Numerous class action lawsuits have been filed against auto insurers regarding the valuation of vehicles that are total losses. These cases typically allege that insurers are undervaluing vehicles in a common way or in violation of national regulations. The Ninth Circuit recently upheld the class certification denial in a published decision that I hope will be helpful to insurers defending these and other cases involving different lines of insurance but similar issues.
In Lara v. First National Insurance Company of America, No. 21-35126, – F.4th -, 2022 WL 414691 (9th Cir. Feb. 11, 2022), plaintiffs sued Liberty Mutual and CCC Intelligent Solutions, a vendor that helps insurers evaluate vehicles, alleging a breach of contract relating to Liberty Mutual and an unfair trade practices action against all defendants. The insurance policy required payment of the “actual cash value” of the vehicle, which was defined by a Washington regulation as “fair market value”. CCC researches the prices at which used vehicles are selling at car dealerships, then makes an adjustment based on the pre-loss condition of the insured vehicle and the difference between the prices paid for vehicles purchased from individuals rather than at dealerships. The adjuster then adjusts, in certain cases, the value indicated on the CCC report. The plaintiffs claimed that the “conditional adjustments” on the CCC reports violated a Washington regulation. The case survived a motion to dismiss, but the district court denied class certification under Rule 23(b)(3), due to lack of predominance of common issues and because a class action would not be a superior method of resolving the dispute.
In confirming, the Ninth Circuit concluded that whether the adjustment of terms violated the settlement was a common question, but liability and injury would require individualized settlement of each claim. The court explained that “[b]Because Liberty owed each putative class member the actual cash value of his or her car, if a putative class member received that amount or more, then he or she cannot win on the merits,” and determining that “would involve d Look at the actual pre-crash value of the car, then comparing it with what was offered to each person. In other words, there should be a minitrial on the value of each vehicle.
As plaintiffs often do in these cases, plaintiffs here have argued that the value of the vehicles involves “damage issues”, and some courts have said that if the individualized issues alone involve damage, that should not negate the class certification. But, as the Ninth Circuit explained here, “if there is no prejudice, then claims for breach of contract and unfair trade practices must fail” and “[t]it is not a question of damages; it is a question of substance. In other words, if the final amount paid was enough, it doesn’t matter how you get there. As the court put it, “the district court was correct in applying ‘the old basketball phrase, ‘no harm, no foul’.” The court also agreed with the district court that the superiority requirement was not met because individual trials would be preferable given the nature of the issues to be decided.
Insurers will want to cite this opinion in cases involving other lines of insurance as well, such as property. Property insurance class actions often involve disputes over actual cash value or replacement cost value, and the same principle should apply. Disputes over whether a few hundred more dollars were owed for damage caused by a hailstorm, for example, are individualized. As in this case, these disputes may be best resolved through the adjudication process provided for in these policies, or through small claims court, and often do not meet the requirements of a class action.