Class Certification In Property Insurance Disputes

The 2005 hurricane season, including the devastation wreaked by Hurricane Katrina, caused estimated losses of $75 billion. The insured property damage from the five major hurricanes in 2005 reached $52.7 billion. Hurricane Katrina alone caused more property loss than had occurred in the entire prior year, posting $27.3 billion. See http://insurancenewsnet.com/article.asp?a=top_news&id=73930. In light of these unprecedented losses, a record number of lawsuits have been filed stemming from damage caused by the 2005 storms. Predictably, an equally high number of class action suits have been filed, purportedly on behalf of those affected by the storms. Despite this flurry of class action suits, the requirements of Federal Rule of Civil Procedure 23 and its state counterparts clearly limit the use of class action suits to very specific, enumerated circumstances that simply do not include first-party insurance disputes, widespread property damage claims, or claims for bad faith and/or unfair trade practices in the adjustment of insurance claims, even where the damage was due to a common weather event.

Under the Federal Rules of Civil Procedure, plaintiffs seeking class certification must satisfy the requirements of F.R.C.P. 23. Under F.R.C.P. 23(a), a plaintiff must first establish the four elements commonly referred to as numerosity, commonality, typicality, and adequacy of representation. F.R.C.P. Rule 23(a). Rule 23(a)(2), the 'commonality requirement' instructs that issues of law or fact must be common to the entire class. The commonality requirement is satisfied if at least one issue's resolution will affect all or a significant number of class members. James v. City of Dallas, 254 F.3d 551, 570 (5th Cir. 2001). However, even if a plaintiff class meets the requirements outlined in F.R.C.P. 23(a), plaintiffs must also demonstrate that one of several other enumerated factors is applicable. In most instances, class litigants rely on subsection 23(b)(3), which requires a court determination that questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is the superior method for the fair and efficient adjudication of the controversy. In making this determination, F.R.C.P. 23 instructs the court to consider the interest of the members of the class in individually controlling the prosecution of separate actions, the extent and nature of any litigation concerning the controversy which has already commenced, the desirability or undesirability of concentrating the litigation of the claims in a particular forum, and the difficulties likely to be encountered in managing the class action. F.R.C.P. 23(b)(3) is typically referred to as the 'predominance and superiority' test. Furthermore, while subsection 23(b)(3) does not necessarily exclude cases where individual damages are high, 'the Advisory Committee had dominantly in mind vindication of the rights of groups of people who individually would be without effective strength to bring their opponents into court at all,' or those whose individual claims would be too small to warrant litigation. Achem Products, Inc. v. Windsor, 521 U.S. 591, 617 (1997); Smilow v. Southwestern Bell Mobile Systems, Inc., 323 F.3d 32 (1st Cir. 2003).

History of Rejection

Long before the 2005 hurricane season and the most recent outbreak of class action activity, several courts had considered class certification as it related to individual property damage claims and associated allegations of bad faith and found the two mutually exclusive. Courts have consistently rejected class certification in such cases, holding that the individual nature of the claims asserted by the plaintiffs simply cannot overcome the 'predominance and superiority' test of F.R.C.P. 23(b)(3). For instance, in Pollet v. Travelers Property Cas. Ins. Co., 2001 WL 1471724 (E.D. La. 2001), the court considered class certification of property damage claims arising out of a severe hail storm that struck New Orleans. More than 20,000 residents filed insurance claims for hail damage to their cars and rooftops. A class action suit was filed alleging that the insurance company had intentionally failed to adequately compensate its policyholders for legitimate hail damage claims. The court found that certification of the matter as a class action was inappropriate because 'the need for individualized proof on thousands of separate claims strongly counsels against maintaining a class action.' Id. at 2. The court observed that each claimant had a different roof and damage in a different location. Further, the court noted that any claim that the insurance company had acted in bad faith by intentionally failing to pay legitimate claims necessarily required individual investigation into the damages, terms of the policy, and the insurer's actions in adjusting the claims. The court similarly dismissed class claims of misrepresentation and deceptive business practices as requiring fact-specific evidence of individual policies and promises made to each class member. In denying class certification, the court stated that, 'even assuming that the numerosity, commonality, typicality and adequacy of representation requirements have been met,' plaintiffs had failed to establish that common questions of law or fact predominated over individual questions or that a class action was the superior method for resolution of plaintiff's claims under F.R.C.P. 23(b). Id. at 2.

