A federal appeals court has upheld a lower court’s denial of sophistication action status in a lawsuit accusing GEICO of systematically underpaying total loss claims in Louisiana, partly since the insurer said it gives its adjusters discretion to change the total amount paid “inside a statistically significant number of instances.”
The plaintiffs, Eric Prudhomme and Elvin Jack, argued that GEICO’s reliance on data from CCC Information Systems, rather than the National Automobile Dealers Association , resulted in a large number of underpayments.
In an amended complaint filed Oct. 13, 2022 in the U.S. District Court for that Western District of Louisiana, Prudhomme asserted GEICO, using CCC figures, paid him $8,885 for that loss of his 2008 Kia Rondo LX inside a Feb. 14, 2013 accident, far lacking the $10,150 NADA value for similar vehicles.
Jack was paid $2,483 for the loss of his 2000 Next year, against a NADA value of $4,475 for similar vehicles, the suit claims.
Prudhomme and Jack sought payment of the difference in values, in addition to class status for the 13,272 people whose claims GEICO had adjusted in Louisiana between Aug. 15, 2010 and Jan. 9, 2022, arguing that have been similarly undercompensated.
The plaintiffs contended that GEICO’s use of CCC’s One Market Valuation Report “systematically undervalues the claims of similarly situated policy owners,” U.S. District Judge Terry A. Doughty wrote inside a Dec. 22, 2022 opinion.
However, Doughty noted, GEICO says it doesn't always use CCC data in settling total loss claims. Because of that, it was not known which claimants could be included in the class, and sorting them out could be impossible without examining each claim.
Evidence and testimony showed that “GEICO adjusters didn't always employ the CCC valuation to pay for a total loss to customers. Troy Penry, GEICO's Assistant Vice President of Auto Damage Claims, that has been employed GEICO in excess of Twenty five years and who himself worked as an adjuster in Louisiana, testified that ‘each claim is handled differently’ which you will find ‘several subjective factors’ towards the valuation process,” the judge wrote.
“His testimony was consistent with those of Daniel Stelly, GEICO's field claims manager with responsibility over most of Louisiana, who testified that there is no exact form or process,” he wrote. “Instead, adjusters had discretion and also exercised that discretion inside a statistically significant number of cases to adjust the CCC valuation in paying a total loss add up to customers.”
“Apparently, [redacted] were paid a lot more than the CCC. Also, apparently [redacted] had manual evaluations used, as opposed to the CCC computer system,” Doughty wrote. “It might be impossible to find out damages on a class-wide basis without examining all 13,272 claims. Common questions couldn't be answered without fact-specific inquiries as to each claim.”
“Since GEICO pays more than the CCC value in [redacted] approximately of their claims, all 13,272 potential claims would have to be regarded individually to determine set up CCC value was paid. Additionally, in approximately [redacted] of cases when the CCC product is used, the system evaluations are reviewed with a person [redacted] or even the evaluations are prepared manually [redacted] by CCC adjusters. Every individual claim must be looked at to find out in which claims GEICO paid more and/or in which claims manual valuations were utilised by CCC,” Doughty wrote.
The judge also noted that “a lot more than one-fifth of the putative class benefited from GEICO using the CCC value instead of NADA Clean Retail value. In other words, Prudhomme and Jack possess a conflict of great interest for the reason that the method they contend must have been used is always to the detriment of more than 20% from the putative class.”
Doughty denied the request for class action status on Dec. 22, 2022, leading Prudhomme and Jack to file for an appeal with the Fifth Circuit Court of Appeals.
On Feb. 21, the 5th Circuit upheld Doughty’s denial.
“The Federal Rules of Civil Procedure require the ‘representative parties [in a class-action] will fairly and adequately protect the interests of the class,'” U.S. circuit judges Dineen King, Gregg J. Costa and Don R. Willett wrote. “This compels focus on ‘the chance of 'conflicts of great interest between the named plaintiffs and the class they aim to represent.'”
“In line with this obligation, the district court questioned whether Appellants' theory of liability was, in fact, beneficial to the proposed class. It was not. Indeed, part of the proposed class members received payments above the allegedly unlawful valuation. This undermined Appellants' class-wide theory of liability,” they wrote.
In the path of the trial in U.S. District Court, the plaintiffs argued that GEICO’s utilization of CCC figures was in violation of Louisiana law, statute 22:1892, which spells out the following means of establishing the particular cash value of an automobile:
A description of how the CCC system works is heavily redacted in the court records.
Doughty noted that Louisiana statute 32:702 “requires NADA values to be used to find out whether a vehicle is really a total loss,” using the repair threshold set at 75% of a vehicle’s “clean retail” value.
“If a vehicle was deemed an overall total loss under Louisiana law, the GEICO Defendants didn't make use of the NADA value for the vehicle, but used another product from CCC, CCC One Market Valuation Report, to determine the amount it would pay an insured on her totaled vehicle,” he added. The judge didn't pursue this type of thinking.
The case, now involving just the claims of Prudhomme and Jack, has been remanded to the Fifteenth Judicial District Court in Lafayette Parish, where it was originally filed.