I’ve written before (see my February 1, 2012 blog post) on a class action pending in the District of Arizona involving repair or replacement of polybutylene (PB) piping on property insurance claims. The policy language at issue provides that “If loss to covered property is caused by water or steam not otherwise excluded, we will cover the cost of tearing out and replacing any part of the building necessary to repair the system or appliance.” The plaintiff has an expert who opines essentially that, whenever a PB piping system is damaged, all of the PB plumbing in the home or building must be replaced. The District of Arizona has previously granted partial summary judgment in favor of the plaintiff on coverage, and certified a class. The magistrate judge has denied a Daubert motion to exclude the plaintiff’s expert (which is pending before the district court for review).
The magistrate judge’s most recent ruling, Guadiana v. State Farm Fire & Cas. Co., 2014 U.S. Dist. LEXIS 33460 (Mar. 13, 2014), recommends denial of the insurer’s motion to decertify the class. The court discusses at some length the Supreme Court’s decisions in Wal-Mart Stores, Inc. v. Dukes and Comcast Corp. v. Behrend, both of which were decided after the class was initially certified. With respect to Wal-Mart’s requirement of a common question that will generate a common answer, the magistrate judge concluded that commonality was satisfied because: “At trial, the trier of fact will be asked to resolve the following question: If a PB plumbing system leaks, must it always be replaced in its entirety? This is a question that is common to all members of the class and one that can be answered once and for all for all class members.” Id. at *11. The magistrate judge further concluded that, although State Farm cited various factual differences in possible failures of PB piping, on the plaintiff’s theory “[i]t does not matter what avenue of failure caused the leak, all PB systems must be replaced in their entirety.” Id. at *16.
But what about coverage? Not every claim for a plumbing leak is covered. Some are excluded because they were caused by faulty workmanship or wear and tear, or failure to maintain heat in a building, etc. It appears the plaintiff tried to take coverage out of this case by limiting the class to people who sustained what the insurer “acknowledged” was a covered loss. But how do you determine that without an intensive file review, and how is the insurer barred from contesting coverage when sued simply because coverage might have been “acknowledged” in some unspecified fashion at some earlier point? What about other defenses the insurer would have to individual claims, such as where the insured failed to preserve the piping for examination by the insurer, or failed to make a timely claim?
With respect to Comcast, the magistrate judge seemed to sidestep that decision, stating simply that the fact “[t]hat the tear-out cost could and would vary from house to house is something the court considered when the class was originally certified.” Id. at *19. The court did not really grapple with the application of Comcast to the prior analysis. Deciding how much it would cost to replace piping in numerous structures would seem to be quite an undertaking for the court. The court appeared to acknowledge that the law would not allow damages to be determined by extrapolation from a sample of claims.
It is relatively rare these days that a federal court certifies a class action in an insurance claims-related case. This is a case worth watching as it continues. Stay tuned.