A recent Fourth Circuit opinion highlights the importance of exploring the possibility that plaintiffs in a class action may have an administrative remedy in the state insurance department, which they may have to exhaust before suit.

Mitchell-Tracey v. United General Title Insurance Company, 2011 U.S. App. LEXIS 15952 (4th Cir. Aug. 2, 2011) was a statewide class action alleging that a title insurer failed to provide proper discounts when property owners purchased a second title insurance policy on the same property, typically when they refinanced their mortgage.  (This is a hot issue in title insurance class actions, see my post earlier this week about another one of these cases.)  A class was certified by the Maryland federal court in this case, but then the Fourth Circuit issued an opinion in another similar case holding that the named plaintiffs were required to exhaust administrative remedies with the insurance commissioner, where a key issue was interpretation of the rate filings and the insurance commissioner had the statutory authority to interpret them.

In insurance class actions, sometimes it’s obvious that there is an administrative remedy and primary jurisdiction argument.  That was probably true here where a rate filing was directly in issue.  In other cases, there is a potential argument based on an administrative remedy, but the potentially applicable statute or regulation is obscure or rarely invoked.  In some instances, the insurer may prefer to litigate than potentially throw the issue into a regulatory proceeding.  What is important here is for insurers and their counsel to remember to explore this issue whenever it might apply, and recognize that the argument might exist in circumstances where, at first blush, you would not expect it to be a viable argument.