The Colorado Supreme Court recently reversed a class certification order in a case challenging the manner in which uninsured/underinsured motorist (UM/UIM) coverage was marketed and sold. The plaintiff, Mark Benzing, alleged that Mid-Century Insurance Company and its parent, Farmer’s Insurance Exchange, engaged in deceptive trade practices by failing to comply with the disclosure requirements announced in a recent Colorado Supreme Court decision which held that UM/UIM coverage applies to an insured person regardless of whether the insured occupied the insured vehicle at the time of injury. The effect of the court’s decision was to make unnecessary the purchase of additional UM/UIM coverage for additional family vehicles. Mr. Benzing had purchased a second family vehicle, and alleged he was “duped into paying more than [he] would have paid” had he known the effect of the court’s decision. Mr. Benzing brought claim under the Colorado Consumer Protection Act on behalf of himself and an alleged class of those similarly situated.
The trial court initially certified the class, but, after a transfer, it was decertified on the basis that the plaintiff had failed to establish injury on a class-wide basis, because the additional (allegedly unnecessary) coverage may have provided a benefit to some insureds. However, Colorado’s intermediate Appellate Court reversed, finding certification was appropriate, because a “fraud-on-the-market” theory could suffice to establish class-wide injury. The Colorado Supreme Court then reversed that holding, finding that the plaintiff could not avail himself of the fraud-on-the-market theory to establish classwide injury because (1) the plaintiff’s claims were not based on the market price of the policies and the integrity of the market but rather on Farmers’ lack of disclosure in individual transactions, and (2) the plaintiff could not establish that the market was “efficient” – meaning that the market price reflected all available public information – because the court’s prior decision was public information at the time, and was allegedly not reflected in the pricing of policies, meaning plaintiff’s claims relied on the inefficiency of the market. The court thus reversed the Appellate Court, with instructions to remand to the trial court, effectively reinstating the original decertification order.