Claims and Bad Faith Law Blog

ACCESS FROM THE BEGINNING. BETTER THAN MAKING POLICY THROUGH LITIGATION.

Yesterday on my Claims and Issues Blog, I wrote an article based on this quote from an article by Professor Ron Buliung of the University of Toronto, Despite Legislative Progress, Accessible Cities Remain Elusive The Conversation (online Jan. 24, 2024):

        Disability as an afterthought makes platform and vehicle retrofit an inconvenient, costly necessity. The technical part of this problem can likely be solved with existing technology, like platform gap fillers and bridge plates. Waiting around for disabled passengers to engage in class-action litigation is not an effective strategy.

    Buliung, who specializes in disability studies and transport geography, was specifically commenting on subway platforms and trains that are too high in the air for many disabled people to access, such that "platform gap fillers and bridge plates" exist to literally fill the gaps and bridge the heights.  Whether that is enough will depend on how you react to reading the rest of his article.

        But it is certainly true in my experience that litigation is a poor way to make policy.  "Waiting around for disabled passengers" to solve the gaps and scale the heights at subway platforms by any kind of litigation, including the "class-action litigation" he specifically mentions, is not a good option.

         Litigation usually depends on one case at a time.  It is rare for litigation to affect the outcomes of many cases all at once.          Moreover, lawyers in litigation owe their loyalties to their clients, not to society as a whole.  They work to obtain the result that is best for their client, not the result that is best for, say, America.

         That is why the results of individual cases are not very satisfactory to large groups of people.   Sometimes, though, litigation is the only option to make policy.  That is a great sadness of our time.

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CLASS ACTION COVID DAMAGES CLAIMS.

A motion to certify a class of insurance coverage claimants with COVID-related loss of income, expenses, and other damages was granted in part, denied in part in Elegant Massage, LLC v. State Farm Mut. Auto. Ins. Co., No. 2:20-cv-265, 2021 WL 3686668 (E.D. Va. August 19, 2021).

          The Court in that case denied the motion to certify a Nationwide Class of policyholders whose COVID-19 coverage claims have been denied by State Farm for various business interruption losses and damages.

          The Court granted the motion to certify what the Court called a "Virginia Sub-Class":

All persons or entities in the Commonwealth of Virginia with a Businessowners insurance policy issued by State Farm on Form CMP-4100, including a Loss of Income and Extra Expense endorsement on Form CMP 4705.1 or CMP 4705.2, or with the same or substantially similar terms, in effect at any time between March 23, 2020 through June 30, 2020, and who submitted claims for business income losses and/or extra expenses incurred as a result of social distancing, closure and/or stay-at-home orders issued from March 2020 forward, which Defendants denied.

Elegant Massage, 2021 WL 3686668, at *11.  How the Court reached this decision is a textbook example of Rule 23 Class Certification analysis.

          Emphasizing the discretion extended to District Judges ruling on Class Certification motions -- discretion extended even by the Roberts Court -- the Court in this case carefully considered the requirements extant under both Rule 23(a) and 23(b).

          The focus here is of course on the Court's treatment of Insurance Bad Faith Claims.  In addition, claims for various kinds of Business Interruption Coverage and the carrier's Virus Exclusion are highlighted for our purposes.

1. Rule 23(a) Numerosity. In part here pertinent, State Farm previously answered an Interrogatory in the case in which it identified 111 "claim files of insureds located in the Commonwealth of Virginia who submitted business interruption claims relating to the COVID-19 pandemic."  Elegant Massage, 2021 WL 3686668, at *5.  That was good enough to satisfy the numerosity requirement under Rule 23 "at this time."  The question of whether the  certified class would be limited later on -- clearly because some of the 111 claims were presumably not denied and so they should not be in a class of denied claims, or they did not involve Bad Faith claims and thus should not be included in a class of Bad Faith claims -- could be answered later.
2. Rule 23(a) Commonality and Typicality. The insurance coverage questions are common to the class members.  These coverage questions include resolution of the term "accidental direct physical loss," and application of the Virus Exclusion.

        The class members also presented the question in common of whether the carrier acted in good faith.

        The commonality requirement is therefore satisfied here.  Elegant Massage, 2021 WL 3686668, at *6.

        The Court held similarly that the typicality requirement of Rule 23(a) is also satisfied here.    For very much the same reasons in the eyes of the Court, the claims of the class members and the plaintiff's claims satisfy the typicality requirement.  Elegant Massage, 2021 WL 3686668, at *6-*7.

