CSAA Dodges Pandemic Refunds as California Court Shields Insurers’ Premiums
On September 10, 2025, the California Court of Appeal upheld a lower court’s ruling in favor of CSAA Insurance Exchange (doing business as AAA), dismissing a class-action lawsuit that accused the insurer of failing to refund premiums during the COVID-19 pandemic. The decision reinforces protections for auto and property insurers against claims of overcharging when policyholders experienced reduced risk due to lockdowns and stay-at-home orders, marking a significant victory for the industry in a series of similar disputes.
Background of the Lawsuit
The case, Ramirez v. CSAA Insurance Exchange, stemmed from a 2020 class-action complaint filed in San Francisco Superior Court by policyholder Maria Ramirez. Plaintiffs alleged that CSAA and other insurers unjustly retained full premiums for auto and homeowners’ policies despite reduced usage and risk during pandemic-induced restrictions. For instance, with fewer miles driven due to lockdowns, the risk of accidents dropped, yet premiums weren’t adjusted or refunded proportionally. The suit sought refunds under California’s Unfair Competition Law (UCL), claiming the practices constituted unfair business acts and false advertising.
Similar lawsuits proliferated nationwide during the pandemic, with over 100 class actions filed against major insurers like Allstate, State Farm, and Progressive. In California alone, courts have seen dozens of such claims, often arguing that insurers profited excessively from unchanged premiums amid lower claims volumes—U.S. auto insurers reported $30 billion in unexpected profits in 2020-2021 due to reduced driving. CSAA, a not-for-profit reciprocal insurer affiliated with AAA serving Northern California and other states, was targeted for allegedly collecting billions in premiums without corresponding risk adjustments.
The Court’s Ruling
The First District Court of Appeal, in a unanimous opinion authored by Justice Alison Tucher, affirmed the trial court’s dismissal with prejudice. The panel ruled that the plaintiffs failed to state a viable claim under the UCL, as the alleged conduct did not rise to the level of “unfair” or “unlawful” practices. Key reasoning included:
- No Legal Obligation to Refund: Insurers are not required under California law to retroactively adjust premiums based on unforeseen events like pandemics unless specified in policy terms. The court noted that standard policies price risk prospectively, and the pandemic’s impact was temporary and unpredictable.
- Balancing Test for Unfairness: Applying the “tethering test” from Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999), the court found the claims untethered to specific statutes like insurance regulations. It rejected broader “public policy” arguments, stating that allowing such suits could disrupt the regulated insurance market overseen by the California Department of Insurance.
- No Fraudulent Misrepresentation: Plaintiffs’ argument that premiums implied ongoing risk coverage was deemed insufficient, as policies clearly outline coverage terms without guarantees of rate adjustments for external events.
The ruling builds on prior California decisions, such as the 2023 dismissal of a similar suit against GEICO, where courts shielded insurers from “pandemic profiteering” claims. Nationally, outcomes vary—New York and Florida courts have ordered some refunds—but California’s stance prioritizes industry stability.
Implications for Insurers and Policyholders
CSAA’s victory—its second major appellate win in 2025 after a similar case against State Farm—shields the company from potential refunds estimated in the hundreds of millions for its California policyholders. The insurer welcomed the decision, stating in a release: “This affirms that our premium practices are fair and compliant, allowing us to focus on serving members without the distraction of meritless litigation.”
For consumers, the ruling closes the door on pandemic-era refund claims in California, where the insurance commissioner had urged but not mandated adjustments in 2020. Critics, including consumer advocates from United Policyholders, argue it perpetuates inequities, as low-income drivers bore the brunt of unadjusted premiums. “This entrenches insurer profits over fairness,” said Executive Director Amy Bach.
The decision may influence ongoing federal cases and regulatory scrutiny, especially as climate change and future disruptions prompt calls for more flexible premium models. With California’s insurance market already strained by wildfires and rising costs, the ruling provides short-term relief to insurers amid a 2025 rate hike approval wave.