Can a court certify a class action to decide an insurance coverage issue, and then issue an injunction requiring an insurer to apply the court’s ruling to claims of class members?  A recent Third Circuit opinion danced around that question, without directly taking it on, holding only that the district court could not issue that type of injunction while simultaneously decertifying the class, but purporting to retain jurisdiction to enforce the injunction.

Meyer v. CUNA Mutual Insurance Society involved coverage under a credit disability insurance policy, under which the insurer would cover car loan payments if the insured became totally disabled.  The central issue was how to construe the policy’s definition of “total disability,” which was as follows:

during the first 12 consecutive months of disability means that a member is not able to perform substantially all of the duties of his occupation on the date his disability commenced because of a medically determined sickness or accidental bodily injury. After the first 12 consecutive months of disability, the definition changes and requires the member to be unable to perform any of the duties of his occupation or any occupation for which he is reasonably qualified by education, training or experience.

The plaintiff argued that, after the first 12 months, if an insured was “unable to perform any of the duties of his occupation,” the insured would be totally disabled.  The insurer argued that, after the first 12 months, an insured must show not only that he was unable to perform duties of his or her pre-injury occupation, but also that he or she could not perform duties of “any occupation for which he is reasonably qualified by education, training or experience.”  The district court certified a class on this issue, and then, on cross motions for summary judgment, ruled that the policy language was ambiguous and must be construed in favor of the insured, reasoning that the use of the word “or”  supported the insured’s interpretation, making it a reasonable one.  The district court then entered a permanent injunction requiring the insurer to review claim forms of class members in accordance with the coverage ruling, with the court retaining jurisdiction to resolve future disputes between class members and the insurer through adjudication of motions for contempt.  After entering this injunction, the district court decertified the class, finding that the remaining issues were inappropriate for class treatment.

The propriety of the original certification of the class and the later decertification were not raised on appeal.  The Third Circuit affirmed with respect to the policy interpretation issue, focusing on the word “or” in the definition of “total disability” and agreeing with the district court (this is discussed further on a Pennsylvania appellate law blog).  The Third Circuit, however, vacated the injunction, finding that it was an abuse of discretion to retain jurisdiction to issue the injunction and retain jurisdiction while at the same time decertifying the class – “[o]nce decertification became effective, the District Court had no jurisdiction over any of the claims of the putative class members and therefore no ability to order that any relief be granted to any claimant other than Meyer [the named plaintiff].” 

What is most interesting here is what the Third Circuit did not address.  Insurance coverage issues frequently can be decided as a matter of law (at least where policy language is unambiguous), but the application of any such ruling to the facts of hundreds or thousands of individual claims is typically inappropriate for class treatment.  The unique approach taken by the district court here was procedurally improper because of how it was implemented, but what if the district court had not decertified the class?  What if somehow the class could be re-certified on remand?  Would this approach be viable?  The Seventh Circuit’s decision in Kartman v. State Farm, which I previously blogged about, says the answer is “No.”  The Supreme Court’s forthcoming opinion in Wal-mart v. Dukes, which I also blogged about, likely will speak on this – the Court is expected to address under what circumstances putative classes seeking injunctive/declaratory relief can be certified under Rule 23(b)(2).