Trends in Class Actions - PowerPoint Presentation

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Trends in Class Actions Mark Johnson February 19, 2015Slide2

Class Actions Magnify Potential DamagesIf certified as class, $500 claim by individual plaintiff becomes a $50M claim with 100,000 class membersClass period can equal statute of limitations periodHigh exposure affects all companiesSlide3

Frequency of Class Actions*The 2014 Carlton Fields Jorden Burt Class Action Survey, available at www.ClassActionSurvey.comSlide4

Pressure to SettleFederal 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 trialBecause of risk of exposure, few certified class actions go to trial9% 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)Slide5

Pressure to SettleBut mechanics of some types of class settlements can reduce actual net costsClaims made settlements reduce net payoutParticipation rates impact net payoutManaging multiple class actions can be complicatedSlide6
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Costs of DefenseAverage 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.Slide8

Costs of Defense40% 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.comSlide9

Importance of Class CertificationClass action lawsuits usually proceed in two stages: whether class should be certified, and if so, liability and damages for class claimsFirst stage is key – defeating class certification in effect wins the caseImportant to take class claims seriously from the start and not as a $500 claimSlide10

Claims Practices – Windshield RepairQuestion whether policy provides for cash payment option in lieu of repair or replacement, and whether policy requires repair restore to preloss conditionPlaintiff claimed entitled to cash payment for value of windshield, even though he chose repairCertified class of policyholders since 1991 whose windshields were repairedSlide11

Windshield Repair ClaimsOhio Supreme Court reversed in 2013 decision – Cullen v. State FarmAdopted recent US Supreme Court decisions that critically evaluate class certRequired evaluation of nature of proof of plaintiff’s claims when deciding class certification, instead of ignoring that evidenceSlide12
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MedPay ClaimsMed pay claims based on payments at lower negotiated PPO rates or usual and customary rateMitchell v. American Family InsuranceWolfe v. Grange InsuranceLaboy v. Grange InsuranceTraditionally difficult to certify as class claims because of individual questions about how each payment determinedSlide14

MedPay ClaimsHandful of class actions around country taken medical payments class actions furtherContend that policyholder is entitled to cash payment of difference between undiscounted amount billed by provider and payment at discounted PPO rateSlide15

Bodily Injury Estimating SoftwareArkansas class actions from use of Colossus to estimate pain and suffering when adjusting BI claimsArgued that software permitted insurer to lower damages range, and was based on faulty dataNearly all settled 4-6 years ago, but a few linger; example of uniformity in claims practices that may trigger class actionsSlide16

Body Shop Payment RatesBody shop pricing cases based on alleged price fixing of payment rates for repairs.23 direct antitrust cases by body shops in a number of states2 nationwide class actions on behalf of policyholders in Chicago and ClevelandConsolidated before federal court in OrlandoSlide17

Homeowners Claims – Roof DamageSlide18

Homeowners ClaimsWhether and when to pay overhead and profit on structure claims continues as regular theme in many class actionsBegan with several class actions in Arkansas Arkansas also home to several class actions now pending on depreciation of labor on ACV paymentsSlide19

Homeowners Claims as Class ActionsClass actions filed in Georgia last year based on diminution of value on homeowners claimsBased on required auto DV in GeorgiaSlide20

Data Breach Class ActionsFlood of data breach class actions in the past few years will likely continueProtect yourself:Robust security protocolDevelop plan on how to reactRemediateApplies equally to covered claims for data breachSlide21

Other Claims Against InsuredsRetail advertising – “sale” price that is the regular priceMisleading food labeling – “all natural,” “organic”Telephone Consumer Protection Act (TCPA) claims - $500 per violationConsumer statutory claims, usually with fixed penalty or damage for violationSlide22

Employment Class Actions Against InsurersAgent and independent adjuster employee classification claimsOvertime and mandatory break claimsSlide23

Premium TaxesKentucky premium tax class actions, based on failure to use geocoding software to identify taxing jurisdictionHighlights use of geospatial technology for other purposes, such as underwritingSlide24

TakewaysClass actions against insurers alive and wellClass actions require significant resourcesDo an early exposure analysis If named in class action complaint, get outside counsel involved promptlyBakerHostetler annual class actions review:http://www.bakerlaw.com/alerts/bakerhostetler-2014-year-end-review-of-class-actions-and-what-to-expect-in-2015Slide25

Trends in Class Actions Mark Johnson February 19, 2015