Pair of insurance agencies file class action suit in Md. against GEICO for $5M

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Two insurance agencies filed a class action suit for $5 million yesterday against GEICO Insurance Agency, alleging wrongful termination and the denial of commissions, among other claims.

The complaint, filed by Steve Ching Insurance of Oregon and Kim Dao Agency of Georgia in the U.S. District Court for the District of Maryland, alleges that the insurance agencies and class members lost the value they invested in their local offices and lost future earnings in the form of renewal commissions when they were wrongfully terminated.

The insurance agencies also claim that GEICO retained commissions for themselves while refusing to pay commissions to the insurance agencies and agency class members, thereby unjustly enriching themselves, the complaint alleged.

The insurance agencies allege that GEICO has a “uniform pattern and practice” of wrongfully denying the insurance agencies and other class members commissions to which they are legally entitled and wrongfully appropriating the insurance agencies’ and the class members’ clients and revenue.

A spokesperson for GEICO was not immediately available for comment.

Previously, GEICO contracted with the two insurance agencies and other class members to set up and run local GEICO offices under its field representative or local agent program. The program required the insurance agencies and class members to sign unilateral contracts of adhesion that would make them independent contractors or non-employee captive agents, according to the complaint.

However, the complaint alleged that GEICO essentially rendered the insurance agencies and class members as employees, allowing GEICO to deny them certain employment benefits, protections of federal and state laws, and overtime wages.

GEICO required the insurance companies and class members to invest their own money to set up local GEICO offices and compensated them via commission for each GEICO insurance policy sold, according to the complaint.

The insurance companies and class members allege that GEICO “arbitrarily” terminated their contracts in bad faith and in breach of GEICO’s contracts with each of them, retained the value of their businesses and investments, and refused to pay post-termination renewal commissions for renewals of the plaintiffs’ customers’ GEICO insurance policies.

According to the plaintiff insurance agencies, more than 300 agency class members and more than 50 subclass members of the former agency class have joined the suit.

GEICO is a Maryland corporation that insures more than 28 million vehicles, making it the third-largest private passenger auto insurer in the U.S., according to its website.

Counsel for the two insurance agencies could not immediately be reached for comment.