Recent Class Actions and Extra-Contractual Claims Asserted Against Insurance Carriers Arising from Subrogation Efforts
Compiled by Kenneth Levine, Esquire
Nelson Levine de Luca & Horst, LLC
A. Claims Brought by Insureds – Reimbursement and “Made Whole” Assertions
1. BIRCH V. FIRE INS. EXCHANGE
122 P.3d 696 (Utah App. Sept. 22, 2005)
UTAH STATE COURT
CLASS ACTION COMPLAINT FILED: 2003
ALLEGATIONS: “Children with matches” started fire damaging nearby Birch property. Carrier paid full replacement cost ($7732.91) over $500.00 deductible. Carrier subrogated and settled claim for 95% (agreeing on 5% depreciation). Carrier returned $475.00 (95%) of $500.00 deductible. $25 difference brought class action.
CLAIMS: Birch claims he was not “made whole” and filed class action to recover full amount of deductible.
TRIAL DISPOSITION: Summary Judgment Granted.
APPELLATE DISPOSITION: AFFIRMED
Birch received $361.65 more than actual depreciated damages, double recovering portion of property damages. Under unique facts, Birch has been “made whole” - paid everything to which he was entitled under insurance policy and recovered more than entitled to if he had filed independent action against tortfeasors.
2. MONTE DE OCA v. STATE FARM
897 So.2d 471 (Fla. App. 3 Dist., Dec. 22, 2004)
Review Denied: 934 So.2d 449 (Fla. June 15, 2006)
FLORIDA STATE COURT
CLASS ACTION COMPLAINT FILED: 2003
ALLEGATIONS: Insured's auto in accident. State Farm paid Insured full amount of damage, less $500 deductible. State Farm resolved subro claim on basis of 50% negligence. State Farm reimbursed Insured 50% ($250) of deductible.
CLAIMS: Insured filed class action seeking balance of deductible on behalf of all State Farm Insureds NATIONWIDE who didn’t receive 100% of deductible from subro money State Farm recovered.
TRIAL DISPOSITION: Summary Judgment Granted. Insured's complaint failed to state cause of action and case could not be maintained as class action.
APPELLATE DISPOSITION: AFFIRMED
“Insured, as a wrongdoer legally responsible for 50% of harm, not entitled to be absolved from liability and must not receive windfall. His liability as 50% comparative wrongdoer is for half of deductible. Under formula Monte de Oca made whole and thus has no cause of action.”
3. NAT’L CONT’L INS. V. PEREZ
897 So.2d 492 (Fla. App. 3 Dist., Jan 12, 2005)
Review Denied: 934 So.2d 450 (Fla. June 15, 2006)
FLORIDA STATE COURT
Similar jurisdiction and allegations as in Monte de Oca matter directly above. But, the trial court in this case actually certified the class.
TRIAL DISPOSITION: Class Certified.
APPELLATE DISPOSITION: REVERSED
“Insureds claim they were not fully compensated where insurer returned only prorated portion of deductibles considering insureds' contributory negligence. In Monte De Oca, we clarified that insurer does not violate made-whole doctrine where it returns to contributorily negligent insured properly calculated prorated portion of insured's deductible after recovery. The analysis in Monte de Oca resolves case and must be reversed.”
4. ELLIS v. ALLSTATE
479 F.Supp.2d 782 (N.D. Ill. Dec 7, 2006)
ILLINOIS FEDERAL COURT
CLASS ACTION COMPLAINT FILED: August 29, 2006
ALLEGATIONS: Allstate’s Insured injured in accident, received Med Pay. Insured recovered $9,800 for personal injuries, defendant sent Allstate full $4,100 Med Pay subro lien without paying Insured’s counsel under Common Fund Doctrine (legal fees).
CLAIMS: Violation of Illinois Ins. Code; Violation of Illinois Consumer Fraud Act; Unjust Enrichment; and Civil Conspiracy and RICO violations (Allstate and State Farm).
PREDISPOSITION: Allstate waived subro rights and endorsed and tendered $4,100 check
DISPOSITION: All Claims Dismissed
a. No Unjust Enrichment (Allstate returned money);
b. Allstate did not violate Insurance Code as policy did not list compliance with Common Fund doctrine as “benefit;”
c. Allstate did not engage in scheme to defraud insured and his attorneys as allegations rest on statements of alleged fraudulent intent (not actionable).
