Justia Insurance Law Opinion Summaries

A Tennessee resident insured by State Farm had her vehicle declared a total loss after an accident. State Farm calculated the payout for her claim using a valuation method provided by Audatex, which included a “Typical Negotiation Adjustment” (TNA) that reduced the value based on the assumption that used cars typically sell for less than their advertised price. The plaintiff argued that this adjustment did not reflect actual market practices and unfairly reduced the payout, constituting a breach of contract and a violation of Tennessee law. She filed a class action on behalf of similarly situated State Farm policyholders in Tennessee who received payouts calculated with the TNA.After the plaintiff filed suit in Tennessee state court, State Farm removed the case to the United States District Court for the Western District of Tennessee. The district court denied State Farm’s initial summary judgment motion but enforced the policy’s appraisal provision, leading to an appraisal process in which the plaintiff ultimately received a higher payout. State Farm then argued that the plaintiff’s claims were moot or lacked standing because she had been paid the appraised value, but the district court rejected this argument, finding her claims for breach of contract and consequential damages survived. The district court certified a class of Tennessee policyholders who received payouts reduced by the TNA, finding the requirements of Federal Rule of Civil Procedure 23 were met.The United States Court of Appeals for the Sixth Circuit reviewed the class certification. The court held that the plaintiff had standing to pursue her claims and that the class satisfied the requirements of numerosity, commonality, typicality, adequacy, predominance, superiority, and ascertainability. The court distinguished its approach from other circuits, emphasizing that common questions about the propriety of the TNA predominated over individualized damages issues. The Sixth Circuit affirmed the district court’s order certifying the class and remanded for further proceedings. View "Clippinger v. State Farm Automobile Insurance Co." on Justia Law

Three individuals, two of whom were former insureds of an insurance company, financed their insurance premiums through a separate premium finance company. Under the financing agreements, the finance company paid the full premium to the insurer and the insureds made monthly payments to the finance company. Each agreement authorized the finance company to cancel the insurance policy if the insured defaulted on payments. After defaults occurred, the finance company initiated cancellation of the policies. The plaintiffs alleged that the insurer’s procedures for cancellation did not comply with Louisiana law, resulting in ineffective cancellation and breach of good faith.The plaintiffs initially filed a class action in Louisiana state court against the insurer and the finance company, claiming that the insurer had not properly cancelled their policies and had failed to act in good faith. The case was removed to the United States District Court for the Middle District of Louisiana. Both sides moved for summary judgment on whether the insurer’s cancellation procedures satisfied Louisiana statutory requirements. The district court granted summary judgment for the insurer, finding that its procedures complied with state law, and dismissed all claims with prejudice.On appeal, the United States Court of Appeals for the Fifth Circuit reviewed whether the insurer’s procedures strictly adhered to Louisiana law governing cancellation of financed insurance policies. The court held that Louisiana law does not require a signature on the notice of cancellation sent by the premium finance company to the insurer, and that the insurer’s receipt of notice via its computer system satisfied the statutory requirement of “receipt.” The court declined to certify questions of statutory interpretation to the Louisiana Supreme Court and affirmed the district court’s judgment. View "Williams v. GoAuto Insurance" on Justia Law

