Several notable recent class action filings against insurers have come across my desk (or computer screen) and seem worthy of interest to readers of this blog. I will summarize and comment briefly on them. If you’d like a copy of any of the complaints, just e-mail me.
- Use of Staff Counsel: In Golden v. State Farm Mutual Automobile Insurance Company, Cause No. 02D01-1110-PL-363 (Indiana Superior Court, Allen County; removed to federal court), the plaintiff alleges that State Farm improperly fails to disclose to its insureds that it may use staff counsel to represent them in defending lawsuits under liability insurance coverage. There are two proposed classes: (1) insureds in Indiana that have purchased or renewed a policy with State Farm within the last two years, containing liability coverage; and (2) insureds in Indiana who were represented by State Farm staff counsel within the last two years. The causes of action are breach of an alleged duty to disclose the use of staff counsel (at the time of policy issuance or renewal), breach of a duty of good faith and fair dealing by not disclosing the use of staff counsel at the time of policy issuance or renewal, unjust enrichment, and injunctive relief barring State Farm from continuing to issue or renew policies without disclosures regarding staff counsel, and barring State Farm from assigning staff counsel to represent insureds where no prior disclosure was made. It will be interesting to see if this complaint survives a motion to dismiss. There may not be any legal duty to inform insureds about the use of staff counsel absent a statute or regulation requiring it. It also seems unclear that anyone is injured by a failure to disclose at the time the policy is issued or renewed, particularly if they have never been sued. The complaint seems to suggest that the use of staff counsel is somehow a new or unusual practice not followed by other insurers. I’m not sure what the practice has been in Indiana, but as far as I know all of the major insurers have been using staff counsel to defend in the vast majority of jurisdictions for some time (except for a few jurisdictions where use of staff counsel is prohibited). The complaint also seems to suggest, without articulating any basis, that staff counsel is somehow inferior to private outside counsel. On the other hand, there is probably no harm in disclosing the use of staff counsel, and some insurers probably are doing that. It’s hard to imagine that people buy their auto or homeowners’ policies based on whether the insurer is going to use staff counsel in defending them in a lawsuit.
- Wildfire Claims: In Abed v. Allstate Ins. Co., Case No. BC 473460 (Cal. Super. Ct., Los Angeles County), the named plaintiffs assert a variety of claims against Allstate arising from their claim for smoke damage to their house from the “Station Fire” in Southern California in August of 2009. They assert various individual claims but only one cause of action on behalf of a putative class, alleging that Allstate’s policies failed to comply with California law on appraisal, and the efficient proximate cause doctrine. The appraisal-related claim focuses on a provision in the California standard fire insurance policy providing that “In the event of a government-declared disaster, as defined in the Government Code, appraisal may be requested by either the insured or this company but shall not be compelled.” Cal. Ins. Code § 2071. The plaintiffs assert that the “Station Fire” was a “government-declared disaster” within the meaning of this provision. They claim that Allstate improperly sought to compel a mandatory appraisal, and the appraisal clause in its policy failed to include this sentence. The efficient proximate cause claim is a bit difficult to discern from the complaint. That doctrine applies where a loss has more than one cause, and it appears that the claims at issue here were attributable only to the wildfire. There is no suggestion that I can identify of another cause. On the appraisal issue, although I think it involves the kind of individual issues that would not be appropriate for class treatment, insurers may want to check into their practices in California with respect to appraisal of claims for government-declared disasters given the unusual statutory language.
- Depreciation on Auto Claims: In Silvin v. Geico General Insurance Company, Case No. 1:11-cv-24128-CMA (S.D. Fla.), the plaintiff seeks to certify a nationwide class on the question of whether a particular Geico policy form allows for deduction of “betterment” or depreciation on auto claims under either comprehensive or collision coverage. The policy language that is quoted in the complaint does not appear to make any reference to a deduction for “betterment” or depreciation. It will be interesting to see what happens with this case. This also seems like an area in which insurers may want to check what their policies say and what their practices are.