A recent Florida Supreme Court decision addressed class certification in a case involving insurance premium finance agreements, and highlighted several important issues. 

In Sosa v. Safeway Premium Finance Co., No. SC09-1849 (Fla. July 7, 2011), the plaintiff claimed that the defendant violated a Florida statute by applying a $20 service charge for a premium finance agreement twice in one year.  Under a premium finance agreement, a finance company pays the entire premium for an insurance policy upfront, and the insured then repays the finance company in monthly installments, with interest and typically a service charge.  Here, a Florida statute required that an “additional service charge” (beyond interest) must not exceed $20 and can be imposed no more than once in a 12-month period, except if there was a cancellation for nonpayment.  The plaintiff claimed that the defendant improperly charged this fee twice per year for policies issued for six-month terms, in violation of the statute.  The Florida Department of Financial Services had discovered this during an audit of the defendant, and had required that the problem be fixed going forward, but had not required refunds of past overcharges. 

The trial court had granted class certification, and the Third District Court of Appeal had reversed.  The Florida Supreme Court reversed the court of appeal, finding the case appropriate for class certification.  (This was a 4-3 decision, with the dissenters opining that there was insufficient conflict between the courts of appeal for the state supreme court to exercise jurisdiction.)  I saw a few points of broader applicability to insurance class actions here: 

1. Predominance should be evaluated based on whether trial of one named plaintiff’s case can prove the class members’ cases.  The court explained that “a class representative establishes predominance if he or she demonstrates a reasonable methodology for generalized proof of class-wide impact,” and “[a] class representative accomplishes this if he or she, by proving his or her own individual case, necessarily proves the cases of the other class members.”  (Slip opinion, at 35 (emphasis in original).)  This is not new, a number of other courts in Florida and other jurisdictions have said this, but parties and trial courts do not always give it sufficient attention.  The focus needs to be on how the plaintiff and defendant will prove their cases at trial.
2. Appellate courts owe appropriate deference to trial court factual findings.  The Florida Supreme Court stressed that, where the trial court had conducted an evidentiary hearing, the Third District Court of Appeal “gave no deference to the trial court’s factual findings and made its own independent determination” of whether the class certification requirements were met.  (Id. at 15.)
3. Defenses matter to class certification when they are individualized, not common defenses.  The court concluded that, in this dispute over a billing practice of the defendant, “any minor variance in factual circumstances would be with regard to the issue of damages and not liability,” and “any defense by Safeway would involve a defense common to all class members, i.e., that it was not aware, nor did not understand, that its conduct would result in an overcharge to all class members.”  (Id. at 38.)  One thing insurers need to focus on in defending class actions is identifying defenses that are dependent on the individual circumstances of putative class members, and proving that up with concrete examples at a class certification hearing.  Safeway may not have had the ability to do this effectively here where the case focused on an across-the-board billing practice.