3. Rule 23(a) Adequate Representation. State Farm did not challenge the adequacy of the plaintiff's counsel to represent the class.  The Court found no evidence that the representation would be in any way inadequate.  This requirement too is satisfied.  Elegant Massage, 2021 WL 3686668, at *7.

        There are still requirements under Rule 23(b) to consider, and the Court in this case considered them all.  They are condensed here.

1. Rule 23(b) Predominance.   For all claims of all class members in this case, the Court will need to "determine the proper legal interpretation of the Defendants' 'all risk' policy as it pertains to the COVID-19 mandatory closures."   Elegant Massage, 2021 WL 3686668, at *8.   Note that the Plaintiff in this particular case initially voluntarily closed its business "[a]s a result of the policies on social distancing and restrictions on its business[.]"  Elegant Massage, 2021 WL 3686668, at *2.  One week after plaintiff's voluntary closure, however, the Governor of Virginia issued an executive order for the (involuntary) closure of recreational and entertainment businesses, a category which included businesses like the plaintiff's.   Elegant Massage, 2021 WL 3686668, at *1.

        Even after holding that the insurance coverage issues predominate here, this Court examined each count of the operative complaint to determine whether the claims alleged in those counts predominate for the class as a whole or whether they are claims unique to the individual plaintiff that filed this lawsuit.

        After refusing certification of a class for Declaratory Judgment across the nation, the Court never again turned to Count I, the Declaratory Judgment count at bar.

        Count II is a claim alleged for breach of the insurance contract common to all the class members.  The Court reviewed its previous denial of the carrier's motion to dismiss the breach of contract count and concluded that "the questions of law and fact" necessary to adjudicate Count II "predominate across each member of the purported class."  Elegant Massage, 2021 WL 3686668, at *9.

        Count III is of great interest here for the reason that it contains an alleged claim for Insurance Bad Faith.  As with the Court's previous denial of the carrier's motion to dismiss this claim, the Court again "reasoned that since 'coverage is a pre-requisite to a claim for bad faith' Plaintiff may proceed with Count III," Elegant Massage, 2021 WL 3686668, at *9, and thus so may the class members.   Simply put, "the questions of fact and law required to establish Count III for the Virginia Subclass are predominate across each member of the purported class."      Elegant Massage, 2021 WL 3686668, at *10.

2. Measurable Damages and 3. Superiority under Rule 23(b).  The Court also considered the roles of Measurable Damages and of Superiority under Rule 23(b) and held that they are met here as well.  As for proof of damages "using common proof," that determination will be made if necessary following the close of discovery.   Elegant Massage, 2021 WL 3686668, at *10.  As to Superiority, from all that has been said so far it was something of a foregone conclusion that the treatment of the interests of the class members in a class action is superior to any alternatives to adjudicate those interests; class action treatment will, the Court held, serve the interests of "efficiency, time, and uniformity of decision, and because the Court also finds that common issues predominate[.]"   Elegant Massage, 2021 WL 3686668, at *10.

The Elegant Massage decision to certify a class is a tour-de-force in the certification of class actions under Rule 23.

Please read the disclaimer.  ©2021 Dennis J. Wall.  All rights reserved.  

MORE ON "COMPUTER MODELLING MAKES FOOLS OF US ALL."

For years I have been writing about the use of computer modelling to predict damages from hurricanes. No, not simply using computers to predict hurricanes, but using computers to predict and process damages claims from hurricanes without investigating and evaluating the claims that are actually made after a hurricane has passed through.

Perhaps the approach of Hurricane Dorian is on my mind. We are sitting in the middle of its latest predicted path. We will know shortly if that prediction holds.

Courts have begun to address the use of computer models to predict and process other types of damages claims and found it to be an actionable abuse of computer models. In a recent case, a State court certified a class of GEICO policyholders who alleged that GEICO filtered their PIP claims through computer models instead of investigating and evaluating their PIP claims based on investigation. The case is Green v. GEICO General Ins. Co., No.: N17C-03-242 EMD CCLD, 2019 WL 4039609 (Del. Super. Ct. August 27, 2019) (stated UNPUBLISHED OPINION. CHECK COURT RULES BEFORE CITING).

Computer modelling makes fools of us all: Predicting damages using computer models instead of paying adjusters to adjust claims is not just a continuing practice. It has actually expanded, for example, from hurricanes to PIP injuries, as in this case.

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