A California Supreme Court review of military auto-insurance pricing could determine whether affiliated carriers must extend the lowest qualifying-driver rate across their group, in a case involving nearly 200,000 policyholders.
At a Tuesday, Nov. 10, conference, the justices agreed to answer two questions sent by the U.S. Court of Appeals for the Ninth Circuit in Coleman v. United Services Automobile Association (case S298496). The Ninth Circuit described the litigation as affecting close to 200,000 California policyholders, a figure the parties did not contest. Its order made no finding that any of them were overcharged.
Enlisted policyholders Eileen-Gayle Coleman and Robert Castro allege that military rank led to higher auto-insurance rates. United Services Automobile Association (USAA) assigns applicants to affiliated insurers under its underwriting guidelines. United Services insures officers and enlisted members in pay grades E-7 and above; USAA General Indemnity Company insures enlisted members at E-6 and below. The Ninth Circuit said United Services offers larger good-driver discounts, and the plaintiffs contend they were entitled to lower rates.
One question asks whether Insurance Code section 1861.16(b) bars the rate difference across the affiliates. If it does not, the justices will consider whether section 11628(f)(1), which permits insurers to limit insurance issuance or renewal to military members or segments of the military, is invalid under Amwest Surety or other California law. Proposition 103, approved by voters in 1988, is part of the legal background to that dispute. The Ninth Circuit said the lowest-rate rule was intended to prevent insurers from steering good drivers to higher-priced affiliates.
The other question concerns whether specified Insurance Code provisions limit Coleman and Castro’s ability to recover under the state business laws listed in section 1861.03. The plaintiffs seek refunds, among other relief. The Ninth Circuit said California appeals courts have differed on the filed-rate doctrine and that the state Supreme Court had not resolved the issue.
Consumer Watchdog says the ruling could have broader effects for millions of Californians with auto, home and business insurance. That estimate goes beyond the nearly 200,000 policyholders identified in the federal court order.
The Ninth Circuit has paused its appeal while the California Supreme Court considers the questions. The state court’s answers will guide the federal case; they will not themselves establish that USAA violated the law or owes refunds.
