9th Circuit asks state Supreme Court to resolve major Prop. 103 insurance dispute

The 9th U.S. Circuit Court of Appeals asked the California Supreme Court on Thursday to resolve a major dispute over Proposition 103 that could determine whether nearly 200,000 military veterans can pursue claims that they were unlawfully charged higher auto insurance rates because of their military rank.

The federal appellate court certified questions asking whether California insurance law permits insurers to offer lower rates to higher-ranking servicemembers and, if so, whether the statute allowing that distinction improperly amended Proposition 103.

The three-judge panel also asked the justices to resolve conflicting California appellate decisions over the state's "filed-rate doctrine" and whether approval of insurance rates by the state insurance commissioner prevents consumers from later recovering damages based on those rates.

The underlying class action was brought by military veterans against United Services Automobile Association and a subsidiary. The plaintiffs allege USAA violated Prop. 103, the landmark 1988 insurance initiative, by placing former enlisted personnel with an affiliate that charged higher rates than those offered to retired officers.

Plaintiffs seek injunctive relief and hundreds of millions of dollars, according to their attorneys.

U.S. District Judge Robert S. Huie of San Diego granted USAA summary judgment in January 2025, prompting the class to appeal.

During oral arguments in June, 9th Circuit Judges Danielle J. Forrest and Eric C. Tung suggested the California Supreme Court was better positioned to resolve the unsettled questions of state law.

"The reason to certify is so we don't mess up state law," Forrest said. "This is a big deal. It's going to affect a lot of people."

Further proceedings will be stayed while the California Supreme Court decides whether to accept the certified questions. Coleman v. United Services Automobile Association, 2026 DJDAR 8047 (9th Cir., filed Feb. 6, 2025).

Matthew A. Seligman, a principal with Grayhawk Law PC who represents the class with Harvey Rosenfield of Consumer Watchdog, praised the decision to certify the questions, a step he urged the panel to take during oral argument.

"The Ninth Circuit recognized the importance of this case to hundreds of thousands of enlisted military personnel and veterans who qualify as good drivers," Seligman said in an email. "USAA unlawfully overcharged those enlisted personnel and veterans by funneling them to a separate affiliate company based on their military rank, violating the protections that the people adopted in Proposition 103."

Seligman said the state Supreme Court can now determine whether USAA is exempt from the initiative's requirements and whether the insurance commissioner's approval of rates shields insurers from private lawsuits challenging allegedly unlawful conduct.

Kahn A. Scolnick, a partner with Gibson, Dunn & Crutcher LLP representing USAA, opposed certification. During oral argument, he maintained that the 9th Circuit could resolve the dispute under what he called a "straightforward" statute.

Scolnick could not be reached for comment Thursday.

Rosenfield, the principal author of the initiative, said the case gives the state Supreme Court an opportunity to settle a longstanding dispute over the initiative's enforcement provisions.

"This will be an opportunity for the [state] Supreme Court to resolve a conflict that gives insurance companies a get-out-of-jail-free card for violating Prop. 103," Rosenfield said.