5. FERGUSON v. SAFECO
342 Mont. 380, 180 P.3d 1164 (Mont. April 1, 2008)
MONTANA STATE COURT
CLASS ACTION COMPLAINT FILED: Sept. 23, 2004
ALLEGATIONS: After accident, Safeco subrogated, recovering portion of claim. Insured not reimbursed; not “made whole” prior to Safeco’s recovery; never provided notice she could recover; and claimed Safeco never inquired as to whether Insured made whole (deductible, rental expenses, attorney fees).
CLAIMS: Violation of Montana's Unfair Trade Practices Act; Breach of Policy; Fraud; Civil Conspiracy; Bad Faith.
TRIAL DISPOSITION: Class NOT Certified: no COMMON Questions; individual analysis as to “made whole,” predominated over such common issues
APPELLATE DISPOSITION: REVERSED
a. Insurer had duty to determine if Insured made whole;
b. Common fact issue as to whether Safeco programmatically breached that duty;
c. Commonality requirement not stringent threshold; only needs standardized, uniform course of conduct
PENDING STATUS (as of 1/1/2010):
Certified as class action by district court on remand. Awaiting direction regarding which Safeco companies will be involved, which claims will be included, and what relief will be allowed. Argument has been made on cross motions for summary judgment, and Order from Court anticipated at any time. Settlement conference was unproductive.
5. COMPTON V. COUNTRY MUT. INS.
887 N.E.2d 878 (Ill. App. 1 Dist. April 29, 2008)
ILLINOIS STATE COURT
CLASS ACTION COMPLAINT FILED: Feb. 17, 2006
ALLEGATIONS: Insurer filed lien (without permission in policy) with tortfeasor's carrier to recover payments made to Plaintiff's medical providers. Plaintiff settled with tortfeasor. Defense carrier issued $1,050 check payable to Plaintiff, Plaintiff's attorney and Country Mutual. Country Mutual denied access to funds to which Insured entitled.
CLAIMS: Declaration that Imposing Liens Improper; Breach of Policy; Violation of Illinois Consumer Fraud Act.
TRIAL DISPOSITION: Dismissed Third Amended Complaint (No Damages as Country Mutual entitled to entire settlement check).
APPELLATE DISPOSITION: AFFIRMED
Plaintiff’s argument not persuasive that lien was for Med Pay coverage payments and not monies from property settlement as policy’s subro provision made no distinction between damage types recovered in allowing carrier to be reimbursed for payments to insured.
6. Pennsylvania Deductible Reimbursement Cases:
(i) JONES v. NATIONWIDE
Slip opinion (Phila. Ct. Comm Pleas, Oct. 6, 2008)
PENNSYLVANIA STATE COURT
CLASS ACTION COMPLAINT FILED: July 15, 2008
ALLEGATIONS: Deductible of $500. Insured’s vehicle damaged. Nationwide pursued subro claim and recovered in excess of $500. Allege entitlement to complete reimbursement before carrier entitled to any payment. Nationwide pro rated recovery and paid insured $450. This dispute arose from $50 difference
CLAIMS: Breach of Contract; Bad Faith; Conversion; Unjust Enrichment; Injunctive Relief
DISPOSITION: Preliminary Objections Granted; Claims Dismissed.
No opinion yet, but PA Ins. Regulation 146.8(c) allows subro recoveries to be shared on proportionate basis with insured, and so conduct doesn’t violate common law “made whole” doctrine.
APPEALED to Pennsylvania Superior Court. Oral Argument on February 23, 2010. Pending resolution
(ii) HARNICK v. STATE FARM
2009 WL 579378 (E.D. Pa. Mar 5, 2009)
PENNSYLVANIA FEDERAL COURT
CLASS ACTION COMPLAINT FILED: December 11, 2008
ALLEGATIONS: Deductible of $500. Insured’s vehicle damaged. State Farm pursued subro claim and recovered in excess of $500. Allege entitlement to complete reimbursement before carrier entitled to any payment. State Farm pro rated recovery and paid insured $250.
