In the October 29, 2015 edition of the MAIA’s weekly newsletter, The Massachusetts Agent, the MAIA announced that it had filed a formal complaint against GEICO with both the Division of Insurance and the Massachusetts Attorney General’s Office. The MAIA filed the formal complaint along with MAIA member Chris Russo of the Russo Insurance Agency on behalf of one of Russo’s insured who was a former insured of GEICO.
According to the MAIA and Mr. Russo, GEICO is refusing to pay Mr. Russo’s insured a $20,000 total loss collision claim stemming from a collision involving the insured’s daughter. Apparently, the insured had a recently-licensed daughter who after the purchase of the GEICO policy found a job as a Papa Gino which included her being a delivery person two nights a week. After the collision, the insured filed a $20,000 total loss collision claim with GEICO, which the insurers summarily refused to pay.
The MAIA’s Donna McKenna begins her own investigation into the matter
Before filing a formal complaint against GEICO on behalf of Mr. Russo’s insured, the MAIA’s Donna McKenna, the Association’s Vice President of Communications, conducted an investigation into the matter.
As part of her research on the complaint, Ms. McKenna decided to review personally GEICO‘s new business application on file with the Division of Insurance. In addition, Ms. McKenna contacted the State Rating Bureau actuary to find out more about GEICO’s insurance policy and business use rates. In response to her query, the State Rating Bureau‘s actuary replied that, “GEICO has never filed a business use rate (they simply don‘t write business use). Their application, however, does specifically ask if the vehicle is used in business (see attached).“
In the next step in her investigation, Ms. McKenna went online to request her own quote from GEICO and to review what the insurer actually posted on its site about the business use of a vehicle. “During this quote,” Ms. McKenna wrote in The Massachusetts Agent article, “I did not see any notice that GEICO does not write business use. In fact, in the quote, I indicated that the primary use of my vehicle was business — specifically, “Carry out, Fast Food“ Continued McKenna, “GEICO gave me a quote for six months and offered to start my GEICO policy immediately, and followed up on the quote with emails daily for about a week … and NEVER said that my business activities would not be covered under GEICO‘s policy.“
Interestingly, Ms. McKenna also noticed that GEICO does not provide a copy of the policy for review prior to purchasing insurance. Upon contacting a GEICO CSR by phone, the CSR confirmed to Ms. McKenna that, “…you don‘t get the policy until you buy it.“
Upon obtaining a copy of the GEICO policy, however, Ms. McKenna found that while GEICO claims that its policy does not cover the business use of an insured’s vehicle, during the on-line application process, GEICO specifically asks a new customer what will be the “Primary use of the vehicle.”
“[If] I read the rules on file with the Division of Insurance properly,” explained Ms. McKenna in the MAIA newsletter article, “… the only business use which seems to not meet GEICO’s private passenger definition is: ‘A utility vehicle that is customarily used for wholesale or retail delivery or commercial transportation of property.’”
The insured‘s vehicle, in this case, a 1999 Honda Accord LX, is clearly not a utility vehicle. According to the article, when the insured purchased his GEICO policy, his vehicle was not being used for business. However, after his daughter got a job working at Papa Gino’s a couple of nights a week, pizza delivery was not the primary or customary use of the vehicle. The father (the named insured) was the primary operator of the vehicle and used it to get to and from work every day. The insured did not misrepresent the use of his vehicle since he did use the vehicle primarily for commuting to and from his job.
The MAIA files a formal complaint with both the DOI and the AG’s office
After her review of GEICO’s policies and practices, Ms. McKenna penned the formal complaint to both the Division and the AG’s office. In it, she emphasized that it was important to note that a GEICO policyholder does not actually have the opportunity to review their policy until after the insured has purchased their policy. “While the consumer didn‘t have access to the rules filed by GEICO,” explained McKenna in the MAIA newsletter, “I have reviewed them, and there are a number of rules in the GEICO filings which discuss business use.“ Furthermore, in this case, Ms. McKenna said that the insured answered all of GEICO’s questions accurately and truthfully at the time of the purchase of the policy.
He [the insured] indicated, truthfully, that the primary use (which is all the application asks for) was “Commute (to work or school).“ Even after his daughter got the job working for Papa Gino‘s, the consumer‘s answers on the application were STILL true. The complaint was filed with the Commissioner of Insurance; however, a copy of the complaint letter was also sent to Attorney General Maura Healey since a $20,000 out-of-pocket loss is HUGE for someone who has really done nothing wrong.
In any case, GEICO denied the total loss claim based upon the following policy exclusions:
In addition to the above exclusion for the business of selling, servicing, repairing or parking autos, while anyone is using a vehicle in the course of any business. The exclusion also applies to private passenger autos, pick-up trucks, vans, and similar vehicles used for the delivery or transportation of goods or materials unless such use is incidental to your business of installing, maintaining, or repairing furnishings or equipment.
The formal complaint has now been filed with the Division of Insurance and the Attorney General’s Office. Agency Checklists will keep its readers posted if the MAIA makes progress on getting this issue resolved by the Attorney General or the Division of Insurance.
