Trends in Class Actions
Mark Johnson
February 19, 2015
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Baker Hostetler
Class Actions Magnify Potential
Damages
• If certified as class, $500 claim by
individual plaintiff becomes a $50M claim
with 100,000 class members
• Class period can equal statute of
limitations period
• High exposure affects all companies
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Baker Hostetler
Frequency of Class Actions
One or more class actions
regularly
Class action every 1-2
years
Class action every few
years
No class actions
*The 2014 Carlton Fields Jorden Burt Class Action Survey, available at www.ClassActionSurvey.com
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Baker Hostetler
Pressure to Settle
• Federal study of 231 class actions, 70 motions
to certify a class were filed, contested class cert
granted in 12%*
• If certified class, doesn’t mean liability, but
greatly increases the stakes of trial
• Because of risk of exposure, few certified class
actions go to trial
• 9% of all sampled cases resulted in class
settlement - every case where class certified*
*”Impact of the Class Action Fairness Act on the Federal Courts”, Federal Judicial Center (2008)
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Baker Hostetler
Pressure to Settle
• But mechanics of some types of class
settlements can reduce actual net costs
– Claims made settlements reduce net payout
– Participation rates impact net payout
• Managing multiple class actions can be
complicated
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Baker Hostetler
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Baker Hostetler
Costs of Defense
• Average annual defense costs nationwide
for each class action suit were $757,000
during 2013*
• Internal costs are high as well – average
of 4 attorneys and 1 non-attorney devoted
to managing class litigation*
• Other internal costs required to defend
class actions
*The 2014 Carlton Fields Jorden Burt Class Action Survey, available at www.ClassActionSurvey.com.
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Baker Hostetler
Costs of Defense
• 40% of companies have system to
determine early on potential exposure
from class action*
• In 2013, those companies spent average
of $442,000 annually on outside counsel
per class action, while those that didn’t
spent average of $803,000 annually*
• Takeaway: early exposure analysis
*The 2014 Carlton Fields Jorden Burt Class Action Survey, available at www.ClassActionSurvey.com
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Baker Hostetler
Importance of Class
Certification
• Class action lawsuits usually proceed in
two stages: whether class should be
certified, and if so, liability and damages
for class claims
• First stage is key – defeating class
certification in effect wins the case
• Important to take class claims seriously
from the start and not as a $500 claim
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Baker Hostetler
Claims Practices – Windshield
Repair
• Question whether policy provides for cash
payment option in lieu of repair or replacement,
and whether policy requires repair restore to
preloss condition
• Plaintiff claimed entitled to cash payment for
value of windshield, even though he chose
repair
• Certified class of policyholders since 1991
whose windshields were repaired
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Baker Hostetler
Windshield Repair Claims
• Ohio Supreme Court reversed in 2013
decision – Cullen v. State Farm
• Adopted recent US Supreme Court
decisions that critically evaluate class cert
• Required evaluation of nature of proof of
plaintiff’s claims when deciding class
certification, instead of ignoring that
evidence
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Baker Hostetler
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Baker Hostetler
MedPay Claims
• Med pay claims based on payments at
lower negotiated PPO rates or usual and
customary rate
• Mitchell v. American Family Insurance
• Wolfe v. Grange Insurance
• Laboy v. Grange Insurance
• Traditionally difficult to certify as class
claims because of individual questions
about how each payment determined
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Baker Hostetler
MedPay Claims
• Handful of class actions around country
taken medical payments class actions
further
• Contend that policyholder is entitled to
cash payment of difference between
undiscounted amount billed by provider
and payment at discounted PPO rate
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Baker Hostetler
Bodily Injury Estimating
Software
• Arkansas class actions from use of
Colossus to estimate pain and suffering
when adjusting BI claims
• Argued that software permitted insurer to
lower damages range, and was based on
faulty data
• Nearly all settled 4-6 years ago, but a few
linger; example of uniformity in claims
practices that may trigger class actions
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Baker Hostetler
Body Shop Payment Rates
• Body shop pricing cases based on alleged
price fixing of payment rates for repairs.
• 23 direct antitrust cases by body shops in
a number of states
• 2 nationwide class actions on behalf of
policyholders in Chicago and Cleveland
• Consolidated before federal court in
Orlando
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Baker Hostetler
Homeowners Claims – Roof
Damage
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Baker Hostetler
Homeowners Claims
• Whether and when to pay overhead and
profit on structure claims continues as
regular theme in many class actions
• Began with several class actions in
Arkansas
• Arkansas also home to several class
actions now pending on depreciation of
labor on ACV payments
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Baker Hostetler
Homeowners Claims as Class
Actions
• Class actions filed in Georgia last year
based on diminution of value on
homeowners claims
• Based on required auto DV in Georgia
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Baker Hostetler
Data Breach Class Actions
• Flood of data breach class actions in the
past few years will likely continue
• Protect yourself:
– Robust security protocol
– Develop plan on how to react
– Remediate
• Applies equally to covered claims for data
breach
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Baker Hostetler
Other Claims Against Insureds
• Retail advertising – “sale” price that is the
regular price
• Misleading food labeling – “all natural,”
“organic”
• Telephone Consumer Protection Act
(TCPA) claims - $500 per violation
• Consumer statutory claims, usually with
fixed penalty or damage for violation
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Baker Hostetler
Employment Class Actions
Against Insurers
• Agent and independent adjuster employee
classification claims
• Overtime and mandatory break claims
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Baker Hostetler
Premium Taxes
• Kentucky premium tax class actions,
based on failure to use geocoding
software to identify taxing jurisdiction
• Highlights use of geospatial technology for
other purposes, such as underwriting
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Baker Hostetler
Takeways
•
•
•
•
Class actions against insurers alive and well
Class actions require significant resources
Do an early exposure analysis
If named in class action complaint, get outside
counsel involved promptly
• BakerHostetler annual class actions review:
– http://www.bakerlaw.com/alerts/bakerhostetler-2014year-end-review-of-class-actions-and-what-to-expectin-2015
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Baker Hostetler
Trends in Class Actions
Mark Johnson
February 19, 2015
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Baker Hostetler