CLAIMS: Breach of Contract; Bad Faith; Conversion; Unjust Enrichment; Injunctive Relief
TRIAL COURT DISPOSITION: Dismissed.
PA Ins. Regulation 146.8(c) allows subro recoveries to be shared on proportionate basis with insured. Because behavior does not violate common law “made whole” doctrine, Plaintiffs have failed to state valid claims and must be dismissed. Plaintiffs wrongly argued that regulation was invalid.
APPEALED on Mar 31, 2009 to US Court of Appeals for Third Circuit. Matter stayed pending disposition of Jones v. Nationwide in state court.
(iii) AMOS v. AMERICAN INDEPENDENT INS.
LEVY V. HARLEYSVILLE INS.
Related Pennsylvania cases with same theme and fact patterns, seeking to set aside favorable insurance regulation modifying “made whole” doctrine so as to pro rate recoveries. These matter were –like Harnick – filed in federal court and are stayed pending disposition of Jones v. Nationwide in state court.
7. CHANDLER v. STATE FARM
596 F.Supp.2d 1314 (C.D. Cal. Dec 29, 2008)
CALIFORNIA FEDERAL COURT
CLASS ACTION COMPLAINT FILED: August 21, 2008
ALLEGATIONS: State Farm paid $253 for rental expense and Insured paid $63. State Farm subrogated, but did not demand Insured’s loss. Tortfeasor’s carrier only paid $70 to State Farm for all rental expenses, and advised Insured it would pay him nothing. State Farm refused to share, and told Insured to file own claim.
CLAIMS: Violation of Unfair Competition Law; Conversion; Unjust Enrichment; Declaratory Relief
DISPOSITION: Dismissed Without Prejudice.
Plaintiff lacks standing and his claims are unripe because Plaintiff has not established he cannot recover $63 from tortfeasor. Until Plaintiff sues tortfeasor and is unable to recover amount, Plaintiff cannot claim State Farm harmed him. Plaintiff's claims involve future events too uncertain and speculative to permit lawsuit.
8. DeHERRERA v. AMERICAN FAMILY MUT. INS. CO.
219 P.3d 346 (Colo.App., March 05, 2009)
COLORADO STATE COURT
Allegations: After personal injury claims against auto accident tortfeasor were settled, Insured brought action against Insurer seeking declaration that Insurer did not have subrogation right for reimbursement of medical expenses, and asserting bad faith and outrageous conduct claims.
TRIAL COURT DISPOSITION: Insurer dismissed on summary judgment, and insured appealed.
APPELLATE COURT DISPOSITION: AFFIRMED
a. Insurer had right of subrogation under insurance policy for payments Insurer made directly to Insured's medical providers;
b. Anti-subrogation rule did not bar Insurer from recovering from settlement proceeds payments made to Insured's medical providers;
c. “Make whole” doctrine was not applicable because case law relied on by Insured was based on Colorado's repealed No-Fault Act (and “such a rule would not comport with the policy of encouraging the settlement of lawsuits”); and
d. Insurer did not act in bad faith or engage in outrageous conduct when it sought reimbursement for medical payments.
9. California Attorney Fee and Litigation Cost Reimbursement Cases:
(i) 21ST CENTURY INS. CO. V. SUPERIOR COURT
60 Cal. Rptr. 3d 782 (Cal. App. 4 Dist., June 14, 2007)
47 Cal.4th 511, 213 P.3d 972, 98 Cal.Rptr.3d 516 (Cal. Supr. Ct. Aug. 24, 2009)
CALIFORNIA STATE COURT
CLASS ACTION COMPLAINT FILED: 2005
ALLEGATIONS: Insured alleged Allstate not entitled to reimbursement of Med Pay benefits since Insured’s attorney fees and costs prevented Insured from being “made whole.” Allstate’s received $1,700 of $4,200 lien from Insured’s recovery, then Insured filed Class Action.
CLAIMS: Violation of California Business and Professions Code; Conversion; Unjust Enrichment.
TRIAL DISPOSITION: Motion to Dismiss Denied. Under “made whole” doctrine, insurer that doesn’t participate in litigation only entitled to reimbursement “when amount carrier paid not exceeded by attorney's fees and costs incurred by insured to obtain recovery.”