Noah Gilbert purchased a motor vehicle insurance policy from Progressive Northwestern Insurance Company, initially declining underinsured motorist (UIM) coverage but later adding a UIM endorsement with $25,000 per person and $50,000 per accident limits. The policy included an offset provision, reducing any UIM payout by amounts received from another party’s insurance. Gilbert paid premiums for this coverage but never filed a UIM claim or experienced an accident triggering such coverage. He later filed a putative class action, alleging that Progressive’s UIM coverage was illusory under Idaho law and asserting claims for breach of contract, breach of the implied covenant of good faith and fair dealing, unjust enrichment, fraud, and constructive fraud.The District Court of the Fourth Judicial District, Ada County, reviewed cross-motions for summary judgment. The court raised the issue of standing and ultimately held that Gilbert lacked standing because he had not filed a claim or been denied coverage, and thus had not suffered an injury-in-fact. Alternatively, the court found that Gilbert’s claims failed on the merits: there was no breach of contract or bad faith without a denied claim, no damages to support fraud or constructive fraud, and unjust enrichment was unavailable due to the existence of a valid contract. The court granted summary judgment for Progressive and denied Gilbert’s motion for class certification as moot.On appeal, the Supreme Court of the State of Idaho held that Gilbert did have standing, as payment of premiums for allegedly illusory coverage constituted a concrete injury. However, the Court affirmed the district court’s judgment, finding that Gilbert’s claims failed on the merits because he never filed a claim, was never denied coverage, and did not incur damages. The Court also affirmed the dismissal of the unjust enrichment claim, as an enforceable contract provided an adequate legal remedy. The judgment in favor of Progressive was affirmed. View "Gilbert v. Progressive Northwestern Insurance Co." on Justia Law

Two former customers of an insurance company filed suit after their vehicles were declared total losses and the insurer paid out claims based on the vehicles’ “actual cash value” (ACV). The insurance policy defined ACV as the “market value, age, and condition of the vehicle at the time the loss occurs.” The insurer calculated market value using a system that included a “projected sold adjustment” (PSA), which reduced the list prices of comparable vehicles to reflect typical consumer negotiation. The plaintiffs alleged that the PSA always resulted in an artificially low valuation, breaching the policy’s requirement to pay true market value.The United States District Court for the District of Arizona found that the plaintiffs met the requirements of numerosity, commonality, typicality, and adequacy under Federal Rule of Civil Procedure 23(a). However, the court determined that individual questions about how each vehicle’s ACV was calculated predominated over common questions, as required by Rule 23(b)(3), and therefore denied class certification. The plaintiffs appealed this decision.The United States Court of Appeals for the Ninth Circuit reviewed the district court’s denial of class certification for abuse of discretion. The appellate court held that the PSA was not facially unlawful and that determining whether each class member was harmed would require individualized inquiries into each person’s vehicle valuation. Because liability and injury could not be established through common evidence, individual issues would predominate over common ones. The Ninth Circuit therefore affirmed the district court’s order denying class certification, holding that class certification was inappropriate under Rule 23(b)(3) due to the predominance of individualized questions. View "AMBROSIO V. PROGRESSIVE PREFERRED INSURANCE COMPANY" on Justia Law

Peterson’s Oil Service, Inc. supplied heating fuel to customers in Massachusetts between 2012 and 2019. The fuel contained higher-than-standard levels of biodiesel, averaging 35% between 2015 and 2018, exceeding the 5% industry standard for ordinary heating oil. Customers alleged that this biodiesel-blended fuel was incompatible with conventional heating systems, caused repeated heat loss, and resulted in permanent damage to their equipment. They brought a class action in Massachusetts state court against Peterson’s and its officers, asserting claims for breach of contract, fraud, and negligence, including allegations that Peterson’s continued supplying the fuel despite customer complaints and only later disclosed the high biodiesel content.United States Fire Insurance Company and The North River Insurance Company had issued Peterson’s a series of commercial general liability and umbrella policies. The insurers initially defended Peterson’s in the class action under a reservation of rights, then filed suit in the United States District Court for the District of Massachusetts seeking a declaration that they owed no duty to defend or indemnify Peterson’s. The insurers moved for summary judgment, arguing that the claims did not arise from a covered “occurrence” and that policy provisions limiting or excluding coverage for failure to supply applied. The district court denied summary judgment, finding a genuine dispute as to whether Peterson’s actions were accidental and holding that the failure-to-supply provisions were ambiguous and did not apply.On appeal, the United States Court of Appeals for the First Circuit affirmed. The court held that the underlying complaint alleged a potentially covered “occurrence” because it was possible Peterson’s did not intend or expect the property damage alleged. The court also held that the failure-to-supply provisions were ambiguous and, under Massachusetts law, must be construed in favor of coverage. The district court’s summary judgment rulings were affirmed. View "United States Fire Insurance Company v. Peterson's Oil Service, Inc." on Justia Law

