Federal Judge Certifies Class Action vs. PGAC on Auto Policy Fees

A subsidiary of American Family Insurance now faces a federal class-action lawsuit in Florida, alleging it regularly charged auto policyholders a cancellation fee that was never mentioned in the policy.

The size of the class will be at least 100 people and will include everyone who was insured under Permanent General Assurance’s non-standard auto coverage from 2015 to 2020, when the initial complaint was filed, U.S. District Judge William Dimitrouleas, of Miami, said in his order last week certifying the class.

The plaintiffs, represented by the Zebersky, Payne, Shaw, Lewenz firm in Fort Lauderdale, and others, charge that the policy promised to refund 90% of the “pro-rata unearned premium” if the motorist cancels the policy. Instead, Permanent General charged a “short rate cancellation premium” based on the amount of premiums that were never paid by the insureds, the amended complaint reads.

The suit gave this example: Plaintiff Dorine Conner renewed her policy in 2019 and timely paid her $259 monthly premiums. When she canceled, she expected a refund of $240 in unearned premium, minus the 10% as stated in the policy. Instead, she was charged an $89 penalty and received only $153 from the insurer.

For another driver, Permanent General assessed a penalty of $620 – higher than the policyholder’s monthly premium, the suit alleges. The complaint alleges breach of contract, unjust enrichment by the insurer, and unfair business practices.

The judge found that the plaintiff’s motion to certify the case met all the case law requirements for a class.

“The Court rejects Defendant’s argument that class certification is inappropriate because ‘not all Plaintiffs have a common contract,'” the judge noted. “First, the suggestion that the insurance application, not the policy, is the contract is a distinction without a difference. It is the insurance application and the insurance policy which together constitute the contract.”

Non-standard auto policies are short-term policies often purchased by people who have difficulty affording coverage through standard carriers, and cancellations are common, the court said.

Permanent General has denied the allegations. The carrier’s attorneys also argued that Conner could not represent the class because she was convicted of kidnapping in 2001 and served 12 years in prison.

“Based on her serving significant time in prison, Connor does not possess the personal characteristics and integrity to fulfill the fiduciary role of class representative,” the company argued.

The judge said that argument “is wholly without merit,” and that a criminal conviction does not automatically disqualify a class representative.

This is not the first time that an American Family Mutual Insurance unit has been accused of underpaying.

In February, attorneys in Illinois proposed a class action against American Family for allegedly using a “typical negotiation” method of determining the value of totaled vehicles. The plaintiffs said the method was unlawful and significantly undervalued their payments in claims.

That suit was voluntarily dismissed, without prejudice, in early April, court records show. No explanation was given.

Topics Lawsuits Auto Legislation