Court: Safeco Must Disclose Who it Surcharged for Auto Insurance

Seattle-based Safeco Insurance Co. will be required to disclose which customers it surcharged due to their lack of prior continuous automobile insurance coverage, the California Court of Appeal in Los Angeles has ruled.

According to Safeco Insurance Company of America v. Superior Court of Los Angeles County, the plaintiffs alleged that the unapproved and undisclosed surcharges violated Proposition 103, the insurance regulation initiative approved by California voters in 1988. In 2002, after investigating Safeco’s auto insurance application process, Consumer Watchdog sued the company in Los Angeles Superior Court for violating California Insurance Code section 1861.02(c), which forbids insurers from surcharging or refusing to insure motorists because they previously did not have insurance. The suit also charges that Safeco failed to disclose its practices to the Insurance Commissioner — a separate violation of the law.

In 2004, a coalition of insurance companies and other business groups sponsored a ballot measure, Proposition 64, which they claimed would stop frivolous lawsuits — but Safeco argued that under that measure, Consumer Watchdog could not bring this lawsuit on behalf of the public. A volunteer stepped forward to continue the suit, but the trial court determined that she was not a proper plaintiff.

That led to the present appeal. Because there was no way a Safeco customer could determine whether he or she had been surcharged, Plaintiffs’ counsel asked the Los Angeles Superior Court to order Safeco to provide a list of the people who were surcharged, so they could have an opportunity to participate in the litigation. After reviewing evidence, including internal Safeco documents that remain under court seal, Los Angeles Superior Court Judge Anthony Mohr issued the order based, at least in part, on “what appears to be direct evidence, to the effect that the defendant had a surcharge policy based on a lack of prior insurance … This justifies allowing the discovery plaintiff seeks.” Safeco appealed.

In the recent ruling, the Court of Appeal rejected Safeco’s arguments and confirmed that the lower court order was appropriate.

“This is an important victory for Safeco policyholders who paid hundreds of dollars more for auto insurance because Safeco knowingly broke the law and hid its lawbreaking from its customers and state regulators,” said Harvey Rosenfield, author of Proposition 103 and attorney for Consumer Watchdog, a California-based non-profit organization. “Because Safeco concealed these surcharges, only Safeco knows who it overcharged, and this decision means that those people can have their day in court.”

To view the Court of Appeal decision, visit www.consumerwatchdog.org/resources/SafecoAppDec.PDF.

To read Consumer Watchdog’s brief before the Court of Appeal, visit http://www.consumerwatchdog.org/resources/SafecoAppBrief.pdf. To read the original complaint by the Proposition 103 Enforcement Project, visit www.consumerwatchdog.org/resources/Safeco_Complaint.pdf.

Sources: California Courts, Consumer Watchdog

Topics California Auto