Judge Rules in Favor of USAA in Discrimination Lawsuit: Plaintiffs Vow to Appeal
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| U.S. District Judge Robert S. Huie dismissed a class action lawsuit against USAA that alleged discrimination against enlisted military personnel in auto insurance practices. |
Judge Rules in Favor of USAA in Discrimination Lawsuit: Plaintiffs Vow to Appeal
San Diego, CA – In a closely watched case, a federal judge in California has granted summary judgment in favor of United Services Automobile Association (USAA), effectively dismissing a class-action lawsuit that alleged systemic discrimination against enlisted military personnel in their insurance practices. Plaintiffs Eileen-Gayle Coleman and Robert Castro, both veterans, spearheaded the legal challenge, accusing USAA of relegating enlisted members to a subsidiary with higher insurance rates and fewer benefits compared to offerings available to officers.
Allegations of Discrimination
The plaintiffs claimed that USAA violated California’s insurance laws and anti-discrimination statutes by assigning enlisted service members to USAA General Indemnity Company (USAA-GIC), which allegedly charges significantly higher premiums for collision coverage. According to the lawsuit, this practice disadvantaged approximately 200,000 enlisted policyholders who qualify as good drivers under California law. Plaintiffs also argued that USAA failed to disclose that military rank—officer versus enlisted—plays a significant role in determining premium rates.
The complaint further alleged violations of California Insurance Code Section 1861.16(b), the Unruh Civil Rights Act, and California’s Unfair Competition Law (UCL). “USAA’s placement of enlisted personnel in its substandard subsidiary is a clear act of discrimination based on military status,” said plaintiffs’ attorney Michael Lieder.
Legal Representation and State Laws
The plaintiffs are represented by Consumer Watchdog, Mehri & Skalet, PLLC, and Mason Lietz & Klinger LLP. Attorneys Harvey Rosenfield, Jay Angoff, and Gary Mason have been at the forefront of this legal battle, arguing that USAA’s practices violate multiple California laws designed to protect consumers and prevent discrimination. These include the Good Driver Protection Provisions under Proposition 103, the Unruh Civil Rights Act (Cal. Civ. Code § 51), and Military and Veterans Code § 394, which specifically prohibits discrimination based on military status.
Court’s Decision
U.S. District Judge Robert S. Huie dismissed the claims, ruling that USAA’s practices were consistent with California’s insurance regulations. “USAA is entitled to follow its placement rules that limit insurance eligibility, provided they comply with state law,” the judge stated in the decision.
USAA welcomed the ruling, emphasizing that its rate-setting and membership alignment practices undergo rigorous regulatory scrutiny. “California law allows us to serve members in the manner we do, and our rates are examined and approved by regulators,” said USAA spokesperson Roger Wildermuth.
Grounds for Appeal
Despite the ruling, Coleman and Castro plan to appeal, asserting that the court’s decision undermines the rights of enlisted military members. The plaintiffs argue that the court overlooked key elements of California’s Good Driver Discount law, which mandates that insurers within a commonly controlled group offer the lowest available rates to qualified good drivers. Additionally, they contend that USAA’s failure to disclose military rank as a factor in premium calculations violates the Unfair Practices Act and constitutes deceptive business practices.
“The disparity in rates and treatment between officers and enlisted personnel remains unjust,” said Lieder. The appeal will likely focus on whether USAA’s segmentation practices amount to unlawful discrimination under the Unruh Act and Military and Veterans Code § 394.
Broader Implications for the Insurance Industry
This case highlights ongoing concerns about fairness and transparency in the insurance industry, particularly in how companies segment their customer base. Critics argue that USAA’s practices create a “second-class” system for enlisted members, undermining the organization’s mission to serve the military community.
Industry experts note that segmentation practices are not uncommon, but they urge companies to ensure such policies do not lead to systemic inequities. “This ruling underscores the importance of understanding policy terms and advocating for equitable treatment across all customer groups,” said consumer advocate Harvey Rosenfield.
Looking Ahead
The plaintiffs’ appeal will likely focus on whether USAA’s practices violate California’s anti-discrimination and insurance laws. A successful appeal could force the company to revise its rate-setting practices and potentially lead to restitution for affected policyholders.
For now, the ruling allows USAA to continue its current practices, but the controversy surrounding the case is far from over. As Coleman and Castro prepare for the next stage of their legal battle, the broader military and consumer communities will be closely monitoring the outcome.
