Customers’ Suit Against Insurer Over Rate Hikes Not Barred

Longtime customers of Allstate Insurance Corporation alleged that Allstate determined they were willing to pay higher prices than new customers with similar risk profiles and started hiking their auto insurance rates as a result. The customers sued Allstate, alleging that Allstate failed to disclose its practice of optimizing rates in this fashion when it filed its rates with the Illinois Department of Insurance. Allstate attempted to have the case dismissed under the filed rate and primary jurisdiction doctrines, but the circuit court denied the motion and the appellate panel affirmed.

Allstate Corporation sells property and casualty insurance, including private passenger automobile insurance, to consumers in Illinois. Several customers who had purchased insurance from Allstate for more than two decades sued Allstate, alleging that Allstate illegally increased prices for their insurance under a practice called “price optimization,” after it determined that longtime customers would be more willing to absorb price hikes than new customers. The plaintiffs alleged that as a result they were charged higher prices than new customers who presented the same risk and that Allstate’s use of price optimization was not disclosed in its rate filings with the Illinois Department of Insurance.

In the trial court, Allstate filed a motion to dismiss the complaint, arguing that the action was barred by the filed rate doctrine and the primary jurisdiction doctrine. Following a hearing, the circuit court denied Allstate’s motion to dismiss. The court determined that Allstate failed to establish that the plaintiffs’ complaint should be dismissed under either the filed rate doctrine or the primary jurisdiction doctrine. The circuit court noted that Illinois is unique in that insurers may select their own rates and merely inform the Illinois Department of Insurance of their selection. The circuit court then granted Allstate’s motion to certify the questions of whether either the filed rate doctrine or the primary jurisdiction doctrine barred plaintiffs’ suit to the appellate court and the appellate court granted interlocutory review.

The Illinois Appellate Court panel began by stating that the filed rate doctrine protects public utilities and other regulated entities from civil actions if the entity is required to file its rates with the governing regulatory agency and the agency has the authority to set, approve, or disapprove the rates. Citing Adams v. Northern Illinois Gas Co., the panel stated that, under the doctrine, any filed rate that is approved by the governing regulatory agency is per se reasonable and unassailable in judicial proceedings brought by rate payers. The panel then stated that Illinois has embraced open competition in regard to rate setting for auto insurance, and the Director of the Department had not been given any administrative authority to set, approve, or disapprove the rates that insurers filed. Therefore, the panel reasoned, the filed rate doctrine did not apply and did not bar the plaintiffs’ suit.

Next, the panel turned to the primary jurisdiction doctrine. The panel stated that this doctrine proposes that even though the circuit court has jurisdiction over a matter, the court should, in some instances, stay the proceeding and allow an administrative agency to decide an issue. The panel stated that, based on the allegations in the complaint, the plaintiffs were challenging deceptive business practices that were not defined or enumerated in section 432 of the Code. The panel noted that the practices were not unique to the insurance industry, and therefore Allstate had not shown that the Director or the Department had any specialized knowledge or technical expertise with regard to the deceptive practices alleged. The panel determined therefore that the primary jurisdiction doctrine did not apply, and it affirmed the decision of the circuit court.

You can see the full decision here.

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