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Homeowners’ Claims Against Insurer for Hail Damage Will Not Be Treated As Class Action

In Kartman, et al. v. State Farm Mutual Auto. Ins. Co., et al., the Seventh Circuit held that an injunctive-relief class of homeowners was improperly certified because the requested injunction was neither “appropriate” nor “final,” as required by Federal Rule of Civil Procedure 23(b)(2). The plaintiffs, a group of homeowners who sustained damage to the roofs of their homes as a result of a severe hailstorm, filed a proposed class action against State Farm alleging breach of contract, bad faith, and unjust enrichment. The district court declined to certify a Rule 23(b)(3) damages class on the grounds that each plaintiff’s claim of underpayment required an individualized factual inquiry on the merits. However, the district court certified an injunctive-relief class under Rule 23(b)(2) to determine whether State Farm should be required to reinspect policyholders’ roofs using a “uniform and objective standard.” The district court defined the class as all policyholders who submitted claims resulting from the hailstorm and did not receive an entirely new roof.

On State Farm’s appeal, the Seventh Circuit first pointed out that while the plaintiffs advanced several legal theories, they had only one cognizable injury, namely the alleged underpayment of their insurance claims. The only remedy for their action was damages, for which, as the district court properly held, they were not entitled to Rule 23(b)(3) certification. The plaintiffs’ claim for injunctive relief created the illusion that in addition to State Farm’s duty to compensate insured homeowners, it had an independent duty to examine all hail-damaged roofs in accordance with a particular standard. The court found no such duty exists in either contract or tort. Further, while State Farm’s allegedly inconsistent approach to performing damage estimations may have been evidence of underpayment of some claims, it did not independently establish liability or support a separate injunctive remedy.

In analyzing whether injunctive-class certification was appropriate, the court noted that Rule 23(b)(2) requires that the contemplated injunctive relief be both “appropriate respecting the class as a whole” and “final.” The plaintiffs could not demonstrate the most basic requirement for an injunction—their alleged injury could have been fully remedied by money damages, and therefore, they had not suffered irreparable harm. Further, the court pointed out injunctive relief would have imposed an inappropriate hardship on State Farm. As defined by the district court, the class of plaintiffs potentially included policyholders who had been fully compensated even though they were not given new roofs, yet they would have been entitled to a reinspection. Given that the hailstorm generated over 7,000 claims, complying with such an injunction would have been immensely expensive. Finally, far from providing “final” relief, a class-wide roof reinspection would only have initiated thousands of individualized damage proceedings.

 

Kartman, et al. v. State Farm Mutual Auto. Ins. Co,. et al., 2011 WL 488879
(7th Cir. February 14, 2011)

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About this Author

Beth Kushner, von Briesen Roper Law Firm, Milwaukee, Health Care, Labor and Employment Litigation Attorney

Beth Kushner is a Shareholder in the Litigation and Risk Management Practice Group and Chairs von Briesen’s Appellate Section. She specializes in complex litigation and has successfully handled a broad range of business and commercial disputes, shareholder disputes, construction matters, antitrust disputes, class actions of all sorts, fraud and RICO cases, employment cases and product liability claims. She has a particular expertise in cases that involve high exposure and difficult facts, and her clients appreciate her creative, pragmatic, and cost-effective approach to...

414-287-1373
Heidi Vogt, von Briesen Roper Law Firm, Milwaukee, Insurance and Litigation Law Attorney

Heidi Vogt is a Shareholder and Co-Chair of the Litigation and Risk Management Practice Group as well as the Chair of the Insurance Coverage and Risk Management Section. Her practice focuses on insurance coverage litigation, commercial disputes, constitutional law, and complex litigation. She has represented insurance companies in Wisconsin and across the country in both state and federal courts in complex insurance coverage matters for more than 20 years.

She represents and counsels insurance clients on a wide variety of topics including general liability, environmental, asbestos, toxic tort, products, construction defect, mold, bad faith, mass tort, intellectual property, firearms litigation, employer liability, first party property, and professional liability. She is frequently retained to negotiate and draft allocation agreements among insurers and develop creative solutions to various insurance coverage issues.

Heidi lectures on a wide variety of topics including environmental insurance coverage, environmental issues, bad faith litigation, motor carrier issues, and advertising injury liability/personal injury liability coverage.

414-287-1258