'Katrina' Cases

One of the first 'Katrina' cases to address the issue of class certification for property damage claims was that of Comer v. Nationwide Mutual Insurance Co., et al., 2006 WL 1066645 (S.D. Miss. 2/23/06). There, plaintiffs sought class certification as representatives of all 'similarly situated' property owners in Mississippi with insurance claims pending against the defendant insurance companies. Comer at 1. In denying class certification, the court succinctly outlined its reasons. First, each property owner is 'uniquely situated,' having suffered different losses, different types of property damage, and owning different types of property. Although the property damage arose from a common cause, Hurricane Katrina, the damage varied greatly depending on the pre-storm condition of the property and the combination of forces that caused the damage. Thus, the court opined that each individual claim would require evidence to establish the cause and extent of the loss. Second, the district court noted that the particular terms of the insurance policy and the coverage afforded under it varied from one company to the next. Finally, varying relationships between mortgage holders and owners based upon the terms of their mortgage agreements needed to be individually considered. The court specifically held that the proposed class did not meet the predominance and superiority standards of F.R.C.P. 23(b) stating, 'the questions of law and fact common to the members of the plaintiff class do not predominate over the questions affecting individual members … [and] I do not believe that a class action of this nature is a superior method of resolving the issues that will arise with respect to the insurance defendants.' Id. at 3.

The same court similarly denied class certification in a separate suit arising from 'slab cases' where the entire house had been destroyed by Katrina, leaving nothing but the home's foundation. The court observed that 'there are as many differences between the 'slab cases' as there are similarities in terms of the evidence available to ascertain the cause of the destruction and damage to the properties,' and that, therefore, there was no reason to treat the cases together as a class action. The judge stated in his opinion that, after having tried several 'slab' cases, he had learned that:

1) the forces exerted by Hurricane Katrina varied substantially from one location along the Mississippi Gulf Coast to another; 2) the forces exerted against a particular building varied substantially depending on the building's proximity to the shore line; 3) the damage any given building may have sustained varied substantially depending on its age, quality of construction, and even its design and orientation to the forces exerted by the storm, particularly the wind; and 4) claims were handled by Defendant in a variety of ways.

Accordingly, the judge denied class certification because, ultimately, he was not convinced that it was the superior method of resolving the claimants' issues. Guice v. State Farm, 2007 WL 912120 (S.D. Miss. 3/22/07).

Similarly, federal courts in Louisiana have refused to certify class actions alleging property damage and bad faith practices by insurers following Katrina because the proposed class fails to meet the predominance and superiority requirements of F.R.C.P. 23(b). In Aguilar v. Allstate Fire and Casualty Ins. Co., et al., 2007 WL 734809 (E.D. La. 3/6/07), the proposed class included Allstate insureds who had suffered physical damage to their property as a result of Katrina. The class complaint alleged that loss payments made to each class member included below market unit pricing on numerous items and non-payment of industry standard items, resulting in inadequate compensation to the class members. Id. at 1. In dismissing the class allegations, the judge opined that while Allstate's general internal policies for adjusting claims could arguably constitute a common issue of fact, demonstrating a wrongful pattern and practice of failing to adjust claims would require a fact-intensive review of each class member's claim for damages, 'including the nature and extent of the damage, the timing and adjustment of each class member's claim, how much each class member was paid for his claim and for what damage, and whether that amount was sufficient and timely.' Id. at 3. The judge correctly concluded that the plaintiffs failed to meet their burden under Rule 23(b)(3) of proving that issues common to the class predominated over individual issues. See also Spiers v. Liberty Mut. Fire Ins. Co., No. 2:06-CV-4493, Doc. No. 11 (E.D. La. 2006) (denying class certification because individual questions pertaining to each class member overwhelmed any common issues, making the claims inappropriate for class treatment).

California state court cases arising out of the Northridge Earthquake have reached similar conclusions regarding class action allegations against insurers for property damage and bad faith. The court in Newell v. State Farm General Insurance Co., 118 Cal.App.4th 1094 (Ca. App. 2d. 2004), adeptly laid out the reasons for denying class treatment of individual policyholder claims against insurance companies resulting from the earthquake. The court noted that even if the insurers had adopted improper claims practices across the board for adjustment of earthquake claims, each class member could recover for breach of contract and bad faith only by proving his or her individual claim was wrongfully denied and that the insurer's action in doing so was unreasonable. Id. at 1103 (emphasis in original) citing to Basurco v. 21st Century Insurance Co., 108 Cal.App.4th 110 (Ca. App. 2003). In concluding that the plaintiffs failed to meet the predominance requirement, the court opined that, 'each putative class member's potential recovery would involve an individual assessment of his or her property, the damage sustained, and the actual claims practices employed. In such cases class treatment is unwarranted.' Id. at 1103. The court further concluded that a class action was not the superior means for resolving the litigation, as numerous individual suits were already pending and the trial courts had already established procedures for handling the number of claims arising out of the earthquake.

