Circuit II on the principle of the registration rate for a class action suit

On May 25, 2022, in Grossman v. GEICO Cas. (No. 21-278), the Second Circuit Court of Appeals affirmed the district court’s rejection of an attempted class action by two auto policyholders alleging that GEICO unfairly withheld windfall profits on personal insurance policies on cars sold in New York due to the COVID-19 pandemic.

The summary order of the court, which is based on the principle of “registration rate”, can be read over here.


As a result of the COVID-19 pandemic and due to the associated closures that have been imposed in New York and other states, the number of miles driven by the general public has decreased significantly after mid-March 2020, and car accidents have decreased significantly. Of course, auto insurance companies like GEICO have saved billions of dollars because fewer accidents translate into fewer claims. In April 2020, GEICO announced the GEICO Giveback Program, which offered 15 percent credit to both existing and new customers who chose to renew GEICO’s personal car policy.

In New York, insurers must obtain approval for personal auto insurance rates from the New York State Department of Financial Services (“NYDFS”) under Section 23 of the New York Insurance Act. GEICO’s Giveback Program, with 15% premium credit, is approved by NYDFS.

Certain GEICO policyholders have filed an alleged class action in federal court in the Southern District of New York alleging breach of contract, unjust enrichment, and violations of the New York General Business Act (“NY GBL”) caused by GEICO’s alleged unfair profit investigation as a result of the COVID-19 pandemic. Specifically, the plaintiffs argued that GEICO imposed excessive premiums, that the GEICO Giveback Program was not appropriate to compensate consumers for the excessive premiums charged, and that GEICO unfairly retained windfall profits. In response, GEICO argued that: (i) the procedure should be rejected under the scoring rate principle; (2) The action for breach of contract must be dismissed for not breaching any contractual clause. (3) The claim for wrongful enrichment should be dismissed, because the relationship between the two parties is governed by contract; and (iv) NY GBL claims must be denied because no reasonable consumer will be misled by GEICO’s promotional materials that have offered 15% savings.

In September 2021, District Judge Marrero convinced Marrero that the plaintiff’s claims had been barred under the rate of action doctrine, agreed to Geico’s motion for dismissal, and the plaintiffs appealed.


The “registration rate principle” is a judicially created rule that states that any rate offered and approved by the governing regulatory agency is itself reasonable and non-negotiable in judicial proceedings brought by taxpayers to challenge the rate. It protects regulated entities from civil action if the entity is required to submit its rates to the governing regulatory agency and the agency has the power to set, approve or reject rates. The scoring credo is a form of respect and proactivity, and there are two principles that underpin the creed. First, the principle of “non-justiciability” states that courts should not undermine the agency’s power to set rates by breaching approved rates; Second, the principle of “non-discrimination” states that litigation should not become a means for some pedigree payers to obtain preferential rates through litigation. Claims that refer to either principle are prohibited.

The Second Circuit concluded that the plaintiffs’ claims failed to state the claim as a matter of law, warranting dismissal, for at least three reasons. Most importantly, the enrollment rate principle is broad, up to the causes of federal and state action, and protects rates that are set and approved by federal or state regulators. The application of the doctrine does not depend on the nature of the cause of action, the responsibility for the defendant’s conduct, or the likelihood of unfair outcomes. Therefore, no matter how the claim is designed, if the principle of non-justiciability or non-discrimination is involved, the action is blocked. Here, there was no dispute that GEICO’s rates had been brought to and approved by NYDFS, and that the plaintiffs were charged the same price.

According to the Second Circuit, by repeatedly stating that the charges were “excessive” or inadequate, prosecutors were essentially seeking to recalculate the insurance rates that GEICO had imposed during the pandemic. For this reason, the court concluded that the lawsuit implicated the principle of non-justiciability and affirmed the dismissal. This principle embodies the understanding that regulators use their own experience to look at the bigger picture regarding the reasonableness of a proposed price and to rely on that experience in determining whether a price is appropriate. The court, lacking this expertise, is not suited to challenge the reasonableness of the rate offered. The approval of the rates by the NYDFS made them in themselves reasonable and not subject to change. Thus, whether framed as a claim for breach of contract, wrongful enrichment, or a violation of New York GBL, the suit implicated the principle of non-justiciability and is therefore prohibited by the scoring rate doctrine. The court also stated that the plaintiffs’ reasons for filing were not legally sufficient, for the reasons stated by GEICO, even if the filing rate principle was not applicable.


Although, as a summary, the Second Circuit ruling lacks the important precedent effect of the official opinion, it nonetheless joins a number of other appeals decisions that invoke the scoring rate doctrine in the context of insurance. See, for example, Granite State Ins. Company v. Star Mine Servs., Inc., 29 F.4th 317 (6th Cir. 2022) (priority principle barred from judicial review for non-compliance and enforceability of workers compensation insurance company audits); Lewis v. M&T Bank, No. 21-933, 2022 WL 775758, at *1 (2d Cir. March 15, 2022) (conclusion that the plaintiffs’ allegations violate both the principles of non-justiciability and non-discrimination); Albert v. Nationstar Mortg., LLC, 198 Wash. 2d 228, 494 P.3d 419 (2021) (considering that the offered rate principle will apply to claims against intermediaries such as the loan provider and the broker to the extent that awarding damages will directly attack the file rate); Rothstein vs. Balboa Ins. Co., 794 F.3d 256, 263 (2d Cir. 2015) (rejected, on the principle of non-justiciability, claims against the risk insurer that[ed] on the grounds that the rates approved by regulators were too high”); W. Park Assocs., Inc. v. Everest Nat’l Ins. Co., 975 NYS2d 445, 452 (2d Dep’t 2013) (“[A] However, a consumer’s claim, disguised, seeking compensation for damage allegedly caused by paying a price registered with a regulatory commission, shall be viewed as an attack on the price approved by the regulatory commission and, therefore, is prohibited by doctrine.” ); Regarding the Pilkington N. Am., Inc., 2015-Ohio-4797 complaint, 145 Ohio St. 3d 125, 47 NE3d 786 (which carries a statutory rate paid by the customer under the log rate doctrine); McCarthy Fin., Inc. v Premera, 182 Wash. 2d 936, 347 P.3d 872 (2015) (arguing that insured class action claims were barred by the rate-to-moderate doctrine).

Insurers and producers against whom alleged errors are brought in the course of rate setting must determine, with the assistance of expert advisor, whether the rate principle offered will serve as a full or partial defence. The courts have shown receptiveness to the application of the doctrine where, as in the GEICO case, the facts justify it.