Judge Sides with USAA in Controversial Class-Action Lawsuit » Live Insurance News
USAA Wins Summary Judgment in Discrimination Lawsuit, Plaintiffs Plan to Appeal –
Judge Rules in Favor of USAA
A federal judge in California has ruled in favor of USAA in a contentious class-action lawsuit, marking a significant development in a case alleging discrimination against enlisted military personnel and veterans. U.S. District Judge Robert S. Huie granted a summary judgment dismissing the claims, effectively siding with the San Antonio-based insurance provider without proceeding to trial.
The lawsuit, initiated by plaintiffs Eileen-Gayle Coleman and Robert Castro, contended that USAA relegated enlisted service members to its subsidiary, USAA General Indemnity Co. The plaintiffs accused the company of providing subpar insurance services and charging higher auto insurance rates through the subsidiary, compared to products offered to officers through United Services Automobile Association (USAA).
Judge Huie ruled that California state law allows USAA’s placement practices, stating that the company’s membership structure and rate-setting methods comply with state insurance regulations. “USAA is entitled to follow its placement rules that limit insurance eligibility,” the judge wrote.
Plaintiffs Decry “Second-Class” Treatment
Despite the ruling, the plaintiffs expressed disappointment and are preparing to pursue an appeal. Representing enlisted policyholders, Coleman and Castro alleged in their initial claim that being assigned to USAA General Indemnity Co. effectively treated them as “second-class” members.
The plaintiffs’ attorney, Michael Lieder, voiced concerns about the decision and its implications for enlisted military members. “We are disappointed with Judge Huie’s decision and intend to appeal,” he noted. According to the plaintiffs, approximately 200,000 policyholders who qualify as good drivers were systematically excluded from discounts offered at USAA’s main branch, resulting in higher premiums
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Claims of Discrimination in Insurance Access
At the heart of the lawsuit is the assertion that enlisted service members are disproportionately affected by USAA’s segmentation practices. The complaint posited that these practices amount to systemic discrimination, unfairly placing enlisted personnel into a subsidiary that the plaintiffs claim delivers less value in terms of service quality and cost.
While allegations of discrimination initially gained traction, leading to class action certification for what was referred to as the “Good Driver Class,” other claims of broader discrimination were dismissed in early stages of the case. Ultimately, the summary judgment rules out any liability on USAA’s part under California’s insurance code.
USAA Responds to Legal Challenge
USAA maintained throughout the litigation that the lawsuit was meritless. Company spokesperson Roger Wildermuth described the ruling as a confirmation of USAA’s adherence to insurance laws. “California law allows us to serve members in the manner we do, and our rates are examined and approved by regulators,” he stated.
The insurance giant defended its membership alignment and rate policies, emphasizing that these practices are consistent with its long-standing mission to serve the military community.
The Broader Impact on Insurance Practices
The USAA case raises important questions about transparency and equitable treatment in the insurance industry. For many, the lawsuit highlights the complexities involved in balancing risk analysis, actuarial fairness, and the need to ensure all policyholders receive equitable service.
Segmenting insurance offerings for specific groups is not uncommon within the industry. Companies frequently use risk assessments and other metrics to create varied policy structures, but these practices can sometimes feel opaque or unfair to consumers. Critics argue that such segmentation can exacerbate disparities, leaving certain groups paying more for less coverage.
For consumers, the case underscores the importance of understanding policy terms, coverage options, and how rates are calculated. It also brings attention to the regulatory oversight required to prevent any potential discrimination or unequal treatment.
USAA wins court case over military insurance rate dispute in California
USAA signage
Aaron M. Sprecher/Getty ImagesUSAA Insurance just took a major victory this week in a California court, ending litigation that’s plagued the military insurance provider for nearly four years. A judge shut down a class action suit against the insurer on January 9, which was filed by enlisted military members upset they were getting charged higher premiums than their military officer counterparts.
Since February of 2021, a group of low-ranking military members have been arguing with USAA Insurance over their auto insurance rates. In a nutshell, USAA operates four separate insurance providers, which each service different “segments” of the military market – one is reserved for ranked officers within a higher tax bracket, one is reserved for lower-paid enlisted members and other exist to insure family of military servicemen.
