants' Memorandum of Law in Support of Motion to Dismiss (“Defs....