California Supreme Court to Decide Whether Insurers Can Hide Illegal Overcharges Behind Approved Rates, Says Consumer Watchdog
Ruling Will Impact Millions of State Consumers
LOS ANGELES, Nov. 12, 2026 /PRNewswire/ -- The California Supreme Court will decide whether consumers can sue insurance companies for overcharges that are illegal under Proposition 103, the insurance reform enacted by the voters 38 years ago.
The case before the court concerns a class action lawsuit brought by enlisted policyholders who are good drivers. They allege that USAA, a military insurer, charged them a higher price for auto insurance than it charged officers. Proposition 103 mandates a 20% Good Driver Discount for qualified drivers and state law requires an insurance company to offer good drivers the lowest rate available, regardless of military rank.
Proposition 103 authorizes consumers to challenge violations like that in court. However, some courts have ruled that those lawsuits cannot be brought if the insurance company can argue that the Insurance Commissioner approved the rates being charged.
About 200,000 enlisted USAA customers were overcharged. However, the Supreme Court's decision will ultimately affect millions of Californians who buy insurance for their autos, homes and businesses.
Ninth Circuit Asks California Supreme Court to Address Pocketbook Issues
The case began in federal court in San Diego, the home of many people in military service. The United States District Court for the Southern District of California ruled that after the passage of Proposition 103, the California legislature passed a bill exempting companies that only insured military personnel from the application of Proposition 103's protections for good drivers. The plaintiffs appealed to the Ninth Circuit, pointing out that under California's Constitution the Legislature cannot undermine laws passed by the voters through a ballot initiative.
Before the 9th Circuit, USAA made a second argument, which had been rejected by the District Court: that other state insurance laws shield insurance companies from consumer lawsuits seeking refunds, notwithstanding Proposition 103. Plaintiffs noted that Proposition 103 specifically authorizes lawsuits under the state's consumer protection laws.
Noting that California courts have adopted conflicting interpretations of Proposition 103, the Ninth Circuit of the United States Court of Appeal then asked California's Supreme Court to decide these issues of state law.
Representing the enlisted military in the litigation are Consumer Watchdog, the California based non-profit that defends and enforces Proposition 103; Mehri & Skalet, a Washington, D.C.-based law firm specializing in class actions and complex litigation; Mason & Perry LLP, a class action and complex litigation firm also based in D.C., Matthew Seligman, of Grayhawk Law, [more], is leading the plaintiffs' team before the Supreme Court.
The case is Coleman v. United Services Automobile Association, No. S298496. Review the complaint in the lawsuit. The Ninth Circuit's certification to the California Supreme Court is available here. (Coleman v. United Services Automobile Ass'n, No. 25-793, slip op. at 3–15 (9th Cir. Sept. 10, 2026)).
Consumer Watchdog is a nonprofit, nonpartisan organization that advocates for taxpayer and consumer interests, with a particular focus on insurance, health care, privacy, energy, and corporate accountability. Consumer Watchdog represents consumers in proceedings enforcing Proposition 103's protections.
SOURCE Consumer Watchdog
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