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When a group of enlisted military members found out their officer-ranked counterparts were getting better rates, they filed suit with the court saying they should be allowed the join that particular company and get the same “good driver” rates. USAA, however, says the company was founded by and to serve military officers, specifically, and has only expanded its offerings to include higher-risk, lower-paid enlisted members in the decades since its founding.
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USAA also argues that all of its insurance companies and their rates went through a vigorous review process by a California department which deemed the rates fair and reasonable.
Both the disgruntled military member and USAA have been going back and forth over the issue for nearly four years. But Judge Michael M. Anello, of the Southern District of California, ruled in favor of USAA’s arguments on January 9, approving a call from the insurance provider to quickly dismiss the claims made against them.
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As first reported by the San Antonio Express-News, the military members opposing USAA say they plan to appeal the judge’s decision. But for now, USAA can continue to operate as they have for years, offering different rates, plans and insurance companies for different “segments” of the military.
“USAA remains committed to providing competitive products and exceptional service to the military community, and the allegations in this suit had no merit. California law allows us to serve members in the manner we do, and our rates are examined and approved by regulators. We believe the judge reached the right decision in dismissing this suit,” a USAA spokesperson told MySA.
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USAA Hit with Class Action Over Alleged Treatment of Officers Versus Enlisted Military Personnel
Current and former military officers receive markedly better treatment from United Services Automobile Association (USAA) and USAA General Indemnity Company (USAA-GIC) than current and former enlisted personnel, a proposed class action alleges.
According to the 39-page lawsuit, USAA has violated the rights of current and former enlisted personnel—those on active duty in pay grades E-1 through E-6 and veterans whose highest rank was within those pay grades—with respect to policy prices and good-driver discounts, purported consideration of military status in setting premium rates and by consigning them to its “substandard” affiliate, USAA-GIC.
The complaint, filed by two United States Marine Corps and Army veterans, alleges USAA and USAA-GIC have violated California consumer protection laws, the state’s Insurance Code and the Unruh Civil Rights Act.
As the case tells it, USAA, while it holds itself out as a single entity, does not disclose to policyholders that they may be placed with USAA-GIC based on their military status.
Per the suit, the defendants charge enlisted policyholders with collision coverage and who qualify as good drivers under California law more for car insurance than they charge officers with the same coverage who qualify as good drivers, an apparent violation of the state’s Insurance Code. While the defendants provide the 20-percent discount mandated by California law, enlisted personnel, insured by USAA-GIC, pay higher base rates than officers insured by USAA, the case claims. From the suit:
“The California Department of Insurance (‘CDI’) never approved USAA-GIC’s conduct of failing to offer and sell to Enlisted Policyholders with collision coverage who are statutory good drivers a good driver discount policy from the insurer under common control with it that offers such policyholders the lowest rates for good driver coverage.”
According to the lawsuit, the pertinent section of the California Insurance Code provides that an insurer within a commonly controlled group of insurance companies shall sell a good driver discount policy that offers the lowest rates for that coverage. The defendants’ failure to offer enlisted personnel with collision coverage who qualify as good drivers under California law the “least expensive good driver discount policy” amounts to a violation of the state’s insurance code, the suit claims.
Further, the lawsuit alleges USAA “deceives” enlisted policyholders by omitting military status from what the insurer claims to be the complete list of information it says it considers in setting auto insurance premiums.
“Notably, military status as officer or enlisted—information USAA does not disclose—can have a greater effect on the premium a USAA insured pays than does much of the information USAA does disclose,” the complaint reads.
Third, the lawsuit alleges USAA “discriminates” against enlisted policyholders by “consigning” them to USAA-GIC, who’s described in the complaint as a “substandard insurance company” that charges “higher base rates for automobile insurance” than USAA.
“United Services offers insurance to current and former military officers, but not to Enlisted Policyholders,” the case charges.
The lawsuit looks to represent all enlisted persons in pay grades E-1 through E-6 who are citizens of California and who, at any time during the applicable statute of limitations periods, had collision coverage from USAA General Indemnity Company. The suit also proposes to cover a subclass comprised of all enlisted persons in pay grades E-1 through E-6 who are citizens of California and had collisions coverage from USAA-GIC and who qualified as good drivers under the California Insurance Code and were not offered a good driver discount policy from USAA.
In an email Friday, a USAA representative told Law360 that the company is “evaluating our legal options,” the publication wrote.
“However, we are confident there is no misconduct by USAA and look forward to defending our position,” the USAA rep said.
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