The California suit alleged that USAA's subsidiaries offered lower-quality insurance while charging higher base rates for auto insurance than USAA itself. (Credit: Tada Images/Adobe Stock)
Insurer USAA has defeated a California class action suit accusing them of discriminating against enlisted military personnel and veterans. The class action, which has been pending for four years, claimed the carrier relegated enlisted members to USAA General Indemnity Co., one of the insurer’s subsidiaries.
The class action alleged that the subsidiary offered lower-quality insurance while charging higher base rates for auto coverage than USAA itself. However, current and former military officers were able to purchase policies with the main carrier, United States Automobile Association (USAA).
In 2023, U.S. District Judge Robert S. Huie in San Diego granted certification for one of the plaintiffs’ claims for a group known as the “Good Driver Class.” This class consisted of around 200,000 enlisted military personnel who claimed they qualified as “good drivers,” but were denied a good driver discount. This led them to pay more for their auto policies through General Indemnity than they would if they were served by USAA itself.
However, in January 2024, Huie denied a request to certify a proposed discrimination class alleging those who bought or renewed General Indemnity policies paid more than if they had been purchased through USAA.
Huie ruled that plaintiffs in the case could not rely on the state’s insurance code to defend their assertion that USAA isn’t allowed to distinguish between officers and enlisted personnel.
USAA faces another similar class action, which was filed in Texas in May 2024.
That complaint alleges, in part, “So central is membership to USAA that its website prominently reads: 'Member owned. Mission led. We’re run by members, for members.' USAA aggressively promotes membership’s importance and value… But for nearly two-thirds of USAA’s customers, membership is a false, unfair, and deceptive promise that USAA has systematically breached.”
The case alleges that USAA secretly reserves real membership and the benefits that accompany it for customers in the officer class; particularly commissioned and senior non-commissioned officers, officer candidates and their unmarried widows. Meanwhile, the company relegates other customers — particularly enlisted personnel and their family members — to a “nominal” or “fake” member status.
The benefits of “real” membership that the suit mentions include annual surplus allotments.
The Texas class action essentially accuses USAA of the same actions as the California case — alleging non-officer members were relegated to one of the company’s three subsidiaries: the aforementioned USAA General Indemnity, USAA Casualty Insurance Company and Garrison Property and Casualty Insurance Company. The suit alleges profits from these subsidiaries flow directly into USAA, where they are then shared with “real” USAA members through annual distributions. Meanwhile, USAA and its subsidiaries do not distribute any policyholder surplus to customers placed with the subsidiaries, who the suit calls “nominal members.”
This class action aims to cover everyone who purchased one or more USAA contracts that were placed with its subsidiaries where at least one of their insurance contracts included a provision that, “If this policy is issued by United Services Automobile Association (USAA), … [b]y purchasing this policy you are a member of USAA and are subject to its bylaws.”
USAA has filed a motion to dismiss the case.
A full copy of the class action suit can be found here.
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