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State Farm premiums are the focus of a class action lawsuit filed on behalf of a small business that claims they’ve been unfairly charged during the coronavirus outbreak.
Owners of Boobuli’s, a Walnut Creek, California cafe, say State Farm is “unjustly profiting from the COVID-19 pandemic by collecting” these “excessive” and “unfair” premiums and argue that the practice violates California laws against unfair business practices.
The class action lawsuit is the latest in a series of legal moves related to the coronavirus outbreak.
“While Covid-19 wreaked its continuing toll on collective health, business, and society, State Farm chose a windfall of excessive premiums over fairness mandated by California public policy,” the owners of Boobuli’s said in the class action lawsuit.
State Farm premiums are unfair, according to the complaint, because the rates on commercial property and casualty policies were determined using pre-COVID metrics. The owners of Boobuli’s explain further in the filing how these rates hinge on risk factors “associated with type, volume, and location” of the business.
When California implemented state-wide closures in March, these factors changed dramatically for business owners, including Boobuli’s.
“Boobuli’s could not operate for months,” according to the class action lawsuit. When the cafe did reopen, it did so with less employees and resulting sales were “dramatically” lower.
“Some days gross revenue fails to cover daily operating costs,” Boobuli’s owner’s said, adding further State Farm premiums “did not incorporate or contemplate that the majority of insured businesses would cease to operate or that their operations would be severely reduced.”
Even now, the cafe, which is surrounded by vacant offices, operates at reduced capacity because offices and businesses in the area are empty; their employees are working remotely, according to the plaintiffs in their complaint.
This “substantial reduction” in business should have been considered when determining State Farm premiums, the plaintiffs argue and “are well in excess of a fair rate.”
Boobuli’s owners describe the collection of State Farm premiums during the COVID-19 outbreak as a profit-making tool for the insurer and further claim in the lawsuit the company is “taking advantage” of the lowered risk by continuing this practice.
“State Farm is aware” of the drop in businesses and the extraordinary circumstances the coronavirus outbreak presents, the class action lawsuit alleges, pointing specifically to their refunding of auto insurance policy premiums.
“We know this is a difficult time and we continue to look for ways to support our customers,” State Farm is quoted saying in the court filing. The sentiment did not extend to Boobuli’s or other businesses, the plaintiffs said, as State Farm continued to collect premiums.
Furthermore, the plaintiffs say the offer to lower State Farm premiums 7% is “woefully inadequate” and “fails to address State Farm’s prior collection.”
“State Farm has continued to collect excessive premiums and failed to issue appropriate refunds,” the owner’s of Boobuli’s said in the filing.
They point to California law “limiting insurance premiums and rates to a fair rate of return on the risk covered by the policy” and argue State Farm premiums aren’t “commensurate with [business] returns” and aren’t “sufficient to attract capital and maintain credit.”
“The harm to Plaintiff and the Class substantially outweighs any [of] the benefit or utility of Defendant’s unfair business practice of collecting excessive, unfair premiums,” the class action lawsuit alleges.
Formally, the plaintiffs are accusing State Farm of unjust enrichment and violations of California’s Business and Professions Code. The proposed Class seeks to restore State Farm premiums “through disgorgement, restitution and a constructive trust.”
State Farm is the largest commercial and private insurer in the U.S. More than $65.6 million worth of casualty and property premiums were written in 2019.
Are you a business owner paying full State Farm premiums during the pandemic? Let us know in the comments below.
Counsel representing the plaintiffs in this class action lawsuit are Daniel L. Rottinghaus, Fredrick A. Hagen of Berding & Weil LLP; David M. Birka-White and Robert S. Robinson of BIrka-White Law Offices.
The State Farm Premiums Class Action Lawsuit is Boobuli’s LLC v. State Farm Fire And Casualty Company, Case No. 3:20-cv-07074, in the U.S. District Court for the Northern District Of California.
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