Insurance Class Action Report 2021 First–Third Quarters

Alerts / December 8, 2021

Property and casualty class action activity has continued at a fast clip so far this year. More of the same claims – total loss, tag, tax and title, labor depreciation, diminished value, and medical payments – all garnered attention alongside new(er) claims that premiums at filed rates were too high and a bizarre twist in New Mexico for uninsured/underinsured policies.

Download the 2021 Q3 report here.

Challenging Pandemic Rates

Last year saw several class actions filed against insurers in Illinois alleging that insurers charged too much for auto premiums during the pandemic because of reduced driving. [2020 4Q] Since that time, several more have been filed in Nevada.

One court refused to dismiss all claims. Siegal v. GEICO Casualty Co., 523 F. Supp. 3d 1032 (N.D. Ill. 2021). The court allowed a claim for violation of the Illinois Consumer Fraud and Deceptive Business Practices Act to proceed, based in part on certain statements by the insurer about passing on savings. The court recognized that whether those statements were a proximate cause of the purchase of insurance was tenuous, but it found the required causation allegation to be minimal and “best left to the trier of fact.” The court also refused to dismiss for lack of standing entities with whom the plaintiff had no contractual relationship – a jurisdictional question – citing to a 19-year-old Seventh Circuit decision that class certification must precede standing questions. To compound the error, the court later refused to allow an interlocutory appeal of the decision. 2021 WL 2413155.

But another court in the same district came to a different conclusion. In Ridings v. American Family Ins. Co., the court refused to find any deceptive conduct from allegations of a failure to disclose as part of the insurer’s premium relief program. 2021 WL 722856 (N.D. Ill. Feb. 24, 2021). As the court noted, “Ridings does not argue that the pandemic somehow nullified her insurance contract, and under its terms, American Family was not required to provide premium relief in the event that it received fewer claims than expected. American Family could have done nothing. . . . All that’s alleged is that Ridings continued to pay the premiums she owed under her insurance contract. And because of the relief program, Ridings actually paid less than that.” The rest of the plaintiff’s claims were dismissed as well. The same judge adopted the logic in Ridings in dismissing a similar action against another insurer. Kopsaftis v. Progressive Universal Ins. Co., 2021 WL 780715 (N.D. Ill. Mar. 1, 2021).

That theory was later applied in claims to recover “excess” premiums following business closures. While the heavy regulatory control of rates and the filed-rate doctrine make these claims a bit of a stretch, one California court refused to dismiss these claims. Boobuli’s LLC v. State Farm Fire and Cas. Co., No. 3:20-cv-07074, dkt. no. 54 (N.D. Calif. Oct. 5, 2021). The court rejected application of the filed-rate doctrine, using a bit of circular logic, because the insured “is not seeking to challenge the rate itself, but the misapplication of the rate”; [how could a rate affect an insured other than by its application?]. In fairness, California law does have some statutory and case law restrictions narrowly construing the filed-rate doctrine, which serve to limit the authority of this decision.

Boobuli’s was also supported by a series of bulletins issued by the California commissioner of insurance ordering insurers to report on how they will return premiums. The latest concludes that extensive analysis of data received led the department to conclude that policyholders were paying “inflated premiums” because of the reduced risk of loss. Bulletin 2021-3 (Mar. 11, 2021). Query whether, if everyone hits the road to travel when life returns to normal and the industry is under an increased risk of loss, there’ll be an announcement from DOI of premium “undercharges.”

Other courts have weighed in on claims asserting reduction or refund of premiums during the pandemic. G.O.A.T. Climb & Cryo, LLC v. Twin City Fire Ins. Co., 2021 WL 2853370 (N.D. Ill. July 8, 2021) (holding that “settled law holds that charging an unconscionably high price generally is insufficient to establish a claim for unfairness”; that where a plaintiff could freely shop for alternative products at a more acceptable price, “it is difficult to see how the premium that [an insurer] charged and that [an insured] freely paid could be ‘unfair’ under the ICFA”; and that “[a]n insurance contract cannot be called unfair under the ICFA simply because the purchase proved in hindsight to be a losing bet”); Grossman v. GEICO Cas. Co., 2021 WL 5229080 (S.D.N.Y. Sept. 13, 2021) (dismissing action on filed-rate grounds because the plaintiff’s insurance rates “were filed with NYDFS” and were “only allegedly ‘excessive’ in retrospect, and the fact that these rates were approved by NYDFS renders them per se reasonable and unassailable”); Jones v. GEICO Cas. Co., 2021 WL 3602855 (D. Ariz. Aug. 13, 2021) (declining to find purportedly “unfair windfall” to be unconscionable and noting that “Plaintiff’s argument ignores the inherent risk parties take on when entering into an insurance agreement” and that “[c]ourts do not rescind a contract just because the results appear unfair in hindsight”).

