The recent denial of class certification in Fosmire v. Progressive Max Ins. Co., 2011 U.S. Dist. LEXIS 117366 (W.D. Wash. Oct. 11, 2011) is the second opinion I’ve seen post-Wal-Mart that applies the new standards in detail in an insurance class action.  This putative nationwide class action alleged that Progressive improperly failed to pay for diminution in value on auto claims under uninsured/underinsured (UM/UIM) coverage.  That is, where a vehicle has been damaged in an accident and repaired, it may not be fully repairable, or it may lose some value because a repaired vehicle may be worth less than one that has never been in an accident.  (It seems that those “Carfax” reports make a difference to used car buyers.)  The plaintiff asserted that Progressive had what she labeled as a “don’t ask, don’t tell” policy, under which the company would not advise insureds of the potential availability of a payment for diminution in value, and would consider such claims only where the insured made a claim for it.  Id. at *4-5.

There are several notable aspects to this opinion:

1. The court excluded the plaintiff’s expert under Daubert.  The court found the more “relaxed” standard adopted by the Eighth Circuit in In re Zurn Pex Plumbing Prods. Liab. Litig., 644 F.3d 604 (8th Cir. 2011) (see my prior blog post) to be the correct standard, rather than the full Daubert analysis that has been required by the Seventh and Eleventh Circuits.  This “relaxed” standard does not decide on admissibility at trial of the expert’s testimony, but rather focuses on its reliability for purposes of class certification issues and limits the focus to the evidence available to the expert at the class certification stage, in light of the discovery taken to date.  Here, the plaintiff’s expert (Polissar) proposed to calculate classwide damages using a 10-year-old study conducted by a different expert (Siskin).  The court found this testimony inadmissible for class certification purposes because Polissar did nothing to ascertain the reliability of Siskin’s work, had never looked at Progressive’s data produced in discovery, had no idea what the proposed class definition was, and had made no attempt to determine how the 10-year-old study by Siskin would apply to the proposed class in the case at bar.  This is a classic case for exclusion of expert testimony under Daubert.  Despite the court’s characterization of its analysis as application of a “relaxed” standard, in the end I don’t think that mattered much – this was a thorough vetting of the reliability and admissibility of the testimony. 
2. The named plaintiff was atypical because of a defense raised regarding a material misrepresentation on the insurance application.  Progressive raised a defense based on the fact that, when she purchased the policy, the plaintiff failed to disclose that her fiancé was a driver in her household who would drive the car. He was driving when the accident occurred.  Although the plaintiff argued that she did not make a misrepresentation, the court was “concerned that litigation concerning this defense will preoccupy Ms. Fosmire to the detriment of class claims” and “it threatens to undermine her credibility at trial, which also undermines the element of typicality.”  Id. at *24.  This is a good reminder for insurers and their counsel to fully explore any potential defenses to a named plaintiff’s claim.  Even if you are not going to win summary judgment on a defense, it may be grounds to defeat certification. 
3. Adequacy of representation was not satisfied due to claim splitting.  The court explained that some jurisdictions allow a recovery for “stigma” damages, on the theory that the value of a vehicle has declined because a repaired vehicle is worth less to buyers than one that has never been in an accident (my “Carfax” example above).  Other jurisdictions, like Washington State, do not allow this type of recovery but allow a recovery on the theory that a particular vehicle cannot be fully restored to its pre-loss condition (e.g., because of weakened metal).  The plaintiff here did not pursue “stigma” damages, apparently because she thought that would improve her chances on class certification.  Putative class members who wanted to pursue “stigma” claims in jurisdictions that allowed such claims likely would not be able to do so if the class were certified.  The court found that this created a conflict of interest between the named plaintiff and the putative class, and therefore adequacy of representation was lacking.  This is a good example of how, in defending these cases, you need to put yourselves in the shoes of the putative class members and think about what kinds of claims they might want to bring but that the named plaintiff chose not to pursue.  This is somewhat counterintuitive because in most cases your focus as defense counsel or in-house counsel is on aggressively defending the claims that were brought, not thinking about what additional arguments a plaintiffs’ lawyer might have asserted.  
4. Predominance was not satisfied due to differences in state law.  Because only one jurisdiction had expressly ruled on the availability of diminution in value damages under UM/UIM policies, the court found that the need to decide numerous unsettled issues of state law demonstrated a lack of predominance.  The court explained that “determining whether each [UM/UIM] statute requires diminution damages would require an evaluation of the interplay between the statutory language and the tort law in each state.”  Id. at *30.  Despite the plaintiff’s argument that the policy language was essentially the same in all applicable jurisdictions and that breach of contract law is consistent, the court found that given the nuances that would need to be delved into for each jurisdiction, the plaintiff had not met her burden of demonstrating a method for addressing the differences in state law.  (See my prior post on the topic of differences in state law on breach of contract.)
5. Rule 23(b)(2) certification was unavailable because of a lack of cohesiveness and because monetary damages were not incidental.  The court found a lack of cohesiveness precluding certification under 23(b)(2) for essentially the same reasons that certification was denied under (b)(3).  It also concluded that, under Wal-Mart, the damages sought could not be determined in an objective, classwide manner and thus were not “incidental.”

In my view, this is the type of case that was unlikely to meet the standard for class certification even before Wal-Mart.  It demonstrates though that the bar has been raised and that there are additional lines of argument available to insurers and other class action defendants.