Class action trials are so rare that there is little guidance in court opinions on how these cases should be tried, other than hypothetical discussions in class certification decisions regarding how trials might be conducted.  In Strawn v. Farmers Insurance Company of Oregon, recently reported in Legal Newsline and the Soha & Lang Coverage Blawg, the Oregon Supreme Court recently decided an appeal from a judgment after a trial in an insurance class action.  Reading between the lines of the opinion teaches a few lessons about trying these cases.

The plaintiff claimed that Farmers improperly reduced benefit payments for personal injury protection (PIP) coverage under auto insurance policies, by using “cost containment software.”  This software analyzed medical expenses in comparison with a database of charges for particular services in the region, and allowed Farmers to select a particular percentile (it chose the 80th percentile) as a cutoff for what it would pay for a particular service.  The claim was that this process was arbitrary and a breach of the contractual obligation to pay “reasonable and necessary” medical expenses.  (The issue presented in this case is similar to one raised in a recent class action filing against Nationwide that I posted about.)  A class was certified and the case was tried to a jury.  A judgment in favor of the class was entered for approximately $900,000 in compensatory damages and $8 million in punitive damages.  The court of appeals found that the punitive award exceeded constitutional limits.   

The issues that Farmers raised before the Oregon Supreme Court were: (a) that it was improperly precluded from presenting individualized evidence to show that class members’ medical expenses were unreasonable; and (b) that plaintiffs failed to demonstrate class-wide reliance.  The Oregon Supreme Court rejected Farmers’ arguments on appeal, finding that the trial court had not actually barred individualized evidence, and that reliance could be inferred from the purchase of the auto policy where the terms of PIP coverage were statutorily mandated.  The supreme court agreed with the plaintiff that the constitutional issue should not have been reached by the court of appeals because no appeal was taken to the court of appeals from the trial court’s waiver ruling.  The trial court had ruled that Farmers had waived the constitutional issue by not asking for a jury instruction limiting the amount that could be awarded, and not asking for the jury to be sent back for re-deliberation after it made its award, and Farmers did not appeal the waiver ruling to the court of appeals.

The key lesson I see here is that a defendant may be better off making every attempt to try a class action as if it were a trial of thousands of individual cases.  Even if the plaintiff has the burden of proof and you think they cannot meet that burden with aggregate, class-wide evidence, consider putting on your own individualized evidence.  Ideally the trial court will recognize how individualized evidence is necessary and relevant, and decertify the class.   If the trial court does not allow such individualized evidence, this may well preserve good arguments (including due process arguments) for appeal.  Sometimes defendants may think that because they lost on class certification, the trial must be limited to only the named plaintiff’s claim or that evidence can only be presented in a global, aggregated fashion.  Not necessarily.  There are really no “rules” on how class actions must be tried.  Here, the court seems to suggest that Farmers should have tried to introduce individual evidence on how it handled particular PIP claims where it had a good defense.  Similarly, on the reliance issue, Farmers might have been able to develop evidence showing that some class members did not rely on what was in the policy (the Oregon Supreme Court disavows making any presumption of reliance).  This may have required depositions of a sample of putative class members in order to work up that issue for trial.  Thinking outside the box and almost disregarding the certification of a class potentially can be a good strategy in trying an insurance class action.