The Alabama Supreme Court has held that a class action alleging that an insurer provided illusory coverage to municipalities must be dismissed due to the class’s failure to exhaust administrative remedies through the Alabama Department of Insurance. Alabama Mut. Ins. Corp. v. City of Fairfield, 2014 WL 7234894 (Ala. Dec. 19, 2014).
A municipality commenced a class action against a UM insurer under the theory that the coverage was illusory because it excluded claims of those covered by workers’ compensation insurance, which, according to the city, were the only individuals with a realistic likelihood of seeking UM coverage. The trial court certified the class, and the insurer appealed.
The Alabama Supreme Court held that the court lacked subject matter jurisdiction because the claims asserted were subject to the exclusive jurisdiction of the Alabama Department of Insurance. It ruled that the filed-rate doctrine precluded review because the insurers’ rates, if approved by the state insurance commissioner, could not be contested in court. The Supreme Court also held that the Alabama Insurance Code required the class to first raise any dispute through administrative procedures established by the Insurance Department. The class had not availed itself of any administrative remedy prior to commencing litigation. The order certifying the class action was vacated and the suit was dismissed.