Geico General Insurance Co. must face a class action suit alleging that it has been underpaying benefits to its insureds injured in automobile accidents.
U.S. District Court Judge Dora L. Irizarry in federal court in Eastern New York has certified the class alleging breach of contract against Geico General for shortchanging claimants who earn more than $2,000 a month.
The lead plaintiff in the case, Mary Lanzillotta, who was injured in a car accident, claims she was entitled to $55,000 in insurance coverage but was provided only $51,445 in benefits by Geico General.
The plaintiff contends that the insurer utilizes an improper formula for calculating basic economic loss and first party benefits, resulting in “unlawful deductions and premature policy exhaustion.” The complaint maintains that the insurer has used the same improper formula for all policyholders in the class, who are identified in part as insureds numbering “hundreds if not thousands” who have filed similar claims since March 2013.
The court said the resulting effect establishes an injury in fact and the class definition captures others who suffered this injury.
Lanzillotta submitted a claim for first party benefits. Geico General issued a claim payment of $51,445 and advised her that she had exhausted her basic economic loss and med pay coverages of $55,000. Geico General reached this conclusion by accounting for $2,500 in lost earnings per month, and then subtracting from the total $55,000 in basic economic loss and med pay, 20% of such lost earnings ($500) for the seven months that she received first party wage benefits, for a total deduction of $3,500.
The complaint asserts that Geico General, instead, should have accounted for only $2,000 in lost earnings per month and not applied the 20% deduction. This allegedly improper calculation of first party benefits deprived her of $3,500 in basic economic loss benefits to which she she says she was entitled.
State law defines basic economic loss as the amount of coverage for medical and wage benefits up to $50,000. It further defines wages as loss of earnings from work which the insured would have earned if she had not been injured, capped at $2,000 per month. First party benefits, on the other hand, are the amount of medical and wage benefits a person is entitled to be reimbursed from the basic economic loss coverage limits for wages by more than the $2,000 cap. Lanzillotta earned more than $2,000 per month.
The suit alleges that Geico General has improperly reduced the basic economic loss coverage limits for wages by more than $2,000 and as a result insureds earning more than $2,000 a month have been denied full first party benefits because of the premature exhaustion of basic economic loss.
The suit seeks damages, restitution, and attorneys’ fees.
GEICO General, in part, argued that the class should not be certified because the plaintiff is atypical. But the court rejected that contention, finding that the the claims “not only arise from the same course of events, but rest on similar legal arguments regarding the premature exhaustion of insurance policies through GEICO General’s basic economic loss reduction formula.”
The final court-approved definition limits the class to those GEICO General policyholders who earned gross monthly wages in excess of $2,000 per month at any point during the period in which they were covered, who have submitted first party benefit claims to and received payment from GEICO General that included claims for lost wages, and which, after paying at least one month of first party wage benefits, GEICO General claimed their coverage was fully exhausted on or after March 13, 2013.
While certifying this class, the judge denied extending the class to violations of the New York no-fault statute. In addition, she dismissed the claims as to all the other defendants in the GECO family including Government Employees Insurance Co., GEICO Indemnity Co., GEICO Casualty Co., GEICO Advantage Insurance Co., GEICO Choice Insurance Co., GEICO Secure Insurance Co., GEICO County Mutual Insurance Co., and GEICO Insurance Agency Inc. for lack of standing.
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