in Newswire Published on October 16, 2020

State Farm Collected ‘Excessive’ Premiums During COVID-19 Business Closures, Class Action Alleges [DISMISSED]

Last Updated on May 23, 2024

Boobuli’s LLC v. State Farm Fire and Casualty Company

Filed: October 9, 2020 ◆§ 3:20-cv-07074

A Walnut Creek, California coffee shop claims State Farm charged excessive premium rates while businesses remained closed during the COVID-19 pandemic.

Defendant(s)

State Farm Fire and Casualty Company

Law(s)

California Business and Professions Code

State(s)

California

May 23, 2024 – State Farm ‘Excessive’ COVID-19 Premiums Lawsuit Dismissed

The proposed class action lawsuit detailed on this page was dismissed on January 24, 2024.

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In a 22-page order granting summary judgment in favor of State Farm, U.S. District Judge William H. Orrick found that none of the plaintiff’s claims regarding the company’s alleged failure to adequately adjust its premiums during the COVID-19 pandemic had merit.

“State Farm argues that it did not gain anything to which it was not entitled, and that [the plaintiff business] did not give up anything that it was entitled to keep,” the judge wrote. “I agree.”

Per Judge Orrick, the plaintiff’s argument that State Farm was unjustly enriched after charging businesses “excessive” premiums is undercut by filings with the California Department of Insurance (DOI) that show that the defendant experienced significant underwriting losses—not excessive profits—on its business owners insurance policies during the COVID-19 pandemic.

Judge Orrick determined that the plaintiff business’ claims are further undermined by the fact that State Farm, in response to the pandemic, reduced the coffee shop’s rated liability exposure by 40 percent for one year after it renewed its policy in June 2021.

Regardless, the judge found that State Farm’s premium rates had already been approved by the DOI and that claims challenging DOI-approved rates fall outside the federal court’s jurisdiction.

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State Farm Fire and Casualty Company faces a proposed class action lawsuit in which a Walnut Creek, California coffee shop claims the insurer charged excessive premium rates while the majority of businesses were closed or had reduced operations during the coronavirus pandemic.

Alleging violations of California’s Business and Professions Code, the case argues State Farm’s premium rates amid the pandemic, which were reportedly calculated based on pre-pandemic conditions, far outweigh the substantially reduced risks covered under the insurer’s commercial property and casualty insurance policies while businesses remain closed or operating at reduced capacity due to government orders issued in response to the COVID-19 crisis.

“Given the elimination and/or substantial reduction in business operations, the risks insured under State Farm’s policies have been substantially reduced or eliminated,” the complaint contends. “Nevertheless, after COVID-19 orders, State Farm continued to charge and retain premiums calculated based on the volume of pre-COVID-19 business operations and associated risks.”

As a result, State Farm has obtained “a windfall of excessive, unfair premiums” that oversteps California law, which limits an insurer to a fair rate of return, the suit alleges.

Per the complaint, State Farm is well aware of the difficulties faced by its insureds as a result of shelter-in-place orders and social distancing guidelines. Instead of offering a refund or reduced premium rate, however, the insurer “claims to be working on lowering future business premiums” by a mere seven percent, the suit avers, arguing that such an amount is “woefully inadequate” to address the ongoing reduction in business operations and State Farm’s retention of excessive premiums since March 2020.

The plaintiff, which operates a coffee shop inside a Walnut Creek office building, was closed for months after California Governor Gavin Newsom issued a March 19 shelter-in-place order in response to the pandemic, the case relays. While the shop has since been able to reopen with reduced hours and employees, business remains drastically reduced given the majority of the office building’s tenants are working from home, per the complaint.

According to the case, State Farm continues to charge the plaintiff excessive premium amounts while its business remains crippled “for the foreseeable future,” with daily revenues sometimes failing to cover operating costs.

The plaintiff business looks to represent anyone who paid insurance premiums to State Farm for property and casualty insurance policies covering any period since March 16, 2020 and whose business operations were substantially reduced or eliminated due to the COVID-19 pandemic.

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