Total Loss Claims

As previously reported, claims attacking the methodology used to value and pay total loss claims have been revived, having previously had a run some 15-20 years ago. [See 2018 4Q] Class actions challenging the valuation of vehicles under total loss claims have been filed in several states, including Washington, North Carolina, Alabama, Louisiana, Ohio, Georgia and Florida, among others.

Some claims allege vendors’ estimating software methodology for identifying comparable vehicles in total loss valuation reports, which includes calculating base values and making condition adjustments, is not statistically valid but rather is wholly arbitrary. Others allege somewhat the opposite – that the insurer does not pay what the vendors’ software reports but follows an arbitrary measure of reducing that amount. Defense of class certification can be highly dependent on what specific states’ laws provide for valuing total loss claims, and it typically requires expert opinions to attack plaintiffs’ sample selection methodology to show that proof of liability requires individual inquiries.

Several courts have already held that proof of undervaluation (and thus injury) is an individual issue that precludes class certification. Lundquist v. First National Insurance Company, No. C18-5301RJB, 2020 WL 6158984 (W.D. Wash. Oct. 21, 2020); Signor v. Safeco Ins. Co., No. 19-cv-61937, 2021 WL 1348414 (S.D. Fla. Feb. 18, 2021); Curtis v. Progressive N. Ins. Co., No. 17-cv-176, 2020 WL 2461482, at *3 (W.D. Okla. May 12, 2020); Prudhomme v. GEICO Ins. Co., No. 15-cv-00098 (W.D. La. Dec. 22, 2020); Morgan v. Massachusetts Homeland Ins. Co., 69 N.E.3d 584, (Mass. App. 2017).

The Eighth Circuit recently affirmed dismissal of total loss claims, holding that Arkansas law does not require that insurers justify deviation from a cash settlement method in determining value of a total loss, only that the method chosen is documented. Moffitt v. State Farm Mutual Auto Ins. Co., 11 F.4th 958 (8th Cir. 2021). Other total loss class actions are currently pending in other circuit courts of appeals, either on class certification or of merits decisions. Lara v. First National Insurance Company, Case No. 21-35126 (9th Cir.) (appeal of denial of class cert.); Prudhomme v. Gov’t Empl. Ins., Case No. 21-30157 (5th Cir.) (appeal of denial of class cert.); Signor v. Safeco Ins. Co., Case No. 21-13148 (11th Cir.) (appeal of denial of class cert. and summary judgment for insurer).

Tax, Tag and Title Class Action Update

One insurer resolved tax, tag and title claims in a class settlement in a deal announced this fall, which would pay “up to” $19.5 million to policyholders who claimed the insurer didn’t pay the full amount of sales tax and regulatory fees after their vehicles were deemed total losses. In re: GEICO General Insurance Co., No. 4:19-cv-03768 (N.D. Calif.). The settlement also would supplant a $6.5 million judgment entered in 2018 in favor of the plaintiffs in a related case that had been on appeal in the Eleventh Circuit. Roth v. GEICO General Ins. Co., 2018 WL 3412852 (S.D. Fla. June 14, 2018), vacated and remanded, 2020 WL 5507208 and 2020 WL 6301350 (11th Cir. Aug. 27, 2020). Another settlement was filed in Hindes v. Ohio Mut. Ins. Co., No. 20cv007627, Franklin Cty., Ohio, Common Pleas Court.

More cases have been filed so far this year. See, e.g., Tyler v. Mid-Century Insurance Company, No. 1:21-cv-04514-MLB (N.D. Ga.).

Labor Depreciation Cases Labor On

Like Sisyphus continually pushing that boulder uphill, labor depreciation class actions seemingly never end. Following the Sixth Circuit’s finding that policies’ lack of definition of depreciation was ambiguous under Ohio law, the district court in one of those cases denied class certification, in part because of the aggressive inclusion of commercial with residential policyholders with differing policy limitations periods and differing policy provisions. Cranfield v. State Farm Fire & Cas. Co., 2021 WL 3376283 (N.D. Ohio Aug. 2, 2021).

On a different front, as emboldened plaintiffs continue to add more states to alleged classes, efforts to challenge a single plaintiff’s ability to represent policyholders from multiple states will grow. In one case, a court refused to dismiss or to strike class allegations because of the dissimilarities of multiple states’ laws or because of lack of standing and personal jurisdiction based on Bristol-Meyers Squib arguments. Cedarview Mart, LLC v. State Auto Prop. and Cas. Co., 2021 WL 1206597 (N.D. Miss. Mar. 30, 2021). This decision, though, was on an initial motion and not after class certification briefing.

