In a series of decisions, a Mississippi federal district court rejected the use of class actions and quasi-class actions to litigate homeowners’ insurance claims for property damage caused by Hurricane Katrina. See McFarland v. State Farm Fire & Cas. Co., 2006 U.S. Dist. LEXIS 81900 (S.D. Miss. Oct. 25, 2006); Bradley v. Nationwide Mut. Ins. Co., 2006 U.S. Dist. LEXIS 63966 (S.D. Miss. Sept. 6, 2006); Vaz v. Allstate Prop. & Cas. Co., 2006 U.S. Dist. LEXIS 63965 (S.D. Miss. Sept. 6, 2006); Guice v. State Farm Fire & Cas. Co., 2006 U.S. Dist. LEXIS 57571 (S.D. Miss. Aug. 14, 2006).
In each of these cases, plaintiffs attempted to litigate their homeowners’ insurance claims against insurance companies en masse—either through a class action or by hundreds of claimants joining as plaintiffs in a single lawsuit, which the court characterized as a “quasi-class action.” The court rejected the use of these procedural mechanisms, denied class certification, severed the claims, and required that individual claims be brought in separate lawsuits.
In a class action lawsuit, one or more plaintiffs file a lawsuit and seek to serve as representatives of similarly situated claimants that are not joined as party plaintiffs to the lawsuit. There are a number of requirements for class certification— the named plaintiffs’ claims must be typical of the class claims (“typicality”), the plaintiffs must be adequate representatives of the proposed class (“adequacy of representation”), the class claims must present “questions of law or fact common to the class” (“commonality”) that “predominate over any questions affecting only individual members” (“predominance”), and “a class action [must be] superior to other available methods for the fair and efficient adjudication of the controversy” (“superiority”). See FED. R. CIV. P. 23(a), (b)(3). When, rather than filing a class action, claimants attempt to band together through joinder, each claimant is named as a plaintiff in a single lawsuit. The requirements for joinder are more liberal than those for class certification—there must simply be a common “question of law or fact . . . arising out of the same transaction, occurrence, or series of transactions or occurrences.” See FED. R. CIV. P. 20(a).
In Guice, the court rejected plaintiffs’ class certification motion, holding that a class action was not a superior method for resolving the plaintiffs’ claims and that any common issues of law and fact presented by the claims did not predominate over individual issues, as required under the class certification rule. Guice, 2006 U.S. Dist. LEXIS 57571 at *13-14.
In Vaz, Bradley, and McFarland, the court also rejected the attempts of hundreds of claimants to band together by joinder as plaintiffs in lawsuits against a number of insurance companies in an apparent attempt to circumvent the requirements for class certification. The court saw through this attempted end-around the class certification requirements, characterized the lawsuits as “quasi-class actions,” and ordered the severance of claims, resulting in individual lawsuits for each damaged property. McFarland, 2006 U.S. Dist. LEXIS 81900 at *6-7; Bradley, 2006 U.S. Dist. LEXIS 63966 at *4-5; Vaz, 2006 U.S. Dist. LEXIS 63965 at *5-6. In rejecting the joinder of the homeowners’ claims, the court pointed out that although “[i]n a superficial sense, the hurricane was a common occurrence . . . the storm was vastly different in its effect depending on the specific geographic location of each particular home,” that “each insurance contract is a separate transaction,” and that “any alleged negligent or fraudulent representations by insurance agents constitute separate transactions or occurrences.” Bradley, 2006 U.S. Dist. LEXIS 63966 at *3-4.
In rejecting class certification and joinder of claims as procedural mechanisms for litigating homeowners’ claims for property damage caused by Hurricane Katrina, the court recognized the case management challenges presented by the vast number of legal claims against the insurance industry. The court noted that it “[did] not have the luxury of wearing blinders in managing the Hurricane Katrina insurance litigation,” McFarland, 2006 U.S. Dist. LEXIS 81900 at *5-6, and expressed its receptiveness to utilizing other procedures for efficiently hearing such claims including consolidating cases for purpose of trial “to streamline the litigation process,” Bradley, 2006 U.S. Dist. LEXIS 63966 at *6; Vaz, 2006 U.S. Dist. LEXIS 63965 at *6. There have been a number of recent insurance decisions in which courts have granted class certification. See, e.g., Mitchell-Tracey v. United Gen. Title Ins. Co., 237 F.R.D. 551 (D. Md. 2006); Artie’s Autobody, Inc. v. Hartford Fire Ins. Co., 2006 Conn. Super. LEXIS 2838 (Aug. 30, 2006); J.M.I.C. Life Ins. Co. v. Toole, 634 S.E.2d 123 (Ga. Ct. App. 2006).
The plaintiffs in Mitchell-Tracey brought a class action alleging that title insurance companies charged excessive premiums in connection with refinancing transactions and sought certification of a class consisting of Maryland residents that had been charged premiums in excess of the rate permitted by the Maryland Insurance Administration. In certifying a class, the court noted that although there were variations in the amounts of premium paid, class certification was appropriate because of the common issue of whether the amount of premium charged exceeded the prescribed rate and that “[p]laintiffs’ claims present virtually identical fact patterns and legal theories and are based upon the same conduct” by the title insurers. Mitchell- Tracey, 237 F.R.D. at 558.
In Artie’s Autobody, several auto body repair shops and a trade association sought class certification of claims against an insurance company for allegedly steering insureds and claimants to favored auto body repair shops and depressing repair rates in violation of Connecticut’s Unfair Trade Practices Act. In certifying a class of Connecticut licensed repair shops and individuals, the court found that there was a common issue of whether the insurer violated the Act which could be proven through “generalized, class-wide evidence” and that economic loss could be proven by “generalized evidence” consisting of “average repair job costs” and “average net profit margins.” Artie’s Autobody, 2006 Conn. Super. LEXIS 2828 at *11, 16-18, 20.
In Toole, the Georgia Court of Appeals affirmed a class certification order. The plaintiffs in Toole alleged that an insurer breached its credit life and disability policies by failing to refund unearned premiums upon early payment of car loans. In affirming the certification of a class consisting of insureds from 38 states, the court noted that the “class members executed materially similar form contracts” that required the insurer to refund unearned premiums, that the insurer “administers all its policies in the same manner,” and that breach of the refund obligation could be proven by electronic records that showed loan payoff dates and identified insureds that had not received refunds. Toole, 634 S.E.2d at 377. The court in Toole rejected the insurer’s argument that a multi-state class would be unmanageable because of the need to apply the laws of 38 states, noting that the insurer had “not come forward with evidence showing how the result would be different for the members of the class under the law of contracts on a state-by-state basis.”