USAA Refuses to Pay Lessees Proper Payout Amount for Totaled Cars, Class Action Says

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A proposed class action lawsuit claims USAA General Indemnity Company unlawfully fails to pay insureds with leased vehicles the amount owed after a car is deemed a total loss.

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The 26-page lawsuit says that despite contractually agreeing to provide comprehensive and collision loss coverage in the event of a total loss accident, the insurance company “refuses” to pay the loss payout amount to insureds with leased vehicles—in particular, the equity surplus that results when a leased automobile’s actual cash value (ACV) is higher than the remaining balance of the lease.

The suit relays that the defendant, instead, “wrongfully diverts” the full loss payout amount to an insured’s third-party leasing company, regardless of the lessee’s entitlement to some or all of the funds.

Though the ACV of a leased vehicle is historically lower at the time of a total loss collision than the amount owed on the car by a lessee, thanks to a rise in the market value of used cars, a leased automobile sometimes has a higher value than the remaining balance of the lease at the time of an accident, the case explains. Per the complaint, this means that when a total loss collision occurs, after the remaining lease balance amount is covered by insurance, a surplus remains that “should rightfully be paid to the insureds as owners and payees of the insurance policy.”

However, contrary to the “plain terms” of the company’s insurance policy and in violation of state law, USAA does not pay insureds any of the loss payout amount, including the equity surplus, the case claims. Rather, the insurer sends the full payment to third-party lenders that “have no right to the surplus under the insurance contract, or otherwise,” the filing alleges.

The plaintiff, a California resident, had a USAA insurance policy on his leased 2021 BMW X5, the lawsuit says. According to the suit, after the car was totaled in January of this year, the defendant determined that the vehicle’s ACV was $59,834.90. At the time of the accident, the plaintiff owed only $37,595.06 to BMW under the terms of the lease, resulting in an equity surplus of $21,239.84, after a $1,000 deductible was waived, the case shares.

However, the insurance company “refused” to pay the plaintiff any portion of the loss payout amount and instead wrongfully paid to BMW both the lease balance that the man still owed and the surplus to which he was entitled under his policy, the complaint claims.

The lawsuit looks to represent any USAA insureds with comprehensive loss or collision loss coverage for physical damage to their leased vehicle under an insurance policy issued by USAA General Indemnity Company, who suffered a total loss of their vehicle that resulted in an equity surplus based on the ACV payout calculation, and for which the company failed to pay them for some or all of the loss.

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