In February, there was a new class action filed against Citizens Property Insurance Corporation, Florida’s property insurer of last resort, alleging that it was using Xactware’s 360Value software to purportedly overvalue homes and charge inflated premiums.  This week, Allstate was sued in a putative nationwide class action in Illinois federal court making claims on a similar theory, based on Allstate’s use of Marshall Swift & Boeckh (MSB) software to estimate replacement cost value of homes for purposes of setting policy limits and premiums.  I’m not yet prepared to say this is a trend, but other insurers may wish to take another look at their valuation software. 

The complaint in Diskey v Allstate Indemnity Company.pdf, Case No. 1:12-cv-03728 (N.D. Ill., filed May 15, 2012), alleges that MSB performed an analysis for Allstate in 2004 which determined that 59% of homes insured by Allstate nationwide were underinsured, with an average undervaluation of 27%.  The plaintiff claims that Allstate went too far in remedying that problem and allegedly used MSB software to unduly inflate the valuations of homes used in determining policy limits and thus unduly increase premiums.  The complaint also alleges that Allstate’s homeowners insurance policies provide for the use of a “Property Insurance Adjustment” (PIA) index to adjust policy limits at each policy anniversary, and that when the PIA indices went down, Allstate still increased policy limits and premiums.  The complaint also makes a vague, non-specific allegation that the MSB system that is used by Allstate to determine replacement cost of homes for underwriting purposes is inconsistent with the MSB system used by Allstate adjusters in valuing property damage when claims are submitted. 

The complaint seeks certification of several nationwide classes: (1) a class of policyholders whose properties were appraised using a software program, resulting in an increase in policy limits, and who “paid excessive premiums”; (2) a class of policyholders whose properties were appraised using a software program, resulting in an increase in policy limits, who do not reside in a valued policy law state, and who suffered a loss within the limitations period; and (3) a class of policyholders whose policy included Allstate’s PIA provision, and whose policy limits were increased at the same time that the PIA indices decreased, within the limitations period.  The causes of action alleged include restitution, breach of contract (including breach of the implied covenant of good faith and fair dealing), bad faith and unjust enrichment/constructive trust.

This case is similar, in part, to the Cox v. Allstate case (see my April 11, 2012 blog post) in which certification was recently denied by the Western District of Oklahoma on a claim involving Allstate’s PIA provision.  The court reasoned that determining whether Allstate inappropriately raised a policy limit would require comparing every individual policy limit with the property’s fair market value, an individualized analysis that defeated certification under Wal-Mart v. Dukes.  As the Cox decision demonstrates, this is an issue on which insurers often have strong defenses to class certification.  But given that the plaintiffs’ bar seems to be focusing a bit more on valuation and premium calculation issues, and on whether underwriting valuation methods are consistent with valuations used for loss estimating purposes, this is an area insurers may want to pay attention to in their efforts to avoid potential class action exposure.

Tags: Allstate, Underwriting
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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.  Being in the insurance capital of Hartford, we have a national insurance litigation practice and most of the class actions I’ve defended have been brought against insurance companies. I’ve also handled some involving products liability, managed care, health care, utilities, financial services, higher education and environmental issues.

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 work, you might find me running lines or watching a musical with my teenage daughter who hopes to be a Broadway star (or taking her to voice or dance lessons) or reading a good book.

Read more about Wystan Ackerman
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