Judge Gives Early Nod to GEICO’s $5M Settlement in Georgia Class Action

GEICO Indemnity Co. has agreed and a federal court in Georgia has given approval to a preliminary settlement of $5.1 million in a class-action lawsuit in which plaintiffs said the insurer had shorted them on ad valorem taxes when their vehicles were totaled.

The class action includes 31,000 insureds, bringing the average payout to about $164, the settlement agreement notes.

The attorney fees to the plaintiffs’ law firms will be about $1.5 million, almost 30% of the total settlement amount.

“The court preliminarily finds that the agreement proposed by the parties is fair, reasonable, and adequate and likely to be approved at a final approval hearing,” Marc Treadwell, chief judge for the U.S. District Court for the Middle District of Georgia, wrote in his Dec. 5 order. “The settlement was negotiated with the assistance of a mediator, and appears to be the result of extensive, arm’s length negotiations between the parties after class counsel and defendants’ counsel had investigated the claims, litigated essential matters regarding the claims, and tested the strengths and weaknesses of the claims through extensive litigation.”

The settlement agreement can be seen here. Members of the class can choose to opt-out of the plan by mailing a notice-of-intent letter to the settlement administrator. Members may also object to the settlement terms. The final approval hearing will be held June 6.

The lawsuit is one of many around the country filed against GEICO and other auto insurers, alleging that the carriers underpaid the ad valorem taxes when covering the cost of insured vehicles that were total losses in an accident. In June, another federal judge in Georgia approved a $2.3 million settlement in a 9,000-member class-action against USAA Casualty Insurance Co.

The settlements come more than a year after Georgia Insurance Commissioner John King directed insurers to pay the full amount of sales tax on the agreed-upon cash value of the vehicle. Georgia law requires carriers to pay the totaled vehicle’s negotiated value along with 6.6% in ad valorem taxes, tags and fees.

Atlanta news reports in 2022 showed that some drivers had been paid hundreds less than the correct tax amount. For a 2020 Toyota Corolla, for example, Progressive Insurance paid $1,118 in taxes, about $500 less than the full 6.6% required by law. For the tax amount, the insurer had used the state Department of Revenue’s web-based calculator and estimated the car’s value by combining retail and wholesale prices, CBS46 TV news reported at the time.

While the insurer and the insured agreed on a $25,000 replacement value, Progressive, in the above example, used the lower value of $16,950 to calculate the tax amount due in the claim.