A recent trend in insurance class actions (and class actions generally) has been for plaintiffs to bring cases seeking primarily or exclusively declaratory relief.  This is because of a perception that Rule 23(b)(2) classes (seeking declaratory or injunctive relief) are easier to certify than Rule 23(b)(3) classes, which require predominance of common issues of law or fact.  One argument that insurers often can make in opposing class certification under Rule 23(b)(2), as demonstrated by a recent Western District of Washington decision, is that some of the putative class members would have no standing to seek the declaratory relief being requested.

In Bunch v. Nationwide Mut. Ins. Co., Case No. C12-1238JLR, 2013 U.S. Dist. LEXIS 177057 (W.D. Wash. Dec. 17, 2013), the plaintiff sought class certification solely for the purpose of seeking a declaratory judgment on a homeowners’ insurance coverage issue.  The issue raised was that the insurance policy language at issue was purportedly ambiguous because of a purported conflict between an exception in one exclusion and another exclusion.  The policy excluded loss caused by continuous or repeated seepage or leakage of water over a period of time from within a household system or appliance.  The policy also excluded loss caused by wear and tear, but with an exception where wear and tear caused water to escape from household appliances.  The plaintiff contended that this created an ambiguity.  (Although the court was not presented with the merits of the insurance coverage issue, if I were representing the insurer, I might argue that there is no ambiguity because the exclusions must be read separately, and the exception to the wear and tear exclusion would still have force where the leakage is not continuous or repeated, but rather temporary and quickly identified and fixed.)

The proposed class, as reframed by the court, consisted of policyholders who made a non-weather related water damage claim, and the claim was denied.  Id. at *9.  The court denied certification because, under Ninth Circuit law, a class cannot be certified if some of the putative class members lack standing, and in this case some of them would not have standing.  The court explained that:

For some proposed class members, a favorable interpretation of the policy would simply make no difference: for example, an individual would get no redress if her claims had originally been (or could have been) denied because of unpaid premiums, because some other exclusion operated to deny coverage, or because their deductible exceeded the claim value. Also concerning is the fact that, for many proposed class members, it may be too late to make an accurate coverage determination. If the water damage has already been repaired, it may be impossible to make a post hoc coverage decision that takes into account, for example, whether the challenged ambiguity would even apply to the individual requesting relief.  For others, it may be impossible to unscramble the egg to determine precisely why coverage was denied in the first place, presenting additional obstacles to the court’s ability to redress injury. Fundamentally, each coverage determination involves different facts. Even setting aside concerns about commonality, see Fed. R. Civ. P. 23(a), many of the unique facts pertaining to some class members (but not others) would likely preclude standing to seek declaratory relief.

Id. at *12-13 (citation omitted).

The types of factual scenarios relied upon by the court here can typically be developed in an insurance class action involving a coverage issue.  The requirement that all members of the putative class must have standing (if the relevant circuit has adopted it, or it can be argued that it should be the law of that circuit) is thus a particularly powerful point that insurers can use in defending against a class action seeking declaratory relief. 

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Photo of Wystan Ackerman Wystan Ackerman

Wystan Ackerman is a partner in Robinson+Cole’s Insurance + Reinsurance Group and handles a diverse range of property insurance litigation, including large business interruption cases, class actions, other complex litigation, and appeals. He also has substantial experience representing insurance companies in putative class…

Wystan Ackerman is a partner in Robinson+Cole’s Insurance + Reinsurance Group and handles a diverse range of property insurance litigation, including large business interruption cases, class actions, other complex litigation, and appeals. He also has substantial experience representing insurance companies in putative class actions involving homeowners’ insurance coverage and market conduct/claim-handling practices. He has been prominently involved in high-profile property insurance litigation concerning the September 11th catastrophe and Hurricane Katrina, and Chinese-made drywall. Based in the insurance capital of Hartford, Connecticut, Wystan writes the blog Insurance Class Actions Insider, which was selected by Lexis Nexis as a top insurance blog for 2011.

Wystan 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. He always had strong interests in history, politics and baseball and his heroes growing up were Abraham Lincoln and Wade Boggs (at that time the third baseman for the Boston Red Sox). Wystan says it was his early fascination with Lincoln that drove him to practice law. As a high school senior, he was one of Connecticut’s two delegates to the U.S. Senate Youth Program, which further solidified his interest in law and government. He went on to Bowdoin College, where he wrote for the Bowdoin Orient and majored in government. After Bowdoin, he went on to Columbia Law School. He also interned in the chambers of then-Judge Sonia Sotomayor on the Second Circuit. Wystan graduated from Columbia in 2001, then worked at Skadden Arps in Boston before returning to Connecticut and joining Robinson+Cole.

When Wystan’s not at his desk, flying around the country trying to save insurance companies from the plaintiffs’ bar, or attending a conference on class actions or insurance litigation he often can be found watching “Dora the Explorer” or reading or playing whiffleball with his young daughter, helping his wife with her business, Option Realty, reading a book about history or politics, or watching the Boston Red Sox.

Read Wystan’s rc.com bio.