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Court reverses class certification in hail-damage action

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The 7th Circuit Court of Appeals has reversed the class certification granted by the District Court in a suit brought by unsatisfied homeowners following a 2006 hailstorm in central Indiana.

Policy holders with three different State Farm insurance companies brought a proposed class-action suit in state court, which was later moved to federal court, alleging breach of contract, bad-faith denial of insurance benefits, and unjust enrichment. The homeowners sought damages and an injunction requiring State Farm to re-inspect all the class members’ roofs pursuant to a “uniform, reasonable and objective” standard for evaluating hail damage.

U.S. District Judge William Lawrence denied certification of class under Rule 23(b)(3) under the Federal Rules of Civil Procedure, noting that each plaintiff’s claim of underpayment required an individualized factual inquiry on the merits.

The case should have ended there, the 7th Circuit concluded today, but Judge Lawrence did grant the plaintiffs’ class claim for injunctive relief under Rule 23(b)(2). The District Court certified a class to determine whether State Farm should have to re-inspect the roofs with a uniform and object standard.

But the case is not appropriate for class certification under Rule 23(b)(2), the judges decided in Cynthia Kartman, et al. v. State Farm Mutual Automobile Insurance Co., et al., No. 09-1725. The Circuit Court concluded that the lower court order “misconceptualizes” the claims in the case, and this is simply an action for damages and only suitable for class certification under Rule 23(b)(3).

The plaintiffs claimed to have suffered two separate injuries – underpayment of their hail-damage claims and a violation of the distinct right to have their roofs evaluated under a uniform and objective standard. But State Farm had no independent duty – whether sounding in contract or tort – to use a particular method to evaluate hail-damage claims, wrote Judge Diane Sykes.

The plaintiffs’ argument, that even if State Farm lacked a contractual duty to inspect their roofs pursuant to a uniform and object standard, the duty of good faith required it do so, reflected a fundamental misunderstanding of the tort of bad faith, the judge continued.

“Thus, to prove State Farm committed the tort of bad faith, the plaintiffs must establish that their claims were underpaid — or wrongfully denied — in the first place,” she wrote. “This requirement alone bars class certification because it cannot be established on a class-wide basis.”

A case may be certified as a class action under Rule 23(b)(2) where the “party opposing the class has acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole.” In this rule, there are two independent requirements: the equitable relief must be appropriate regarding the class as a whole and be final. In this case, the contemplated injunction doesn’t provide appropriate or final relief of the alleged underpayment of the plaintiffs’ hail-damage claims, wrote the judge.

The Circuit Court remanded with instructions to decertify the Rule 23(b)(2) class.

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  1. So that none are misinformed by my posting wihtout a non de plume here, please allow me to state that I am NOT an Indiana licensed attorney, although I am an Indiana resident approved to practice law and represent clients in Indiana's fed court of Nth Dist and before the 7th circuit. I remain licensed in KS, since 1996, no discipline. This must be clarified since the IN court records will reveal that I did sit for and pass the Indiana bar last February. Yet be not confused by the fact that I was so allowed to be tested .... I am not, to be clear in the service of my duty to be absolutely candid about this, I AM NOT a member of the Indiana bar, and might never be so licensed given my unrepented from errors of thought documented in this opinion, at fn2, which likely supports Mr Smith's initial post in this thread: http://caselaw.findlaw.com/us-7th-circuit/1592921.html

  2. When I served the State of Kansas as Deputy AG over Consumer Protection & Antitrust for four years, supervising 20 special agents and assistant attorneys general (back before the IBLE denied me the right to practice law in Indiana for not having the right stuff and pretty much crushed my legal career) we had a saying around the office: Resist the lure of the ring!!! It was a take off on Tolkiem, the idea that absolute power (I signed investigative subpoenas as a judge would in many other contexts, no need to show probable cause)could corrupt absolutely. We feared that we would overreach constitutional limits if not reminded, over and over, to be mindful to not do so. Our approach in so challenging one another was Madisonian, as the following quotes from the Father of our Constitution reveal: The essence of Government is power; and power, lodged as it must be in human hands, will ever be liable to abuse. We are right to take alarm at the first experiment upon our liberties. I believe there are more instances of the abridgement of freedom of the people by gradual and silent encroachments by those in power than by violent and sudden usurpations. Liberty may be endangered by the abuse of liberty, but also by the abuse of power. All men having power ought to be mistrusted. -- James Madison, Federalist Papers and other sources: http://www.constitution.org/jm/jm_quotes.htm RESIST THE LURE OF THE RING ALL YE WITH POLITICAL OR JUDICIAL POWER!

  3. My dear Mr Smith, I respect your opinions and much enjoy your posts here. We do differ on our view of the benefits and viability of the American Experiment in Ordered Liberty. While I do agree that it could be better, and that your points in criticism are well taken, Utopia does indeed mean nowhere. I think Madison, Jefferson, Adams and company got it about as good as it gets in a fallen post-Enlightenment social order. That said, a constitution only protects the citizens if it is followed. We currently have a bevy of public officials and judicial agents who believe that their subjectivism, their personal ideology, their elitist fears and concerns and cause celebs trump the constitutions of our forefathers. This is most troubling. More to follow in the next post on that subject.

  4. Yep I am not Bryan Brown. Bryan you appear to be a bigger believer in the Constitution than I am. Were I still a big believer then I might be using my real name like you. Personally, I am no longer a fan of secularism. I favor the confessional state. In religious mattes, it seems to me that social diversity is chaos and conflict, while uniformity is order and peace.... secularism has been imposed by America on other nations now by force and that has not exactly worked out very well.... I think the American historical experiment with disestablishmentarianism is withering on the vine before our eyes..... Since I do not know if that is OK for an officially licensed lawyer to say, I keep the nom de plume.

  5. I am compelled to announce that I am not posting under any Smith monikers here. That said, the post below does have a certain ring to it that sounds familiar to me: http://www.catholicnewworld.com/cnwonline/2014/0907/cardinal.aspx

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