Numerous class actions have been brought against auto insurers on the theory that they should be required to pay under collision coverage not only for the cost of repairing damage to a vehicle but also for the diminished value that a vehicle might sustain because it was in an accident.  This claim for diminished value might be because of damage that is unrepairable (typically weakened metal in the framing) or based on the “stigma” that used car buyers might place on a vehicle that was in a serious accident (think of those “Carfax” advertisements), or both.  The issue of diminished value has also arisen prominently in property insurance recently – the Eleventh Circuit certified to the Georgia Supreme Court the question of whether a property policy provides coverage for alleged diminished value of a building after property damage has been repaired.  See Royal Capital Development, LLC v. Maryland Casualty Company, 659 F.3d 1050 (11th Cir. 2011).  The insured in that case is making a novel argument trying to extend the Georgia Supreme Court precedent on diminished value in auto insurance to the property insurance context.  If the Georgia Supreme Court rules in favor of the insured in that case, we might see a rash of new lawsuits, potentially including class actions, on that issue.  This is an issue that the insurance industry should continue to pay careful attention to.

In Moeller v. Farmers Insurance Company of Washington, 2011 Wash. LEXIS 957 (Wash. Dec. 22, 2011), the Supreme Court of Washington recently held, in a 5-4 decision, that Farmers’ auto insurance policies provided coverage for diminished value.  The majority also affirmed the trial court’s certification of a class.  While this is an outlying decision that expressly rejected the majority view among other courts around the country in these cases, insurers may wish to take another look at their policy language, particularly in Washington but also in other states in which this issue has not yet been conclusively resolved, in order to try to avoid the impact of this decision and a few others like it. 


In Moeller, the policy’s grant of coverage for collision provided that “[w]e will pay for loss to your Insured car caused by collision less any applicable deductibles.”  Id. at *2.  The term “loss” was defined as “direct and accidental loss of or damage to your Insured car, including its equipment.”  Id.  The policy also included “Limits of Liability” and “Payment of Loss” clauses providing as follows:

Limits of Liability

Our limits of liability for loss shall not exceed:

1. The amount which it would cost to repair or replace damaged or stolen property with other of like kind and quality, or with new property less an adjustment for physical deterioration and/or depreciation.

. . . .

Payment of Loss

We may pay the loss in money or repair or replace damaged or stolen property.


Farmers argued that these two provisions unambiguously barred coverage for diminished value.  It argued that under the policy it had the option to repair the damaged vehicle, and if it chose that option that would fully satisfy its contractual obligation.  The majority rejected this argument, concluding that an average consumer reading the policy would expect to be paid for diminished value in addition to the cost of repairs:

We must read an insurance contract as an average person would read it.  Thus, the lens through which we view this question is from the point of view of the consumer. From this point of view, the bargain of the contract is to return the consumer to his preaccident position with respect to the value of his car. Strictly construing the limiting language of Farmers’ policy, as we must, it does not convey to the average policyholder that the value of coverage may be less if Farmers repairs a vehicle rather than replacing or “totaling” it. Rather, the reasonable expectation is that, following repairs, the insured will be in the same position he or she enjoyed before the accident.

Id. at *13 (citation omitted; emphasis added).

Chief Justice Madsen wrote a strong dissent, joined by three other justices.  She wrote that the majority’s interpretation was “a contrived interpretation of clearly worded provisions,” that the majority’s construction was “untenable under language that gives Farmers the right to repair or replace, at its option,” and that it “creates a new obligation with no basis whatsoever in the contract.”  Id. at *31-32 (Madsen, C.J., dissenting).  The chief justice further explained that the “reasonable expectations” doctrine referenced by the majority had not previously been adopted in Washington, and it does not apply unless there is an ambiguity.  Id. at *34-35. 