Customers of a heating oil company in Massachusetts brought a state court class action alleging that, starting in 2012, the company sold home heating oil with excessive biodiesel content, which damaged their heating equipment. The company received a demand letter and complaint in March 2019, before it was insured by the plaintiff insurance company. The insurance company began providing coverage in July 2019 under a commercial general liability policy and an umbrella policy. The policy included provisions excluding coverage for property damage known to the insured before the policy period began.After being asked to defend the company in the state class action, the insurer refused, arguing that the company’s prior knowledge of the alleged damage—based on the demand letter, complaint, and media coverage—triggered the policy’s known loss and loss-in-progress exclusions. The insurer then filed a declaratory judgment action in the United States District Court for the District of Massachusetts, seeking a ruling that it had no duty to defend or indemnify. The state court class had two subclasses: customers who received oil before July 5, 2019, and those who first received oil after that date.The district court found that the insurer had no duty to defend claims by customers who received oil before the policy period, but did have a duty to defend claims by customers who first received oil after coverage began, since the company could not have known of damage that had not yet occurred. Applying the “in for one, in for all” rule, the court held the insurer must defend the entire suit. The court denied summary judgment for the insurer on the duty to defend and granted partial summary judgment to the insured.The United States Court of Appeals for the First Circuit affirmed, holding that the policy’s known loss and loss-in-progress provisions did not bar coverage for claims by customers whose property damage began after the policy period commenced, and thus the insurer has a duty to defend the entire class action. View "Federated Mutual Insurance Co. v. Peterson's Oil Service, Inc." on Justia Law

During the COVID-19 pandemic, two individuals who held automobile insurance policies with a major insurer in California alleged that the insurer’s rates became excessive due to a significant reduction in driving and traffic accidents. They claimed that the insurer was required by statute to refund a portion of the premiums collected during this period, even though the rates had previously been approved by the state’s insurance commissioner. The insurer did provide partial refunds in response to directives from the insurance commissioner, but the plaintiffs argued these refunds were insufficient and sought further restitution on behalf of a class of similarly situated policyholders.The Superior Court of Alameda County initially allowed the plaintiffs to amend their complaint after sustaining a demurrer. In their amended complaint, the plaintiffs continued to assert claims under California’s Unfair Competition Law and for unjust enrichment, maintaining that the insurer’s failure to provide full refunds violated Insurance Code section 1861.05(a). The trial court, however, sustained the insurer’s subsequent demurrer without leave to amend, holding that the statutory scheme did not require insurers to retroactively refund premiums collected under previously approved rates, even if those rates later became excessive due to changed circumstances.The California Court of Appeal, First Appellate District, Division One, reviewed the case on appeal. The court held that Insurance Code section 1861.05(a) does not impose an independent obligation on insurers to retroactively refund premiums collected under rates approved by the insurance commissioner, even if those rates later become excessive. The court reasoned that the statutory scheme provides for prospective rate adjustments through the commissioner’s review process, not retroactive modifications. The court also found that the insurer’s conduct was affirmatively permitted under the statutory “prior approval” system, and thus not actionable under the Unfair Competition Law. The judgment in favor of the insurer was affirmed. View "Davis v. CSAA Insurance Exchange" on Justia Law