APPELLATE DISPOSITION: OVERRULED, Dismissing Case, but ...
... Appealed To California Supreme Court and Consolidated with:
(ii) ALLSTATE V. SUPERIOR CT.
(iii) ALLSTATE V. SUPERIOR CT.
(iv) WAWANESA GENERAL INS. V. SUPERIOR CT.
(v) INTERINSURANCE EXCH. of the AUTOMOBILE CLUB V. SUPERIOR CT.
Under 21ST CENTURY INS. V. SUPERIOR CT.
California Supreme Court Docket #S154790
CALIFORNIA SUPREME COURT DISPOSITION OF CONSOLIDATED MATTERS: Insured's attorney fees and costs to obtain compensation from tortfeasor are NOT included when applying made whole rule that Insurer can’t seek reimbursement in the med-pay insurance context unless Insured has been ‘made whole’ by recovery from tortfeasor and other sources. Attorney fee liability is to be shared pro rata between Insurer and Insured.
10. Washington State Deductible Reimbursement Cases:
(i) AVERILL v. FARMERS INS. CO.
Court of Appeals of Washington, Dock. # 62767-8-1
WASHINGTON STATE COURT
CLASS ACTION COMPLAINT FILED: Nov. 2, 2007
ALLEGATIONS: Farmers insured vehicle with $500 deductible. After accident, arbitrator determined that Averill and State Farm’s driver were each 50% responsible, resulting in payment by State Farm of only 50% of cost to repair Plaintiff's vehicle. State Farm sent check to Insured for only $250 (50% of collision coverage deductible).
CLAIMS: Violations of Washington Consumer Protection Act; bad faith; conversion, and breach of contract on behalf of Insured and “all others similarly situated.”
TRIAL COURT DISPOSITION: Court granted summary judgment to Class on breach of contract claim, concluding that Washington insurance regulation (which has since been repealed and superseded) could not be reconciled with Washington caselaw and that made-whole doctrine required Farmers to reimburse Averill for entire deductible before it could recover anything on its subrogation claim.
APPELLATE STATUS: Trial court certified ruling for discretionary appellate review. Appellate court granted discretionary review, stating that "there clearly are substantive grounds for a difference of opinion whether the make whole doctrine extends to agreed deductibles." On January 11, 2010 the appellate court heard oral argument on the issues, and decision is pending.
(ii) SOMAL v. ALLSTATE
2009 WL 3126452 (W.D.Wash., Sept. 28, 2009)
Washington STATE and Federal Court
CLASS ACTION COMPLAINT FILED: June 23, 2009
ALLEGATIONS: Allstate insured vehicle with $500 deductible. After accident, Allstate and State Farm agreed to split liability on 60/40 basis, resulting in payment by State Farm of only 40% of cost to repair Plaintiff's vehicle. Allstate sent check to Insured for only $200 (40% of collision coverage deductible).
CLAIMS: Violations of Washington Consumer Protection Act; bad faith; conversion, and breach of contract on behalf of Insured and “all others similarly situated.”
PROCEDURAL HISTORY: Allstate removed case to federal court on July 27, 2009, stating class action lawsuit met requirements for diversity jurisdiction under Class Action Fairness Act. Plaintiff sought remand back to state court, asserting that Allstate failed to establish amount in controversy exceeds $5 million, exclusive of interest and costs. Court granted remand, and the matter is pending in Washington State Court.
TRIAL COURT DISPOSITION: In response to cross-motions for summary judgment, the Insureds Class’s motion was GRANTED.
POSSIBLE APPELLATE STATUS: Allstate is currently seeking interlocutory review from the Washington Court of Appeals. Hearing on its motion for leave to take interlocutory appeal is set for February 12, 2010. If leave to appeal is denied, Allstate will remain at the trial court level so as to resolve damages issues (with appeal as of right options to follow).
(iii) WAC § 284-30-393. Washington has new insurance regulation (effective in August 2009) that arguably controls such deductible reimbursements. It is noted by the parties in these cases, but may have greater relevance as to future matters. WAC § 284-30-393 (recovery by Insurer for Insured's property damage must first go to cover Insured's deductible).