There have been an unusually large number of significant decisions in insurance class actions over the last couple of weeks.  I will not be able to discuss all of them in detail but thought you would like to have shorter summaries of them.  Here is the first installment regarding recent P&C class action decisions: 

  • Folks v. State Farm Mut. Auto. Ins. Co., 2012 U.S. Dist. LEXIS 43294 (D. Colo. Mar. 29, 2012):  This case involves personal injury protection (PIP) coverage and a requirement in Colorado’s No Fault Act that insurers must offer enhanced PIP coverage that includes coverage for pedestrians.  State Farm failed to offer the enhanced benefits and, after losing some prior court decisions, modified its policy language.  State Farm also provided voluntary relief, re-adjusting a number of claims.  The court denied class certification, finding that numerosity was not satisfied because, excluding the people who were given voluntary relief, the plaintiff could only speculate that there were about 50 class members that might obtain relief in the suit.  The court also concluded that a reformation claim was not suitable for certification under Rule 23(b)(2) because reformation is an equitable remedy that requires an individualized analysis of whether the class member relied on State Farm’s past practices and the degree of injustice or hardship.  To the extent certification was sought under Rule 23(b)(3), predominance also was not satisfied because the prior litigation, together with State Farm’s voluntary relief program, had resolved the common legal and liability issues, and what remained were only individualized determinations regarding reformation of policies and the amounts claimed by individual class members.  This case is a good example of how a voluntary relief program can potentially defeat a putative class action (for more on that, see my Sept. 16, 2011 blog post). 
  • Cox v Allstate Insurance Company.pdf, No. CIV-07-1449-F, slip op. (W.D. Okla. Mar. 28, 2012):  This is a class certification decision in a first-party property insurance case involving claims for wildfire damage.  The two proposed Oklahoma statewide classes were: (1) insureds who had recoverable depreciation held back from their claim and did not receive a letter from Allstate explaining the amount of depreciation and how to recover it; and (2) insureds whose policy limits were increased automatically by Allstate’s “Property Insurance Adjustment” feature.  The claim on behalf of the first class was that the failure to send a letter regarding the holdback was by itself bad faith and resulted in unjust enrichment to Allstate.  The claim on behalf of the second class was that Allstate’s method of increasing policy limits resulted in overinsurance and unduly high premiums, also resulting in unjust enrichment.  The court held that commonality was not satisfied under Wal-Mart v. Dukes as to proposed class (1) because Allstate’s general policy was to send the letter, and, as the plaintiffs’ expert admitted, some people who did not receive the letter recovered all depreciation they were owed.  Determining whether people failed to receive the letter and sustained an injury would require a file-by-file individualized analysis.  The court reached a similar conclusion with respect to the class of insureds claimed to be overinsured – a file-by-file analysis would be required to determine if there was overinsurance.  The court also found that predominance was not satisfied because, with respect to class (1), a bad faith claim could not be pursued without a breach of contract, and, under Wal-Mart, Allstate would be entitled to present its individualized defenses to breach of contract claims.  The court rejected an argument that Allstate was somehow estopped from asserting defenses in litigation that it had not asserted during the claim process.  With respect to class (2), a determination of whether Allstate inappropriately raised the policy limit would require comparing every individual policy limit with the property’s fair market value, an individualized analysis that defeated certification.  This case is a good example of how courts are applying Wal-Mart v. Dukes in insurance class actions.