Do insurance companies charge premiums for coverage that can never be triggered?  That is the essential allegation in Keeling v. Esurance Ins. Co., 2012 U.S. Dist. LEXIS 26998 (S.D. Ill. Mar. 1, 2012).  In my October 4, 2011 blog post, I wrote about a Seventh Circuit decision finding federal jurisdiction in this case, based on the possibility of punitive damages pushing the amount in controversy over $5 million.  After jurisdiction was established, Esurance challenged the complaint in a motion to dismiss.  The motion to dismiss was denied (except for dismissal of a fraudulent misrepresentation claim). 

The plaintiff claimed that underinsured motorist (UIM) coverage of $20,000/$40,000 was illusory under Esurance’s policies because it would never be paid.  The plaintiffs focused on the following provision in Esurance’s policies:

“Underinsured motor vehicle” means a land motor vehicle or trailer of any type to which a bodily injury liability bond or policy applies at the time of the accident but its limit for bodily injury liability is less than the limit of liability for this coverage.

However, “underinsured motor vehicle” does not include any vehicle or equipment:

1. To which a bodily injury liability bond or policy applies at the time of the accident but its limit for bodily injury liability is less than the minimum limit for bodily injury liability specified by the financial responsibility law of Illinois.

Id. at 7-8 (emphasis added).  The class was defined as insureds who bought UIM coverage from Esurance with limits of $20,000/$40,000 in Illinois.  The claim was that this coverage was worthless to insureds because the minimum required coverage under Illinois law is $20,000/$40,000.  Thus, the plaintiff asserted that if an Esurance policyholder bought UIM coverage of $20,000/$40,000, the only way coverage would apply  under the definition of “underinsured motor vehicle” would be if the underinsured motorist had coverage less than Illinois law required, which was unlikely unless the driver was from out of state.  But if the underinsured motorist had lower limits than what Illinois law requires ($20,000/$40,000), then the exclusion (paragraph “1” above) would bar coverage, and therefore there would never be coverage. 

Esurance argued that coverage should be based on whether the underinsured motorist or his or her insurer pays less than the limits, rather than what the policy limits are, but the court rejected that position, finding it inconsistent with the terms of the policy and applicable Illinois law.  The court also rejected Esurance’s argument based on the filed rate doctrine because the case was not a challenge to premium rates but rather a challenge to the illusory nature of the coverage.

One problem insurance companies sometimes experience, which can lead to these kinds of class actions, is that when policy forms are written or revised that is done by the underwriting department without involvement of the claims department and without involvement of any lawyers who are familiar with the kinds of issues raised in coverage litigation and class actions.  The issue presented by this case seems like precisely the type of issue that could be flagged by a company that is proactive in attempting to identify problems that might lead to class actions.  (See my blog post about Rob Herrington’s book, “Verdict for the Defense,” for more on that.)

In my view, in defending a case raising the kind of issue that Keeling does, insurers should not file motions to dismiss reflexively.  Too often these motions are filed because that is the standard playbook, or to avoid burdensome discovery if the judge will stay discovery while the motion is decided, without thinking about the consequences of losing the motion.  You do not want a judge to rule against you early, as a matter of law, on an issue of contract interpretation that is at the very heart of the case.  (A plaintiff cannot seek such a ruling before class certification because of the one-way intervention rule that applies in class actions.)  You may be better off defending against class certification and not risking an early adverse ruling on a contract interpretation issue that is a close call or, even worse, on which you can identify substantial weaknesses in your own position.  Another common strategy for filing a motion to dismiss is to whittle down some of the causes of action before discovery and class certification.  But unless the discovery can be separated by causes of action, keeping some additional causes of action in the case until class certification also can sometimes help the defense case by broadening the issues on which individualized adjudication is necessary, where narrowing them with a motion to dismiss might make the case easier to certify.  All of this should be considered before the trigger is pulled on a motion to dismiss.

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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.