States continue to arrive at contrasting conclusions. In May, the South Carolina Supreme Court held that an insurer is not prohibited from including an estimate of the depreciation of embedded labor costs in its calculation of actual cash value. Butler v. The Travelers Home and Marine Insurance Co., 858 S.E.2d 407 (S.C. 2001). But in September the Illinois Supreme Court reached the opposite conclusion, that the failure to define depreciation in policies to include labor rendered them ambiguous, and thus it followed the insured’s view that it did not. Sproull v. State Farm Fire and Cas. Co., 2021 IL 126446 (Ill. Sept. 23, 2021).

Insurers should continue to evaluate their nonmaterial depreciation practices for structural damage claims on a state-by-state basis. The most effective way to eliminate this exposure is to adopt an ACV endorsement that specifically defines what types of depreciation can be deducted, but it can be addressed short term by changing depreciation settings for estimating programs.

Puzzling New Mexico Uninsured/Underinsured Policy Decision

A few years ago, a number of class actions were filed against insurers in New Mexico federal district court, alleging that underinsured motorist coverage was illusory at minimum limits and seeking to recover premiums. The district court certified a legal question to the New Mexico Supreme Court of “whether the underinsured motorist (UIM) coverage on a policy that provides minimum uninsured/underinsured motorist (UM/UIM) limits of $25,000 per person/$50,000 per accident is illusory for an insured who sustains more than $25,000 in damages caused by a minimally insured tortfeasor [and] [i]f so, . . . whether insurance companies may charge premiums for such a policy.” Crutcher v. Liberty Mut. Ins. Co., 2021 WL 4520651, *1 (N.M. Oct. 4, 2021).

Important to know is that the New Mexico Legislature requires insurers to offer UM/UIM coverage at those minimum limits, which are also the minimum limits of insurance required of drivers. “[O]nly if the motorist purchases higher than minimum liability coverage may higher than minimum UM/UIM coverage be purchased.” Id. at *3-4. New Mexico follows the gap theory, under which an injured insured is covered by UIM up to the amount of UM/UIM protection purchased, which is offset by available liability proceeds.

The court decided that UM/UIM coverage at minimum limits “is illusory in that it may mislead minimum UM/UIM policyholders to believe that they will receive underinsured motorist benefits, when in reality they may never receive such a benefit” and that insurers must adequately disclose the limitations of minimum UM/UIM coverage –namely, that a policyholder may never receive UIM benefits. Id. at *1. The court acknowledged the insurer’s argument that the coverage does provide value when a tortfeasor is uninsured, but it decided to bifurcate a unitary UM/UIM coverage by declaring that the coverage was not properly disclosed for the other “half” of the risk (UIM), disregarding the role of the regulator in approving rates based on risk (for which UIM may be much less than half). Moreover, as explained by the dissent, multiple scenarios in actual cases show it to be inaccurate that UIM never, in practice, provides UIM benefits to insureds with minimum-limits policies. Id. at *9.

The court deflected reliance on the statutory requirement to offer the coverage by assuring that the legislature’s “intent was not to sanction the deception of those consumers in their selection of policies and coverage levels” and that instead the only “deception” was in selling policies with coverage exactly as prescribed by New Mexico law. Regardless, insurers have an obligation to disclose to policyholders that “purchase of the statutory minimum of UM/UIM insurance may come with the counterintuitive exclusion of UIM insurance if the insured is in an accident with a tortfeasor who carries minimum liability insurance.” Id. at *8. Not to be outdone, the New Mexico superintendent of insurance has required insurers to publish a disclosure and an exclusion to a scenario under UIM coverage that is already excluded. Bulletin 2021-024 (Nov. 9, 2021). Clear?

No Certification of Diminished Value Claims

Asserting Georgia claims, plaintiffs lost out in a bid to certify automobile diminished value claims. Baker v. State Farm Mut. Auto. Ins. Co., 2021 WL 4006124 (M.D. Ga. Sept. 2, 2021), reconsideration denied, 2021 WL 4810620. Plaintiffs relied heavily on an expert’s opinion that the use of a specific formula always resulted in underassessment of diminished value, based on his review of a sample of claims. The court found more persuasive the insurer’s expert opinion, that the plaintiffs’ expert chose a nonrepresentative sample that was too small. Vehicles in his sample had an average mileage of nearly half that of claims in the alleged class, reflecting a bias toward newer and more expensive vehicles, and it was overinclusive of more severely damaged vehicles. Because the rejected expert’s opinion was the primary basis to show classwide proof, the predominance requirement of Rule 23(b)(3) was not met.

