COVID-19 class action suits against State Farm, GEICO allowed to proceed

A federal judge recently permitted a class action lawsuit to proceed against State Farm Fire and Casualty Co. and State Farm Mutual Automobile Insurance Co. concerning the denial of business interruption claims stemming from the COVID-19 pandemic, the law firm representing the plaintiffs said.

Plaintiffs claimed that State Farm arbitrarily and without justification refused to reimburse policyholders for business interruption losses and other expenses incurred as a result of social distancing and/or stay-at-home orders in connection with the pandemic.

The judge denied, in large part, the defendants' motion to dismiss the action and ruled that the plaintiff can claim for breach of contract and for breach of covenant of good faith and fair dealing. The case is pending in the U.S. District Court for the Eastern District of Virginia, Norfolk Division.

State Farm disagrees with the ruling and will review its options, a spokesperson told S&P Global Market Intelligence in an email statement.

"State Farm is confident we have honored the terms of our customer's contract," the spokesperson said. "We do not collect premiums to protect against losses resulting from viruses."

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Separately, U.S. District Judge Sharon Johnson Coleman in Chicago ruled that GEICO Corp. must face a proposed class action accusing it of overcharging policyholders at a time when there was less driving and fewer accidents because of pandemic-induced lockdowns, Reuters reported.

The judge dismissed breach of contract and unjust enrichment claims, but ruled that Illinois drivers can try to prove that the Berkshire Hathaway Inc. subsidiary violated a state consumer fraud law by unfairly and deceptively marketing its GEICO Giveback discount program.

Neither GEICO nor its lawyers immediately responded to requests for comment from the news outlet.