The plaintiff purchased a life insurance policy for her son and consistently paid the required premiums. She alleges that the insurer failed to provide the statutory notices and protections mandated by California law before terminating her policy for nonpayment. After missing a payment in 2016, her policy lapsed, and following reinstatement, it was terminated again in 2018 after another missed payment. The plaintiff contends that the insurer’s failure to comply with statutory notice requirements rendered the termination ineffective and that her experience was representative of many other policyholders in California.The United States District Court for the Eastern District of California granted in part the plaintiff’s motion for class certification. The court found that the prerequisites of Federal Rule of Civil Procedure 23(a) were met and certified a class under Rule 23(b)(2) for declaratory and injunctive relief. The certified class included all policy owners or beneficiaries whose policies lapsed for nonpayment without the required statutory notice. The court appointed the plaintiff as class representative but denied, without prejudice, certification for monetary relief under Rule 23(b)(3).The United States Court of Appeals for the Ninth Circuit reviewed the district court’s class-certification order. Relying on its intervening decision in Small v. Allianz Life Insurance Co. of North America, the Ninth Circuit held that to recover for violations of the relevant California statutes, plaintiffs must show not only a statutory violation but also that the violation caused them harm. The court found that the plaintiff was not an adequate class representative for beneficiaries and that her claims were not typical of class members who intentionally allowed their policies to lapse. The Ninth Circuit reversed the district court’s class-certification order and remanded the case for further proceedings. View "Farley v. Lincoln Benefit Life Co." on Justia Law

The plaintiff, after her vehicle was declared a total loss in a collision, received a payment from her insurer based on the “actual cash value” of her car, as determined by a third-party valuation system. This system used comparable vehicle listings and, when actual sales prices were unavailable, applied a “Projected Sold Adjustment” to estimate market value. The plaintiff accepted the insurer’s offer, paid her deductible, and did not contest the valuation or invoke the policy’s appraisal process. Despite this, she filed suit alleging breach of contract, claiming the insurer’s use of the adjustment resulted in underpayment, and sought to represent a class of similarly situated South Carolina policyholders.The United States District Court for the District of South Carolina certified a class of individuals who received total loss payments calculated using the Projected Sold Adjustment. The court found that the plaintiff’s claims were typical of the class and that common questions predominated, thus meeting the requirements for class certification under Federal Rule of Civil Procedure 23.On interlocutory appeal, the United States Court of Appeals for the Fourth Circuit reversed the class certification order. The Fourth Circuit held that the plaintiff lacked standing because she did not suffer a concrete injury—she accepted the insurer’s payment, was not out-of-pocket beyond her deductible, and never demonstrated that her vehicle’s value exceeded the amount paid. The court further held that, even if standing existed, class certification was improper because determining whether the insurer breached its obligation to pay actual cash value would require individualized inquiries into each class member’s vehicle and circumstances. Thus, the requirements of commonality and predominance under Rule 23 were not met. The district court’s order certifying the class was therefore reversed. View "Freeman v. Progressive Direct Insurance Company" on Justia Law

Plaintiffs initiated a class action against National General Insurance Company and Integon National Insurance Company, alleging that the defendants improperly denied their car accident claims and rescinded their automobile insurance policies. The plaintiffs claimed that the defendants retroactively denied insurance claims and rescinded policies based on the plaintiffs' failure to disclose household members. The plaintiffs sought class certification for 1,032 insureds who had their policies rescinded under similar circumstances.The Superior Court of San Bernardino County denied the plaintiffs' motion for class certification, citing the lack of a palpable trial plan for resolving damages. The court noted that the plaintiffs admitted most of the available damages were inherently individualized and expressed concern that the plaintiffs wanted to make the case more manageable by forfeiting certain categories of damages. The court concluded that class treatment would not be a substantial benefit to the litigants.The California Court of Appeal, Fourth Appellate District, Division Three, reviewed the case. The appellate court disagreed with the defendants' contention that common questions of law and fact did not predominate on the issue of liability. The court found that the trial court had relied on improper legal criteria by denying certification based on individualized damages and by not considering the potential benefits of class certification. The appellate court held that individualized proof of damages does not preclude class certification when common issues of liability predominate. The court reversed the order denying class certification and remanded the case, directing the trial court to certify, at minimum, a liability-only class and to consider whether any subclasses are necessary. View "Cobos v. National General Insurance Co." on Justia Law