GEICO Class Action Alleges Underpayment of Total Loss Claims

Case Overview: A class action lawsuit has been filed against GEICO, alleging that the insurer systematically underpays drivers on total loss claims by excluding sales tax from the Actual Cash Value (ACV) payout, violating New York law.

Who's Impacted: New York drivers who received ACV payouts from GEICO for total loss claims without sales tax included.

Court: U.S. District Court for the Western District of New York

Insurance giant GEICO, owned by Warren Buffett’s Berkshire Hathaway, systemically underpays drivers that have policies with the provider, a new lawsuit claims. According to the proposed class action lawsuit filed in New York, GEICO fails to pay out the accurate amount under its Actual Cash Value system by not including sales tax, a violation of New York law.

Because of the failure to pay full sales tax for first-party total losses, the company not only violates the law but also owes drivers thousands of dollars, the lawsuit alleges.

GEICO accused of violating New York law by excluding sales tax from payouts

Renata Shiloah filed the proposed class action lawsuit against GEICO Indemnity Company accusing it of breach of contract. Shiloah had her 2017 NISSAN Rogue Sport S FWD insured with GEICO and in late 2018 she had an accident that led her to file a claim with the company. The vehicle was determined to be a total loss, and GEICO said it would pay out $15,666, but with no sales tax included. 

By defining Actual Cash Value as “the replacement cost of the auto or property” in its terms GEICO promised to pay sales tax as part of its Collision and Comprehensive coverages, Shiloah says, given sales tax is a “necessary and a mandatory vehicle replacement cost.”

New York insurance regulations require insurers using Actual Cash Value to pay all amounts needed to replace the vehicle, including sales tax, which in Shiloah’s county is 8.625%, the lawsuit states.

Actual cash value policy under scrutiny in class action lawsuit

GEICO defines Actual Cash Value as “the replacement cost of the auto or property less depreciation or betterment.” Under the policy, GEICO can pay ACV in the event of a total loss, rather than spending more than the vehicle’s worth on repairs. 

GEICO uses a third-party vendor to determine the base and adjusted vehicle value of total loss vehicles by using the price to purchase comparable vehicles at the time of the loss.

Shiloah said in the lawsuit the GEICO policy does not say it excludes taxes from Actual Cash Value or defers the payment of the cost of taxes for any purpose, nor does it say it needs drivers to first get a replacement vehicle before getting the cost of taxes.

GEICO faces multiple legal challenges over insurance practices

Recently GEICO has had to pay out near $8 million to settle two separate lawsuits. In New Jersey, GEICO reached a $1.9 million settlement to put to bed claims it failed to pay title or registration transfer fees on the total loss of insured vehicles. It also reached a $6 million settlement with auto claim adjusters who accused the company of wage and hour law violations, Bloomberg Law reports.

Meanwhile, GEICO was able to get out of a proposed class action lawsuit filed by consumers, alleging that it overcharged policy holders early on in the pandemic, with the judge ruling the difference in damages wasn’t suitable for a class action.

Trumbull Insurance has also faced heat from consumers regarding ACV payments, with two consumers taking the insurer to court for allegedly shorting them money due to miscalculations. Progressive Insurance recently paid $48 million to settle a lawsuit accusing a similar issue in New York. 

In her proposed class action, Shiloah wants to represent New Yorkers who have also been involved in ACV claims with GEICO and she is seeking damages, restitution, and costs. 

Case Details

• Lawsuit: Shiloah v. Geico Indemnity Company
• Case Number: 6:24-cv-06447-EAW 
• Court: U.S. District Court for the Western District of New York 

Plaintiffs' Attorneys

• Joseph N. Kravec Jr., Ruairi McDonnell and Kaitlyn M. Burns (Feinstein Doyle Payne & Kravec LLC)

Have you experienced issues with your GEICO car insurance claim or know someone who has? Share your experience in the comments below.