When I try to take off my defense lawyer hat and look at this objectively, I really think the dissenters have the better side of the argument here.  If you give this policy language to a nonlawyer and ask them what they think it means, it seems doubtful that people would expect the insurance company to pay not only to repair the physical damage to a vehicle but also for intangible diminution in value.  I think it’s similar to the flood exclusion issue that arose in Hurricane Katrina, and which occupied a lot of my time.  When I explained to nonlawyers that the plaintiffs’ lawyers were arguing that the flood exclusion did not apply to what occurred in New Orleans on the grounds that there were man-made causes (in addition to the hurricane), the reaction universally was that the argument seemed ridiculous.  Some people commented that only lawyers would argue about something like that.  Eventually, after years of litigation, the Louisiana Supreme Court unanimously rejected that argument.

Class Certification

On class certification, the majority in Moeller found certification appropriate.  It started with a principle that is apparently applied in Washington but contrary to the law in the federal courts and most other places – that “the trial court should err in favor of certifying the class.”  Id. at *19.  The central issue in dispute was whether the plaintiff could prove liability and damages for the putative class as a whole through mathematical modeling, without showing that each member of the putative class actually sustained a diminution in value loss, or the amount thereof.  The majority seemed to sidestep that issue, rejecting an argument that the plaintiff had made a concession that some class members had no loss, and focusing on the abuse of discretion standard.  The court noted that the trial court had conducted a lengthy evidentiary hearing and that the result was not “unreasonable or untenable.”  Id. at *22-23.

A dissenting opinion by Justice Alexander, joined by Justice Pro Tem Seinfeld, took the class certification issue head on and found certification improper.  The key points made by Justice Alexander were:

In my view, the trial court abused its discretion when it found that common issues predominate over individual ones and that a class action is superior to other methods of adjudicating the disputes. My concern is with the plaintiffs’ intended method of arriving at the measure of damages. Moeller does not plan to prove his claim of breach of contract and resulting injury with evidence of the preaccident and postrepair values of class members’ cars. Instead, Moeller intends to use a statistical methodology and data from car auction sales to prove that, on average, cars that are “wrecked and repaired” sell for lower prices than do cars that are “unwrecked” and therefore, as a statistical matter, diminished value exists. Moeller then plans to categorize and quantify the alleged average decreases in value associated with types or amounts of damage, multiply each alleged average amount by the number of class members in each damage category, and then tally the numbers to provide a class-wide “damage[s] estimate.”

The proposed measure of damages should not be permitted on a class-wide basis because individualized proofs of the preaccident and postrepair values of each damaged car should be required to ascertain which of the thousands of class members actually suffered damage caused by Farmers’ failure to tender a diminished value payment. Additionally, Moeller should be required to prove how much damage each individual class member sustained. The problem with the proposed method of calculating damages is that there is no way to ensure that each car included in the model actually sustained diminished value.

. . .

Additionally, the trial plan effectively converts the damages element of Moeller’s claim into an affirmative defense. This impermissibly shifts the burden to prove damages from the plaintiffs to the defendant. This offends due process.

Id. at *43-46 (Alexander, J., dissenting) (emphasis added; citations omitted).

Again, trying to look at this objectively I think the dissent’s view is more consistent with fundamental principles of class action law.  While the dissent describes this as a damages issue, it’s really a question of whether liability for breach of contract (not merely damages) can be shown on a classwide basis or requires an individual analysis.  The dissent does not cite the U.S. Supreme Court’s opinion in Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011), but it could have – the Supreme Court unanimously disapproved a similar statistical sampling methodology as a “novel project” that would improperly allow Rule 23 to affect substantive rights, and deprive Wal-Mart of its individual defenses.  That part of Wal-Mart might be a due process requirement applicable to state courts, and in any event most states do not allow their procedural rules to alter substantive rights.  But unless and until the Supreme Court takes a class action case on appeal from a state court and decides what due process boundaries there are, we will continue to see some state supreme courts take approaches to class actions that diverge substantially from federal law.

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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.