GEICO settles lawsuit over discount policy

Californians who purchased auto policies from GEICO and were denied a discount for not having proof of prior insurance will receive refunds as part of a settlement between the company and a consumer advocate group.

Government Employees Insurance Co., also known as GEICO, will pay $63 to California customers denied the discount, according to the Foundation for Taxpayer and Consumer Rights.

The Santa Monica-based consumer group sued GEICO in 2002. The group declined to say how many GEICO customers might be eligible for a refund, citing a confidentiality agreement. The group estimated GEICO would be making payouts to about 4 percent of its current and former California customers.

Calls to GEICO were not immediately returned by press time.

Under the terms of the settlement, GEICO did not admit wrongdoing. The company ceased offering the discounts that prompted the lawsuit in April 2003.

The consumer group also sued the Auto Club of Southern California and Safeco Corp.’s insurance arm. Both lawsuits were pending.

The lawsuits against GEICO and the other insurers contend their discount policies favoring California drivers with proof of prior insurance violated Proposition 103, an insurance regulation initiative adopted by voters in 1988.

A provision of the initiative established that absence of prior insurance coverage could not be used as a factor in setting rates and granting discounts.

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