The Gecko Will Pay Up: GEICO Settles in California Short Pay Case for $19.5 Million

GEICO reached a settlement deal of $19.5 million in a class-action lawsuit by California policyholders over sales tax and regulatory fees of insured vehicles and insured leased vehicles when total loss was declared.

The legal battle began when Cindy Ventrice-Pearson and Martisha Ann Munoz filed a class action complaint against GEICO on June 27, 2019. According to the court order, their complaint alleged that the auto insurance company allegedly failed to include sales tax on leased vehicles and regulatory fees on all vehicles, a breach of its policies with insured vehicle owners. Poonam Subbaiah filed a class action complaint on July 3, 2019, in California with similar allegations. Another class action complaint was filed on Oct. 23, 2020, by Kristen Perez.

The court’s order states that all four plaintiffs allege that GEICO’s policies required an actual cash value (ACV) when an insured automobile was declared a total loss. ACV was defined as the automobile’s “replacement cost.” The plaintiffs believed that the ACV of a total-loss leased vehicle includes sales tax under GEICO’s policies.

Discussion of settlement began on April 30, 2021. With a mediator, a settlement was reached on July 29, 2021. All individuals insured by GEICO during the class period whose vehicle was declared a total loss under comprehensive or collision coverage are included as members of the class. Also included is anyone who leased a vehicle with comprehensive or collision coverage under GEICO, and the vehicle sustained damage and was declared a total loss.

The monetary value of the settlement was determined to be $19.5 million, which includes 100% of possible damages in sales tax and 50% of possible damages in regulatory fees. According to a court motion, members of the sales tax settlement will each receive $2,000. The settlement value includes attorney’s fees and costs, and other costs approximated at $4.8 million per year.

GEICO also agreed to pay class counsel attorneys’ fees and costs, which class counsel agreed will not exceed more than $3.9 million.

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