A securities class action has been filed in Virginia Eastern District Court claiming an insurer miscalculated and misrepresented the risk involved in a contract to provide ride-share insurance policies to Uber Technologies. The case is Employees' Retirement Fund of the City of Fort Worth v. James River Holdings, Ltd. et al. 3:21-cv-00444.
On October 8, 2019, James River disclosed that it had delivered a notice of early cancellation of all policies issued to Uber, its largest client, amounting to more than 25% of the company's premiums in 2019. The news caused the company's share price to fall over 23% the next day, injuring investors. Then, on May 5, 2021, James River announced its first-quarter 2021 financial results, reporting "$170.0 million of unfavorable development in Commercial Auto, primarily driven by a previously canceled account that has been in runoff since 2019." The company then announced that it was seeking to raise $175 million through public equity offering, which was priced at "the sector's steepest discount ever," resulting in another share price plummet, of 26%, injuring investors further.
The suit alleges that in 2014 James River Group boosted its Commercial Auto Division by underwriting a new type of insurance policy which covered Raiser LLC (Raiser) a subsidiary of Uber Technologies, Inc. (together with Raiser, Uber). The class action alleges that throughout the class period, August 1, 2019 to May 5, 2021, James River made false and misleading statements and failed to disclose that:
- the insurer had not adequately reserved for its Uber policies
- the insurer was using incorrect methodology for setting reserves that materially understated the insurer's true exposure to Uber claims
- as a result, the insurer was forced to increase its reserves even after canceling the uber policies, and
- statements about the insurer's business, operations and prospects were materially false, misleading, and/or lacked a reasonable basis.
Sign up for Law.com Radar to keep up with the latest news and lawsuits in a personalized legal news feed. Track federal litigation, deals and who's getting the work by industry, practice area and region.'Editor's Note: Until James River began insuring Uber with this new type of insurance policy, ride-sharing insurance only covered claims incurred while ride-sharing drivers were transporting passengers for Uber, leaving a gap in coverage for accidents caused by ride-sharing drivers while they were not providing transportation services for hire but were still logged on to the Uber application and available to accept a ride. Personal auto insurance did not cover these claims either, as they occurred while the driver was participating in ride-sharing. According to Uber, these new policies would give contingent coverage for a driver's liability that would meet the highest requirement of any state in the U.S.