Class Claims That Excessive Premiums Paid During Pandemic Partially Survives Motion to Dismiss
Portions of a class action filed against United Services Auto Association and three of its subsidiaries for charging excess premiums during the COVID-19 pandemic survived the insurers' motion to dismiss. 2024 U.S. Dist. LEXIS 202472 (C.D. Cal. Nov. 5, 2024).
Plaintiffs alleged that a decrease in driving and automobile accidents during the early days of the pandemic rendered the premiums paid by policyholders excessive. Plaintiffs further alleged that USAA breached their duty of good faith and fair dealing and violated California's Unfair Competition Law by failing to provide adequate refunds in light of the excess premiums.
USAA filed a motion to dismiss. USAA argued that plaintiffs' claims were precluded by the business judgment rule. Under California law, the business judgment rule insulated from court intervention those management decisions which were made by directors in good faith in what the directors believed was the organization's best interest. The court, however, ruled that the business judgment rule did not bar plaintiffs' claims at this stage of litigation.
Constructing the complaint in the light most favorable to plaintiffs, plaintiff were not seeking to compel USAA to issue dividends due to an excess surplus of the business in general. Instead, plaintiffs sought refunds for overpayment on their insurance contracts during the COVID-19 pandemic. The court declined to hold that the business judgment precluded plaintiffs' claim that USAA failed to issue adequate refunds when COVID-19 rendered premiums paid on negotiated contracts excessive.
Therefore, USAA's motion seeking dismissal of the Count I for breach of contract was denied. The court granted with prejudice, without leave to amend, the motion insofar as it sought dismissal of Count II for Unjust Enrichment/Quasi Contract. Count III alleging violation of California's Unfair Competition Law was dismissed with leave to amend.
