Insurance companies writing Personal Injury Protection (PIP) coverage in New York with optional extended benefits should pay careful attention to a class action recently brought against State Farm.  Judge Block of the Eastern District of New York recently denied a motion to dismiss in this case.  This may result in additional filings against other insurers.

In Servidio v. State Farm Insurance Company, 2011 U.S. Dist. LEXIS 105516 (E.D.N.Y. Sept. 19, 2011), the plaintiff claims that State Farm committed an unfair trade practice under New York statutes by selling an “extended” PIP coverage option that provided no increase in policy limits – the only additional benefit of the extended coverage was a broader definition of who is an “eligible injured person.”  While the basic PIP coverage defined “eligible injured person” as any person injured by the insured automobile in New York State and any New York State resident injured by the insured automobile outside the state, the “Q1” extended option defined “eligible injured person” as any passenger in any vehicle operated by the insured or his or her relatives.  Other than that difference, the basic and “Q1” coverages were identical.  Id. at *3.  The additional premium for this “Q1” option was approximately $1 per policy (but for a company the size of State Farm, the total amount of premiums during the statute of limitations period was over $4 million and, with the possibility of punitive damages, the amount in controversy was over the $5 million CAFA threshold).

Judge Block concluded that the plaintiff had sufficiently pled that State Farm’s conduct was misleading, and therefore potentially a statutory violation:

State Farm argues that its alleged conduct cannot have been materially misleading because the terms of Q1 coverage were (1) “fully disclosed,” Def’s Mem. of Law 23, and (2) defined in terms approved—indeed, required—by DOI.

The Court disagrees that the policy “fully discloses” the nature of Q1 coverage in such a way as to prevent a reasonable consumer from being misled. The language of the endorsement implies that the additional PIP option expands the mandatory coverage by (1) broadening the definition of “eligible injured” person and (2) providing reimbursement for “extended”—as opposed to “basic”—economic loss. At the Q1 level, however, “expanded economic loss” is precisely the same as “basic economic loss,” hardly an intuitive understanding of the word extended.

DOI does not require State Farm to define Q1 coverage as it does. It mandates the endorsement language to be used, but does not purport to assign the numerical limits to the coverage. See N.Y. Comp. Codes R. & Regs. tit. 11, § 65-1.3 n.11 (“Companies may substitute the appropriate term, reference or language for the matter set out in brackets.”). Indeed, a 2008 opinion letter by DOI’s Office of General Counsel states that an additional PIP endorsement “must confer an additional benefit on the insured by altering the time and/or dollar limits available under [mandatory] PIP.” OGC Op. 08-05-17 (May 15, 2008), available at (last visited Sept. 13, 2011). Though not binding, the letter represents DOI’s official position, see id., and accords with the Court’s view that State Farm’s Q1 coverage—which does not alter any of those limits—is likely to mislead reasonable consumers as to what they are paying for.  (Id. at *10-11 (emphasis added).)

I don’t know if this particular issue is unique to State Farm or if it is common in the industry.  But it is common for plaintiffs’ lawyers to file a “test case” on a particular issue against one insurer and, if it has some success, pursue the same issue against a number of other insurers.  With the denial of State Farm’s motion to dismiss, other insurers may want to take a look at whether or not they are offering this type of coverage option and, if so, how their policy is worded and what disclosures are being made.

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Photo of Wystan Ackerman Wystan Ackerman

I am a partner at the law firm of Robinson+Cole in Hartford, Connecticut, USA.  My contact information is on the contact page of my blog.  I really enjoy receiving questions, comments, suggestions and even criticism from readers.  So please e-mail me if you…

I am a partner at the law firm of Robinson+Cole in Hartford, Connecticut, USA.  My contact information is on the contact page of my blog.  I really enjoy receiving questions, comments, suggestions and even criticism from readers.  So please e-mail me if you have something to say.  For those looking for my detailed law firm bio, click here.  If you want a more light-hearted and hopefully more interesting summary, read on:

People often ask about my unusual first name, Wystan.  It’s pronounced WISS-ten.  It’s not Winston.  There is no “n” in the middle.  It comes from my father’s favorite poet, W.H. (Wystan Hugh) Auden.  I’ve grown to like the fact that because my name is unusual people tend to remember it better, even if they don’t pronounce it right (and there is no need for anyone to use my last name because I’m always the only Wystan).

