Class Accuses Direct Auto of Insurance Scam
CHICAGO (CN) - Direct Auto Insurance targets low-income minorities for its "worthless" car insurance policies, profiting from the premiums but refusing to honor the policy as soon as a claim is made, a policyholder claims in a class action.
Lead plaintiff Norbert May sued Direct General Insurance Agency of Tennessee dba Direct Auto Insurance, in Cook County Chancery Court.
Direct General sells "worthless" car insurance in Illinois under the name Direct Auto Insurance, according to the July 11 complaint.
"Direct Auto Insurance Company developed a business strategy wherein the company planned to secure customers by offering auto insurance at premiums that were substantially lower than its competitors and market rates," the complaint states.
"Direct Auto Insurance Company intentionally targeted consumers with low to moderate incomes, including a high percentage of African-American and Hispanic individuals, who did not have the financial ability to hire legal representation to defend them against defendant's predatory practices.
"As part of its business strategy, Direct Auto Insurance Company planned to challenge claims made by its policyholders through filing of declaratory judgment actions. Direct Auto Insurance Company knew that many of its policyholders could not afford legal representation and would not challenge the declaratory judgment actions in court."
Direct Auto's policy of filing meritless declaratory judgment actions on the basis of misrepresentations in policy applications shows that the insurance company never intended to honor any claims on the policies it issued, according to the lawsuit.
"Defendant violated the Illinois Consumer Fraud and Deceptive Practices Act by offering artificially low premium prices to plaintiff and other members of the class, intending to induce plaintiff and other members of the class to purchase policies of insurance without any intention of paying claims," May claims.
May seeks class certification and damages for fraud, breach of contract, and violations of the Illinois insurance code.
He is represented by Edward McCauley with Kelleher & Buckley in North Barrington, and Daniel Konicek with Konicke & Dillon in Geneva.