Let’s consider the following scenarios. For purposes of this discussion, we assume you handle hail claims all over Texas:

  1. For all claims statewide in which the carrier pays for full roof replacement, the carrier still denies payment for particular roofing system components.
  2. The carrier pays Overhead & Profit for Dallas claims, but denies Overhead & Profit in Amarillo.

My previous post in this Aggregate Litigation series generated interest and discussion regarding potential Class Actions. In this post, we will discuss requirements for Class Certification. In addition, how those requirements influence whether a Class Action is the best option for recovery under different circumstances.

What Do The Rules Say?

As noted in my previous post, a Class Action involves an individual seeking court approval to prosecute a claim on behalf of a group of similarly-situated persons. The process where a court decides whether a class action is the appropriate procedure for the lawsuit is called Class Certification.

Clearly, then, Class Certification issues remain paramount in prosecuting Class Actions. With a few notable exceptions that I will address in future entries, federal law (and most states) require the following in order for a Court to grant Class Certification:

Rule 23. Class Actions.

(a) Prerequisites. One or more members of a class may sue or be sued as representative parties on behalf of all members only if:

(1) the class is so numerous that joinder of all members is impracticable;

(2) there are questions of law or fact common to the class;

(3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and

(4) the representative parties will fairly and adequately protect the interests of the class.1

I sometimes like to think of issues a little more simply than how procedural rules have been written. For that reason, I frame Class Certification issues by asking the following:

  • Were folks treated unfairly?
    • How many folks were treated that way?
    • Was everyone treated the same?
    • Was my claimant treated unfairly in the same way as everyone else involved?
    • Will my claimant take care of everyone else treated unfairly, too?

How Does That Apply To My Claims?

In order to apply these principles to claims you might be handling, let’s go back to the scenarios at the beginning of this post:

(i) In hail claims you handle all over the state, many losses result in full roof replacement. Even with the full replacement, however, the carrier still refuses to pay for a comparatively lower cost roofing system component.

Answer: These claims should be explored to determine whether a Class Action stands as the right manner in which to help the people treated unfairly.

(ii) In hail claims you handle all over the state, the carrier pays Overhead & Profit for Dallas claims but denies Overhead & Profit in Amarillo.

Answer: Class Actions are statewide or nationwide. As a result, these Amarillo claims would not support a Class Action.

Instead, these claims would make a nice Mass Action. All of these claims would be filed and consolidated into one complaint, thereby seeking to create the same efficiencies and economic leverage as if a class had been certified.

If you handle claims in which the carrier consistently doesn’t pay for a comparatively lower value component when replacing the entire roofing system, further investigation may be in order to determine whether a Class Action makes sense. If you deal with a carrier that correctly pays claims in one area and then makes unfair denial in another area, however, a Mass Action may be your best bet to get justice for your policyholders.

Motivational Poster For Today:

Fortune Favors the Bold

1 Federal Rules of Civil Procedure, Rule 23.