A federal judge has denied GEICO Group insurers’ motion to dismiss a lawsuit alleging the company owes $69.7 million in unpaid business license taxes and penalties to the Municipal Association of South Carolina.
The Municipal Association, which represents nearly all municipalities in the state, oversees an insurance tax program that collects 2% of gross premiums from property and casualty policies.
Insurers participating in the program must submit reconciliation reports to verify gross income and amounts owed to each municipality. According to the complaint filed in the US District Court for the District of South Carolina, GEICO paid its taxes on time but failed to provide these reconciliation reports for seven years, despite repeated requests from the association.
The association alleges that GEICO did not pay the full amount owed, with taxes for license years 2021 through 2024 totaling $30.3 million and penalties amounting to $39.4 million. In response, Geico argued that only municipalities, not the association, have the statutory authority to collect delinquent taxes and penalties. The court found that this authority was delegated to the association through municipal ordinances and contracts.
GEICO also contended that the association’s claims of underpayment were speculative, as they were based on the absence of reconciliation reports. The court stated that, at this stage, it must accept the association’s allegations as true, including the claim that Geico did not pay the full amount.
Addressing GEICO’s argument regarding a three-year statute of limitations, the court explained that the period begins when a reasonable person would recognize an injury and could bring a claim.
While June 2021 typically start this period, the court determined that GEICO could not use the statute of limitations defense because its repeated assurances that it would submit the reports caused the association to delay filing the lawsuit.
The legal battle between GEICO and the Municipal Association comes at a time when other major insurers have also faced heightened scrutiny over their claims practices and litigation strategies as 2025 draws to a close.
In Idaho, Allstate was sued by an online retailer that alleged delayed and undervalued insurance payments on a $267,000 inventory loss led to the business’s closure. The complaint against Allstate not only cited the insurer’s handling of the claim but also referenced testimony from a US Senate hearing about broader industry practices of undervaluing claims.
Meanwhile, Progressive and Protective Insurance have been drawn into a $6 million lawsuit following a Pennsylvania court judgment, with allegations that the insurers mishandled a property title claim and failed to settle within policy limits.
These disputes reflect a broader environment in which insurance litigation and claims handling are under increased industry and legislative scrutiny. Earlier this year, the CEOs of Chubb and Marsh McLennan publicly criticized the litigation investment industry, pointing to a rise in high-value jury verdicts – so-called “nuclear verdicts” – and calling for reforms to increase transparency and address the impact of litigation funding on insurance costs.
In response to these trends, the American Property Casualty Insurance Association (APCIA) has supported legislative proposals to require disclosure of third-party litigation financing in federal civil cases.
The APCIA’s backing of these bills is intended to limit the influence of undisclosed parties in litigation outcomes, a factor that industry groups say is driving up both litigation costs and insurance premiums.
