Hurricane Katrina resulted in a slew of property insurance class actions. While hopefully the U.S. will not see a disaster of that scale again for decades, recent years have brought a large number of smaller-scale catastrophes, most notably tornadoes, such as the ones that hit Joplin, Missouri, and Tuscaloosa, Alabama, in 2011. Recent years have also brought a large number of wildfires, as well as Hurricane Irene. But these events have not led to any significant number of class action filings against insurance companies. Why is that? Perhaps the insurance industry as a whole is doing such a fantastic job handling these claims and keeping their customers happy that plaintiffs’ lawyers have found few clients or grounds to sue. But that seems unlikely. I think more likely explanations are that: (1) very few of the Hurricane Katrina class actions were successful for plaintiffs; (2) Wal-Mart v. Dukes, together with the Class Action Fairness Act, have made class actions more difficult for plaintiffs to bring successfully and decreased class action filings; (3) the plaintiffs’ bar in the jurisdictions affected by the recent catastrophes might have fewer insurance lawyers and fewer class action lawyers with the right experience and interest to want to pursue these kinds of cases (in contrast to Louisiana, which was a hot bed of mass tort and class action litigation pre-Katrina); and/or (4) some plaintiffs’ lawyers tend to wait until the suit limitation period is about to expire before they sue (a number of the Katrina class actions were filed shortly before the suit limitation period was set to expire and, after the time to sue was extended, additional class actions were filed shortly before the extension expired).
The first class actions I’ve seen resulting from last year’s tornadoes were recently filed in the Circuit Court of Tuscaloosa County, Alabama: Hallman v. Metropolitan Property and Casualty Insurance Company.pdf, Civil No. CV-2012-215-JHR and Strawbridge v. Cotton States Mutual Insurance Company.pdf, Civil No. CV-2012-214. The complaints are largely identical and were filed by the same plaintiffs’ firms. The complaints seek certification of Alabama statewide classes of policyholders making claims for covered property damage since January 1, 2011. The allegations are quite broad and similar to some of the Katrina class actions. The plaintiffs allege general low-balling of claims, failure to properly investigate and adjust claims, application of “commercially unreasonable depreciation rates,” and that the adjustment process on claims has been delayed so as to improperly inhibit insureds’ ability to complete the repairs within one year of the loss, where policy provisions require completion of repairs within that time period in order to recover the full replacement cost of the damage (as opposed to the actual cash value, which takes into account deduction for depreciation). The complaint against Cotton States Mutual also alleges that the company is improperly informing insureds that they have one year from the date of loss to file suit, where Alabama has a six-year statute of limitations on breach of contract claims that it appears cannot be shortened by contract. Notably, the complaints also allege that plaintiffs’ counsel is providing copies of the complaints to the Alabama Insurance Commissioner and requesting the commissioner to investigate the allegations.
These types of broad-brush class actions are rarely certified because courts have repeatedly held that, in order to determine whether property insurance claims have been properly adjusted, an intensive individual inquiry into the facts of each individual claim is required, precluding class treatment. However, one thing to keep in mind if you are faced with defending this kind of case is that the filing of such a broad class action potentially can result in tolling of the statute of limitations or suit limitation period on the claims of the putative class members while the class action allegations remain pending. In order to limit that potential tolling, it can be useful to try to obtain a ruling on the viability of the class allegations as soon as possible after suit is filed. In the Katrina context, the pendency of putative class actions (which were never certified) for years, together with the Louisiana Supreme Court’s decision on class action tolling, has led to a lengthy extension of the time for policyholders to sue (for more about this, see my April 5, 2011 blog post).