As reported in the Class Action Litigation Report article titled “Seventh Circuit Washes Out Hail Damage Class; Injunctive Relief Not Appropriate,” the court of appeals found that a class action could not remain certified on the basis of an injunction that only served to established facts for money damages claims in Kartman v. State Farm Mutual Automobile Ins. Co., 634 F.3d 883 (7th Cir. 2011).
Columbus partner Mark A. Johnson, representing State Farm Insurance Cos., won an appeal in the Seventh Circuit Court of Appeals which ordered decertification of an injunctive relief class of policyholders alleging that, after a severe hailstorm, State Farm had undervalued the damage to their roofs by not using a proper standard to measure for hail damage. The appeals court determined that a Rule 23(b)(2) class was improperly certified based on a proposed injunction to order State Farm to reinspect 49,000 roofs for hail damage, which was “misconceptualized” and only served to establish facts for money damages claims.
After a 2006 storm, 49,000 State Farm policyholders filed claims for damages. State Farm paid out $263 million in claims. The district court had certified an injunctive class under Fed. R. Civ. P. 23(b)(2) to determine whether State Farm should be required to reinspect policyholders’ roofs under a “uniform and objective standard.” The Seventh Circuit said the district court properly did not certify a Rule 23(b)(3) damages class because it found that common issues would not predominate. Individualized determinations would be required for each plaintiff’s claim of underpayment.
The district court said that it would use the Rule 23(b)(2) proceedings and the results of ordered reinspections to assess State Farm’s liability for damages, and if State Farm was found liable, the court may reconsider whether to certify a Rule 23(b)(3) class. State Farm successfully sought interlocutory review of the certification decision. On appeal, the Seventh Circuit court found only one injury: underpayment of the plaintiff’s insurance claims for hail damage to their roofs, for which an injunctive relief class could not be certified under Rule 23(b)(2).
“This is an action for damages and prospective injunctive relief is not proper for this kind of injury,” the court said. “If a given policyholder was fully compensated for the damage attributable to the hailstorm, then State Farm will have satisfied the contractual obligation regardless of whether it used a ‘uniform and objective’ or an ad hoc standard to assess the damage.”