USAA Settles Georgia Class Action on Underpaid Taxes in Auto Claims

A federal judge in Georgia has given preliminary approval to a $2.3 million settlement in a class-action lawsuit that charged USAA Casualty Insurance Co. with underpaying for taxes on totaled vehicles.

“The Court finds, subject to the final fairness hearing … that the settlement agreement is fundamentally fair, adequate, and reasonable,” U.S. District Judge Leigh Martin May wrote in the order this week.

The final hearing has been scheduled for Dec. 13.

Some 9,000 Georgia policyholders had joined the suit, one of several class actions around the country that have been filed against USAA, State Farm, Geico and other auto insurers. Lead plaintiff Jahazel Black, of McDounough, Georgia, argued in the 2021 complaint that in her case, USAA reimbursed only $49.25 to cover the ad valorem tax paid when Black purchased the vehicle.

That was well below the $345 that should have been paid under the actual cash value terms of the policy and under Georgia law, the plaintiff said. Other plaintiffs in the class had similar underpayments, the complaint noted. In its answer to the suit, USAA denied the allegations and said its ad valorem tax manual speaks for itself.

USAA also must pay almost $573,000 in attorney fees, the court’s order notes.

The suit is similar to others that have alleged that auto insurers have systematically underpaid taxes and fees to insured motorists, which amount to a few hundred dollars per plaintiff. In August 2022, San Antonio-based USAA agreed to settle a class action suit in Mississippi, which held that the insurer had underpaid on hundreds of auto claims. The suit was handled by the same plaintiffs’ law firm that has led other class actions.

Geico Insurance in 2022 also was the subject of a similar class action in Georgia. State Farm was sued in Illinois on similar grounds. State Farm in 2022 also settled a class action brought in Alabama, charging that the cost of labor on home repairs was depreciated, something not allowed by state law.

But a Massachusetts judge last week denied class certification in a lawsuit against Safety Insurance and Commerce Insurance, over the resale value of repaired vehicles.

USAA officials could not be reached for comment Wednesday about the Georgia settlement.