USAA Agrees to $5M Settlement Over Maryland Auto Insurance Late Fee Lawsuit

USAA has agreed to a $5 million settlement in a class-action lawsuit concerning interest on allegedly unlawful late fees charged to Maryland auto insurance policyholders. The lawsuit claimed that between 2011 and 2019, USAA collected $8.1 million in late fees without proper authorization after withdrawing the agreed billing plans with the Maryland Insurance Administration (MIA). USAA had refunded $7.4 million in fees in 2020 but did not include accumulated interest on those amounts, which led to the legal challenge. The insurer disputes the allegations, maintaining that the late fees were approved and that not refunding interest was reasonable as no interest was generated on the fees.

The Maryland Insurance Administration's investigation stemmed from a consumer complaint filed in 2018, which found USAA continued to collect late fees despite lacking authorization after 2011. A 2020 consent order required USAA to pay a $67,500 administrative penalty and discontinue the late fee charges. The ongoing settlement includes attorney fees and awaits federal court approval. Plaintiffs argue USAA had no legal right to retain gains from the fees and that refunds were not accompanied by disclosure of the illegality.

The class action involves more than 127,000 Maryland policyholders and centers on claims of unjust enrichment and "money had and received." While the breach of contract claim was dismissed, other claims remain active. Mediation led by a former federal judge resulted in the agreement, with lead plaintiffs receiving specified compensation amounts.

This settlement highlights ongoing regulatory scrutiny over insurer fee practices and reinforces the importance of compliance with state insurance approvals. The case underscores the financial and reputational risks insurers face when administrative errors and regulatory oversights affect premium billing and fee collection. It also signals to the industry the necessity of transparency and adherence to regulatory mandates to avoid similar disputes.