A federal appeals court has partially overturned the dismissal of the class action suit against Geico that claims the insurer underpays for vehicles that have been declared an overall total loss in certain cases.
Based partly on its interpretation of the items a “new” vehicle is, the U.S. Court of Appeals for the Second Circuit reinstated the plaintiffs’ claims that Geico breached its contract and engaged in deceptive practices in its handling of the 2022 claim.
In its Feb. 14 summary order, the court affirmed the low court’s dismissal of claims against CCC Intelligent Solutions, which provided the data Geico used in setting its total loss value, and the plaintiffs’ other claims against Geico, including negligence and unjust enrichment.
The lawsuit, Lorena M. Milligan v. Geico, was delivered back to the U.S. District Court for that Eastern District of New York, where it is expected to go to the discovery phase.
Beyond its implications for consumers, the valuation of totaled vehicles includes a direct effect on the repair industry, as the valuation can see whether a vehicle is repairable, or determined to be considered a total loss and salvaged.
Milligan filed suit on Jan. 15, 2022 after her two-month-old 2022 Lexus was totaled inside a rollover crash, and Geico paid her $45,924 from the $51,400 cost, counting on a Market Valuation Report based on three similar vehicles from CCC.
Milligan claimed that Geico was at violation of the portion of a brand new York code, known as Regulation 64, that requires insurers to pay “the reasonable cost towards the insured on the date of lack of the same new vehicle” for total losses involving current model year vehicles.
“Instead of paying Plaintiff the reasonable purchase price of the new identical vehicle around the date of the loss less any applicable deductible and depreciation allowances, as required by Regulation 64, GEICO paid Plaintiff an adjusted vehicle value based on the adjusted values of comparable vehicles reflective from the market price,” the complaint states.
The suit seeks unspecified financial damages for Milligan, and for other policyholders who received payments that didn't meet the requirements of Regulation 64, starting in 2009.
The relevant a part of Title 11, section 216.7 from the Ny Codes, Rules and Regulations, reads:
If the insured vehicle is a private passenger automobile of the current model year, the insurer shall pay to the insured the reasonable purchase price towards the insured on the date of loss of a brand new identical vehicle, less any applicable deductible as well as an allowance for depreciation depending on the schedule below, except in which the utilization of this process of settlement would create a lower claim payment as compared with the effective use of the methods described in subparagraphs , and of this subdivision.
The lower court had agreed with Geico’s contention it had offered a “reasonable purchase price,” by obtaining an MVR from CCC which was derived from three “comparable vehicle available or recently bought from industry.”
The appeals court, however, disagreed with the judge’s conclusion that Geico had complied with Regulation 64, based on its interpretation of the word “new” within the phrase “new identical vehicle.”
“At oral argument, Geico’s counsel clarified that it interprets ‘new’ to mean a vehicle that's new to the customer,” reads an order, signed by circuit judges Jose A. Cabranes, Gerard E. Lynch, and Denny Chin.
“We disagree,” an order continues. “In our opinion, a ‘new identical vehicle’ means precisely what it says in clear language: a brand-new vehicle of the identical brand name, with identical features and almost no miles on the odometer. Accordingly, the ‘reasonable cost of … a new identical vehicle’ may be the price that a reasonable buyer would pay to purchase the same, brand new, factory-fresh car from the local dealership in the normal span of business.”
The court declared that the plaintiffs “have plausibly alleged the MVR prepared in the present case was fundamentally deficient,” and suggested other methods to estimate an acceptable purchase price.
Based on its analysis of Regulation 64, the court reversed the dismissal of the plaintiffs’ claims that Geico engaged in deceptive practices, in violation of New York law.
The lower court acted properly in dismissing a breach of contract claim against CCC, because the plaintiff had proven no contractual relationship with the company, the appeals court ruled.
The Milligan case is one of numerous cases brought against insurers within the payment of total loss claims.
On Feb. 11, a federal appeals court denied class-action status to those who own vehicles declared a total loss by Liberty Mutual, saying that the plaintiffs hadn't proved the “condition adjustment” used by CCC resulted in all owners receiving under their vehicles were worth.
The 9th Circuit upheld the ruling of U.S. District Judge Robert J. Bryan that each of the potential plaintiffs would need to prove a loss of revenue, which weighing each class member's claim could be “unmanageable.”
In the meantime, a similar class-action case over total loss valuations, Dominick Volino and John Plotts v. Progressive, is making its way with the U.S. District Court for that Southern District of New York. That position, which involves using Mitchell data but doesn't name that company like a defendant, is in the discovery phase.