Homeowner’s Property Damage Claims Fail

One federal court rendered class certification moot by throwing out a homeowner’s alleged claims against an insurer based on how his property damage claim was estimated and paid. In Beyers v. Consolidated Ins. Co., the plaintiff alleged damage when he was not paid for general contractor overhead and profit for roof and gutter damage alone, he was not paid a separately itemized amount for a starter course of shingles in lieu of a waste factor, and a program to value replacement shingles sold by an insurer’s vendor wasn’t an accurate replacement cost. 2021 WL 1061210 (S.D. Ind. Mar. 19, 2021).

The court first granted motions in limine on the plaintiff’s experts’ reports in support of these theories, finding their opinions unreliable and not supported within the industry. Moving to the merits, there was no evidence that a general contractor was needed to coordinate repairs to just a roof and gutters, so overhead and profit were not owing, and the plaintiff was fully compensated for the cost of a starter row of shingles within the estimated waste factor paid for replacement shingles. Finally, the fact that replacement shingles were estimated based on a supplier contracting with the insurer at a lower price than available in stores doesn’t change that the plaintiff was fully indemnified for replacement shingles. An abbreviated appeal of this decision was later dismissed.

Medical Payments Claims Certified

Healthcare providers convinced a federal court to certify claims that the insurer improperly underpaid personal injury protection claims in violation of its policy by paying only 80 percent of the value of the claims. Rosenberg v. Government Employees Ins. Co., No. 19-cv-61422, dkt. no. 200 (S.D. Fla. Sept. 22, 2021). The claims center on use of a code to reduce payments to 80 percent of the billed amount. Much of the class certification analysis focused on ascertainability, and the court agreed with the plaintiff’s experts that providers could be identified through analysis of the insurer’s claims data. Predominance was not found by the court to be much of an issue because of the common method of determining whether or not a code was used to adjust the providers’ claims, but there was scant discussion of how the existence of use of the code alone would establish liability for the plaintiff’s cause of action.

Medicare Secondary Payer Act Class Actions

Cases asserting claims against insurers for reimbursement of assigned claims under the Medicare Secondary Payer Act (MSPA) continue to be active. A Central District of California court sua sponte dismissed one action, on the eve of the class certification hearing, for lack of standing. MAO-MSO Recovery II, LLC v. Mercury General, 2021 WL 3615905 (Aug. 12, 2021). The court found that the plaintiff had failed to show that exemplar claims of beneficiaries alleged in the complaint incurred injury in fact. The class certification briefing and evidence did not show that the defendant failed to pay for a reason prohibited by the MSPA, and spreadsheets of claims with various data fields filed by the plaintiff did not prove a failure to pay by the insurer.

Other courts recently have taken a tougher stance at the pleading stage of these claims, in some cases going beyond surface allegations of injury to dismiss complaints. MSP Recovery Claims, Series LLC v. Amerisure Insurance Co., 2021 WL 358670 and 2021 WL 1711684 (S.D. Fla. Feb. 1 and April 15, 2021); MSP Recovery Claims, LLC v. Metropolitan Gen. Ins. Co., 2021 WL 804716 (S.D. Fla. Mar. 3, 2021); MSP Recovery Claims, Series LLC v. AIG Property Cas. Co., 2021 WL 1164091 (S.D.N.Y. Mar. 26, 2021); MSP Recovery Claims, Series LLC v. Endurance American Ins. Co., 2021 WL 706225 (S.D. Fla. Feb. 23, 2021); MSP Recovery Claims, Series LLC v. NGM Ins. Co., 2021 WL 1172810 (M.D. Fla. Mar. 29, 2021).

One state court, though, has not only granted class certification of MSPA claims based on the equivalent of Rule 23(b)(2) but also then promptly granted summary judgment against the insurer and issued discovery sanctions. MSPA Claims 1, LLC v. IDS Property Casualty Ins. Co., Case No. 2015-027940-CA-01, Miami-Dade County, Florida, Eleventh Judicial Circuit (Aug. 6, 2021). This was the plaintiffs’ second crack at class certification, having failed at certifying a Rule 23(b)(3) damages class. IDS Property Casualty Ins. Co. v. MSPA Claims 1, LLC, 263 So. 3d 122 (Fla. Ct. App. 2018).

More recently, a qui tam complaint listing a number of property and casualty insurers filed by the same plaintiffs’ group was unsealed a few months ago. United States of America, ex rel., MSP WB, LLC v. Under Seal Defendants, Case No. 2:19-cv-12165-GAD-APP (E.D. Mich). In contrast to the private cause of action asserted in other cases, here, the plaintiffs are suing on behalf of the government to collect from property and casualty insurers that fail to do enough to submit identification data to the Centers for Medicare & Medicaid Services sufficient to match claimants with Medicare beneficiaries. The complaint also seeks to recover primary payments against insurers for Medicaid claims for which the government is secondary.

Download the 2021 Q3 report here.

By Mark A. Johnson

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