I grew up in Deep River, Connecticut, a small town on the west side of the Connecticut River in the south central part of the state.  I’ve always had strong interests in history, politics and baseball.  My heroes growing up were Abraham Lincoln and Wade Boggs (at that time the third baseman for the Boston Red Sox).  I think it was my early fascination with Lincoln that drove me to practice law.  I went to high school at The Williams School in New London, Connecticut, where I edited the school newspaper, played baseball, and was primarily responsible for the installation of a flag pole near the school entrance (it seemed like every other school had one but until my class raised the money and bought one at my urging, Williams had no flag pole).  As a high school senior, my interest in history and politics led me to score high enough on a test of those subjects to be chosen as one of Connecticut’s two delegates to the U.S. Senate Youth Program, which further solidified my interest in law and government.  One of my mentors at Williams was of the view that there were far too many lawyers and I should find something more useful to do, but if I really had to be a lawyer there was always room for one more.  I eventually decided to be that “one more.”  I went on to Bowdoin College, where I wrote for the Bowdoin Orient and majored in government, but took a lot of math classes because I found college math interesting and challenging.  I then went to Columbia Law School, where I was lucky enough to be selected as one of the minions who spent their time fastidiously cite-checking and Blue booking hundred-plus-page articles in the Columbia Law Review.  I also interned in the chambers of then-Judge Sonia Sotomayor when she was a relatively new judge on the Second Circuit, my only connection to someone who now has one-ninth of the last word on what constitutes the law of our land.  I graduated from Columbia in 2001, then worked at Skadden Arps in Boston before returning to Connecticut and joining Robinson+Cole, one of the largest Connecticut-based law firms.  At the end of 2008, I was elected a partner at Robinson+Cole.

I’ve worked on class actions since the start of my career at Skadden.  Being in the insurance capital of Hartford, we have a national insurance litigation practice and I was fortunate to have the opportunity to work on some prominent class actions arising from the 2004 hurricanes in Florida and later Hurricane Katrina, including cases involving the applicability of the flood exclusion, statutes known as valued policy laws, and various other issues.  My interest and experience in class actions gradually led me to focus on that area.

In Connecticut courts I’ve defended various kinds of class actions that go beyond insurance, including cases involving products liability, securities, financial services and consumer contracts.

My insurance class action practice usually takes me outside of Connecticut.  I’ve had the pleasure of working on cases in various federal and state courts and collaborating with great lawyers across the country.  While class actions are an increasingly large part of my practice, I don’t do exclusively class action work.  The rest of my practice involves litigating insurance coverage cases, often at the appellate level.  That also frequently takes me outside of Connecticut.  A highlight of my career thus far was working on Standard Fire Ins. Co. v. Knowles, the U.S. Supreme Court’s first Class Action Fairness Act case.  I was Counsel of Record for Standard Fire on the cert petition, and had the pleasure of working with Ted Boutrous on the merits briefing and oral argument.

I started this blog because writing is one of my favorite things to do and I enjoy following developments in class action law, writing about them and engaging in discussion with others who have an in interest in this area.  It’s a welcome break from day-to-day practice, keeps me current, broadens my network and results in some new business.

When I’m not at my desk or flying around the country trying to save insurance companies from the plaintiffs’ bar, or attending a conference on class actions or insurance litigation (for more on those, see the Seminars/Programs page of this blog), I often can be found playing or reading with my young daughter, helping my wife with her real estate and mortgage businesses, reading a book about history or politics, or watching the Boston Red Sox (I managed to find bleacher seats for Game 2 of the 2004 World Series when Curt Schilling pitched with the bloody sock).  When the weather is good I also love to take the ferry to Block Island, Rhode Island and ride a bike or walk the trails there. If you go, I highly recommend the Clay Head Trail.