By Daniel Wilson, LAW360
February 5, 2021
A pair of veterans have hit USAA with a putative class action in California federal court alleging the insurer, which only insures military members, veterans and their families, discriminates against enlisted service members by charging them higher rates than officers.
United Services Automobile Association charges California-based enlisted service member and veteran policyholders who qualify as "good drivers" under state law more for auto collision coverage than officers who qualify for the same status, according to the complaint filed Thursday by former Marine Eileen-Gayle Coleman and former soldier Robert Castro.
"USAA advertises, 'We know what it means to serve,'" the complaint says. "It claims to 'respect and honor the men and women in our nation's military and their families who support them.' As shown by its pricing of automobile insurance policies and its deceptive business practices, USAA respects and honors current and former military officers more than it does current and former enlisted personnel."
USAA represents itself as a single entity, but operates several different insurance companies and shunts lower-ranked enlisted personnel and veterans to a "substandard" insurance company, USAA General Indemnity Co., the suit claims.
Although USAA-GIC provides the mandated 20% discount for good drivers under California law, the company also charges higher base rates for auto insurance than the main USAA company, which insures only enlisted senior noncommissioned officers of E-7 rank — for example, sergeant first class in the Army — or higher, along with commissioned officers, according to the complaint.
As part of its discrimination, the company fails to tell policyholders that enlisted status is one of the factors it takes into account when setting insurance premiums — a factor that sometimes has a greater effect than the factors it does disclose, such as driving experience, location and how a vehicle is used, Coleman and Castro allege.
The base collision policy rates charged to California-based USAA-GIC policyholders in 2017, for example, were nearly 57% higher than those charged to USAA policyholders, rising to a nearly 75% difference by 2020, the suit says, citing a state database that tracks insurance rates.
By drawing a distinction between otherwise similar officer and enlisted policyholders, and failing to be transparent about the distinction, USAA has violated several California laws, including its Insurance Code, Unfair Practices Act, Unruh Civil Rights Act and Military Non-Discrimination Act, according to Coleman and Castro.
"No legitimate business interest justifies USAA's discrimination against enlisted men and women," the complaint says.
USAA does not appear to have a state-by-state public breakdown of its 13 million members, but there are more than 30 military bases located in California, and nearly 1.7 million veterans in the state, according to 2018 figures from the U.S. Department of Veterans Affairs, and the class Coleman
2/7/2021 USAA Accused Of Discrimination Against Enlisted Personnel - Law360
and Castro seeks to represent contains "many thousands of members," the suit says.
A representative for USAA said in an email to Law360 on Friday that they had just received the suit and are "evaluating our legal options."
"However, we are confident there is no misconduct by USAA and look forward to defending our position," they said.
Coleman and Castro are represented by Harvey Rosenfield and Benjamin Powell of Consumer Watchdog, Jay Angoff, Cyrus Mehri and Desiree Langley of Mehri & Skalet PLLC, and Gary Mason and Danielle Perry of Mason Lietz & Klinger LLP.
Counsel information for USAA was not immediately available.
The case is Coleman et al. v. USAA et al., case number 3:21-cv-00217, in the U.S. District Court for the Southern District of California.
--Editing by Breda Lund.