A Florida federal judge ruled in favor of Sunshine State drivers accusing an American Family unit of incorrectly calculating premium refunds after nonstandard auto insurance policies were canceled early.
U.S. District Judge William P. Dimitrouleas on Thursday granted partial summary judgment to Dorine Connor and Myrtle Pugh, who won certification in April for their class of Permanent General Assurance Corp. policyholders in Florida who canceled their policy within the past five years.
Judge Dimitrouleas said the insurer’s interpretation of its policy was “at minimum, an ambiguity that must be construed against PGAC.”
“Accordingly, the court finds that PGAC has breached the policy by assessing a ‘short-cancellation premium’ based upon 10% of those amounts never paid by the insured,” the judge wrote.
While the judge agreed with Connor and Pugh on their breach of contract argument, he said the amount of damages still needs to be resolved at trial.
“We are pleased with the court’s order on the competing motions for summary judgment and will continue working hard through trial on the sole remaining issue of damages,” Zachary D. Ludens, an attorney for the policyholders, told Law360.
After canceling her policy in May 2020 with about four months left on the policy, Connor expected to receive about $216, but only received about $152, according to the order.
Pugh was expecting a $22 refund after canceling her policy with 11 months remaining, but instead owed about $600, according to the order.
The class representatives allege that they expected to receive 90% of the monthly premiums they had paid that had not yet been earned by the insurer. Instead, they allege, they were charged a fee not mentioned in the policy based on 10% of the premiums they hadn’t yet paid, according to court documents.
While the insurer argued that the unearned premium is calculated from the unused part of the annual policy, Judge Dimitrouleas said the term was undefined in the policy and that outside definitions don’t specify how to calculate unearned premiums, especially when they are paid in installments.
He also found that a state statute requiring the unearned premium to be calculated on a pro rata basis does not help the insurer’s case. The use of the terms ‘refund’ along with ‘pro rata unearned premium,’ combined with the fact that PGAC allows insureds to pay in installments, creates an ambiguity regarding whether yet unpaid premium amounts are included or excluded,” Judge Dimitrouleas wrote.
In a statement, a PGAC spokesperson defended the insurer’s calculations.
“We disagree with the judge’s ruling on our motion for summary judgment. When a customer cancels a policy with us, we calculate the amount due back to them consistent with our policy language, insurance statutes and regulation,” the statement said. “We will continue to present our position to the court as the case proceeds.”
The policyholders are represented by J. Matthew Stephens, Robert G. Methvin Jr., James M. Terrell and Courtney C. Gipson of Methvin Terrell Yancey Stephens & Miller PC; Brent Irby of Irby Law LLC; and Jordan A. Shaw and Zachary D. Ludens of Zebersky Payne Shaw Lewenz.
PGAC is represented by Kimare S. Dyer and Reginald J. Clyne of Quintairos Prieto Wood & Boyer PA.
The case is Connor et al. v. Permanent General Assurance Corp., case number 9:20-cv-81979, in the U.S. District Court for the Southern District of Florida.
Original Article published at Law360 by Ben Zigterman and edited by Nick Petruncio on April 29, 2022.