Court Allows Lawsuit Over Legality Of Progressive’s “Binding Restrictions”

In a ruling that challenges what the Defendant insurer claims is a long-standing risk management practice among property and casualty carriers, the Suffolk Superior Court has denied a motion to dismiss a putative class action against Progressive Direct Insurance Company. The litigation centers on the insurer’s use of “binding restrictions”—temporary moratoriums on the sale of physical damage coverage during severe weather events—and whether such restrictions violate Massachusetts’ strict “must offer” insurance statutes.

The decision by Justice Debra A. Squires-Lee sets the stage for a significant legal battle regarding the extent to which insurers can control intake during environmental crises versus their statutory obligation to provide coverage to all eligible drivers.

The “Binding Restriction” at Issue

The case, Danielle Gondola v. Progressive Direct Insurance Company, stems from a transaction that occurred on December 20, 2023. The Plaintiff, Danielle Gondola, sought to insure a 2022 Mazda CX-30. At the time of the transaction, the National Weather Service had issued flood warnings for the region. Consistent with its internal underwriting guidelines, Progressive had implemented a “binding restriction,” temporarily refusing to offer Optional Collision (Part 7) and Comprehensive (Part 9) coverage to new business applicants to mitigate the risk of adverse selection from these applicants purchasing insurance only when a loss is imminent.

Ms. Gondola purchased the policy with the mandatory liability coverages but without physical damage protection. Three weeks later, on January 10, 2024, she was involved in a three-car collision that resulted in the total loss of her vehicle. Progressive denied her subsequent property damage claim, citing that her policy did not include collision coverage.

Ms. Gondola subsequently filed a class action lawsuit, alleging that Progressive’s refusal to offer the optional coverage violated Massachusetts General Laws chapters 93A (unfair business practices) and 176D (unfair insurance practices), as well as breached a contract.

The Statutory Conflict: “Must Offer” vs. Risk Management

The core of the Plaintiff’s argument rests on the specific language of Massachusetts automobile insurance statutes. Under G.L. c. 90, § 34O and G.L. c. 175, § 113A, insurers authorized to write motor vehicle liability policies are generally required to offer optional collision and limited collision coverage.

The statutes, if applicable, provide specific, narrow exceptions under which an insurer may refuse these optional coverages. These exceptions generally relate to the insured’s behavior or risk profile, including:

• Prior convictions for vehicular homicide or auto insurance fraud;
• Four or more at-fault accidents within three years;
• Convictions for driving under the influence; or
• Vehicles with salvage titles or high-theft vehicles lacking anti-theft devices.

The Plaintiff argued that “inclement weather” is not a listed statutory exception, and therefore, Progressive’s unilateral refusal to offer coverage constituted an unfair and deceptive act.

Progressive moved to dismiss the complaint, arguing that binding restrictions are a “common and accepted industry practice” designed to prevent fraud. The insurer further argued that the Plaintiff lacked standing because the specific statute she cited in her complaint (G.L. c. 175, § 113H) applies to the Massachusetts Automobile Insurance Plan (MAIP)—the assigned risk pool—and not to the voluntary market in which Ms. Gondola purchased her policy.

Progressive also contended that the issue fell under the “primary jurisdiction” of the Commissioner of Insurance, arguing that the regulator, not the Court, should determine the validity of binding restrictions.

The Court’s Decision

In her Memorandum of Decision, Justice Squires-Lee bifurcated the ruling, dismissing the contract claims while allowing the consumer protection claims to proceed.

1. The 93A Unfair Practice Claim Survives

The Court rejected Progressive’s argument that the Plaintiff failed to state a claim under Chapter 93A. While acknowledging Progressive’s position that weather restrictions are logical, the Court found that logic does not necessarily equate to legality under the strictures of Massachusetts insurance law.

Justice Squires-Lee wrote:

“I have no information before me, other than Progressive’s say so, that it may lawfully refuse to offer optional coverage during a ‘binding weather restriction[.]’ It has offered no law, regulation, or guidance from the Commissioner of Insurance that such a restriction is acceptable.”

The Court emphasized that while not offering comprehensive coverage during a hurricane is understandable from a business perspective, the carrier could not point to a legal basis for the restriction at the pleading stage. The Judge noted:

“It may well be [acceptable]. I understand the logic… But I cannot dismiss this case applying the appropriate standard, on that basis.”

The Court further rejected the argument that the Commissioner of Insurance had primary jurisdiction, noting that the Plaintiff seeks damages for an injury already incurred, and there is no statutory bar to a private cause of action in this context.

2. Breach of Contract Claims Dismissed

However, the Court agreed with Progressive regarding the breach of contract and implied covenant of good faith and fair dealing. The Plaintiff argued that Progressive breached the policy by failing to offer coverage. The Court found this reasoning circular and legally unsound, noting that one cannot breach a contract term that the other party never agreed to.

“Progressive declined to offer optional coverage before the parties entered the contract of insurance… Because Progressive did not offer those coverages, Plaintiff did not accept them, and Progressive therefore cannot be liable in contract for breach of them.”

The Judge concluded that Progressive “cannot have breached a contract in advance of its formation.”

Industry Implications

This lawsuit is in its initial stages, but the Plaintiff has cleared the first hurdle in a multi-hurdle process to certify a class and prove liability. However, the burden is now on Progressive to produce regulatory guidance, statutory authority, or common law authority supporting its claim that its “binding restrictions” do not violate the consumer protections under M.G.L. c. c 93A embedded in Massachusetts insurance law.

The case is Gondola v. Progressive Direct Insurance Company, Suffolk Superior Court Civil Action No. 2484-CV-02902.

Agency Checklists will keep you posted on further developments in this suit.