GEICO motion to dismiss $69 million suit claiming failure to pay municipal taxes denied
A South Carolina federal judge has denied GEICO’s motion to dismiss a suit filed by the state’s Municipal Association (MASC) requesting $69 million for unpaid municipal taxes and penalties.
The suit filed in May claims that the company hasn’t filed proper paperwork, including a reconciliation report for the past seven years, despite multiple requests.
MASC also alleges GEICO has not paid the full 2% tax on gross premiums collected to municipalities for license years 2021 to 2024. A court filing states MASC has requested $30 million in unpaid taxes and $39 million in penalties from GEICO.
GEICO’s motion to dismiss claims that MASC doesn’t have the statutory authority to collect delinquent taxes or penalties, demand reconciliation reports, or engage in litigation for the municipalities.
The judge denied GEICO’s motion by stating that municipalities have the authority to collect taxes or penalties, require reconciliation reports, and litigate through ordinances made by the municipalities that do not conflict with general state law.
GEICO’s motion also claims that MASC has no right to relief because MASC’s complaint says the taxes were paid on time, and it is only speculation that GEICO underpaid its taxes because the reconciliation reports were not filed.
“At the motion to dismiss stage, this court must accept well-pleaded allegations as true, including the assertion that defendants have not paid the full amount owed,” the judge’s order says. “Consequently, the court denies dismissal on this basis.”
GEICO also argued that the allegations regarding delinquent taxes and penalties from 2021 have expired, as they are subject to a three-year statute of limitations.
MASC responds that GEICO’s actions should toll the statute of limitations because the company repeatedly reassured MASC that it would submit the required documents.
The order, written by U.S. District Judge Joseph Anderson, states that a defendant may be estopped from claiming the statute of limitations if the defendant induced the plaintiff to delay in filing suit.
“After discovery, the court may learn that the circumstances presented are insufficient to satisfy the strictures of equitable tolling; however, dismissal at this stage would be premature,” the order says. “Accordingly, the court will deny the motion to dismiss plaintiff’s claims as time-barred.”
The Insurance Journal reports MASC’s attorney, Robert Tyson Jr., says the association has concluded that GEICO has underpaid its taxes because most other carriers that write similar numbers of policies in the state remit a larger amount of taxes each year.
“We could be wrong about it,” Tyson told Insurance Journal. “But until we get documentation from GEICO, we won’t know for certain.”
Insurance Business reports that the suit comes at a time when insurance companies are facing heightened scrutiny over their claims practices and litigation strategies.
“In Idaho, Allstate was sued by an online retailer that alleged delayed and undervalued insurance payments on a $267,000 inventory loss led to the business’s closure,” the magazine says. “The complaint against Allstate not only cited the insurer’s handling of the claim but also referenced testimony from a US Senate hearing about broader industry practices of undervaluing claims.”
It lists another case where Progressive and Protective Insurance are facing allegations that the insurers mishandled a property title claim and failed to settle within policy limits.
National media have been reporting on lawsuits that State Farm is battling in multiple states, which claim the company used software to calculate actual cash values too low.
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