Progressive has decided to settle a progressive insurance class action lawsuit by agreeing to pay millions of dollars in damages to thousands of Massachusetts residents who alleged that the insurance industry practiced deceptive business practices. The lawsuit named as defendants Progressive, the state’s largest insurance provider, and several companies and agents who purchased insurance in Massachusetts without first conducting an in-depth investigation to determine whether or not the company was a “reputable” company.
The plaintiffs alleged that Progressive advertised personal injury protection policies in a way that encouraged people to purchase these policies without any type of financial analysis. The lawsuit also alleged that Progressive falsely implied that people who signed up for PIPs would receive huge discounts on their insurance premium when in fact, they did not. Furthermore, Progressive used an independent third-party to conduct the financial analysis on behalf of the company instead of the plaintiff itself, thereby increasing the risk of a mischaracterization of the facts.
The plaintiffs’ attorney, Joseph L. DiDonato, argued that the company did not adequately investigate whether or not the policy would be an appropriate product for its customers. He also claimed that the company did not adequately investigate whether the company would have an adequate financial standing to provide this insurance coverage.
According to the plaintiffs’ attorney, when a person purchased a personal injury protection policy from Progressive, the person was committing himself to an arrangement that would result in him receiving lower rates on premiums than other policies offered by competitors in the same industry. When the plaintiff received a notice that his rates had been raised, he or she could either attempt to negotiate the rate back down or go without insurance in an effort to save money.
Progressive, which is a member of the American Association of Retired Persons (AARPP) and the National Association of Insurance Commissioners, has been under investigation for several years by state regulators for its actions related to the buying and selling of its products to major insurance companies. In addition, the state Office of Insurance Regulation (OIR) has sent a number of cease and desist orders against various providers in recent years for not being in compliance with certain state laws regarding insurance sales.
The company’s defense in the lawsuit was that it was entitled to some degree of deference as a large insurance company because it was a publicly traded company. However, in a statement issued prior to the settlement announcement, the state Attorney General’s Office noted that the company “has not demonstrated a willingness to abide by its obligations to provide the consumer protection that is necessary to protect the rights of those who may be injured due to Progressive’s conduct.”
The Massachusetts Office of Insurance Regulation will be monitoring the progress of the litigation and will “tend to provide more careful oversight and supervision of the Progressive company’s activities, in order to ensure that those policies are sold in a manner consistent with state law,” said David Slattery, a spokesman for the state’s Office of Insurance Regulation. However, he added that “The Office of Insurance Regulation has not completed any investigation into the lawsuit,” so it is too early to assess the extent to which it will be effective. “If this were to prove to be a meaningful result, then many consumers in Massachusetts may decide that they want to proceed with this litigation,” Slattery said.
In addition to the settlement announced on Friday, Progressive disclosed to the state that it has agreed to implement changes at the top levels of its insurance division. The changes will result in the hiring of a former U.S. Marshal, who previously worked for the U.S. Department of Justice, an independent insurance investigator, and an outside third-party company that specializes in examining insurance claims.