Similar decisions have been reached by other federal courts with respect to insurance suits arising from catastrophes other than Hurricane Katrina, although not necessarily in the property damage context. For instance, in Guy v. Allstate Floridian Insurance Company, 2007 WL 433508 (11th Cir. 2007), the court of appeal upheld the district court's ruling denying class certification for plaintiffs who had suffered mold damage following Hurricane Charley. The court opined that the proposed class could not meet the predominance and superiority prerequisites of F.R.C.P. Rule 23. Once again, the court determined that the individual issues in each claim were simply too diverse to handle as a class action. Likewise, in Charleswell v. Chase Manhattan Bank, 223 F.R.D. 371 (D.C. Virgin Islands 2004), the court held that the predominance and superiority requirements for class certification were not satisfied with respect to claims of mortgagors that their mortgagees charged excessive hazard insurance premiums by continuing to insure their properties for the full mortgage balance despite the fact that hurricane damage had reduced the values of the properties. The court found that the claims would have required individual analysis of the degree of damage to each property, the extent of repairs to the property, and how much, and for how long, the premiums should have been reduced if the damage to the property had been repaired by the owner. Id.

Refusal to Certify Class Outside Insurance Context

Even outside the context of insurance litigation, courts are hesitant to certify a class where allegations of diverse property damage result from a catastrophic event. In these cases, the courts have focused on the plaintiffs' inability to establish 'commonality' or 'common questions of law or fact.' For example, in Eaton v. Ventura Port District, 45 Cal. App. 3d 862 (Ca. App. 2d 1975), boat owners brought a class action against the Port Authority and other governmental entities for property damaged or destroyed as a result of flooding of the Santa Clara River and marina. In holding that the case could not be maintained as a class action, the court noted that the complaint alleged various causes of action such as negligence, conversion, breach of contract, breach of warranty, and strict liability. The court further observed that all of the plaintiffs were not 'similarly situated,' as some plaintiffs were lessees who leased space in the marina while some were not. Certain plaintiffs had damaged boats, while others lost their boats altogether. Some plaintiffs suffered damage to other types of personal property and some suffered personal injury, while others did not. Accordingly, the court found that the trial court had properly held that the number, variety, and diversity of the claims, theories, and named defendants precluded certification as a class action. Id. at 751.

Likewise, in the case of Cook v. Highland Water and Sewer Authority, 530 A.2d 499 (Pa. Cmwlth. 1987), the court refused to certify a class of plaintiffs seeking damages for personal injury and property damages resulting from the collapse of two dams and the washout of a state highway, allegedly caused by the negligent design and maintenance of the dams by various government entities. In determining that the plaintiffs had failed to meet the 'commonality' requirement for a class action, the court pointed to several factors which could have caused plaintiffs' damages including runoff water, various 'damming' effects, overflow of water channels, the location and elevation of each property, as well as unprecedented rainfall. According to the court, 'where there exist various intervening and possible superseding causes of the damage, liability cannot be determined on a class-wide basis,' and plaintiffs could not, therefore, establish commonality. Id. at 234.

Conclusion

Catastrophic weather events giving rise to insurance property damage claims and the associated allegations stemming from them, i.e., improper claims handling, bad faith, misrepresentation, deceptive business practices, and the like, simply do not yield a cause of action suitable for class treatment. First, such plaintiffs rarely fall into the category of claimants with 'claims too small to warrant litigation,' and in most instances, such claimants have a strong interest in controlling their own case. Second, by the time class actions are brought before the court system, it is likely that thousands of individuals will have already begun pursuing their own individual suits. (For instance, estimates indicate that more than 1000 individual Katrina lawsuits against insurance companies are pending in Mississippi federal courts with a similar number of suits pending in Louisiana federal courts.) Third, most catastrophic events involve a combination of factors leading to property damage and, therefore, the claimed damage cannot easily be attributed to one cause. For instance, in New Orleans following Hurricane Katrina a typical homeowner's claim will likely involve both wind and flood damage. The wind damage may be attributable to the hurricane force winds, or an associated tornado. The flooding may have been caused by excessive rainfall, overtopping or breaching of the levee system, ineffectual or over-powered pumping stations, or a combination of all of these factors. Finally, the proof required to establish a valid cause of action against an insurer is, by its nature, individualized. A proposed class of plaintiffs may include insureds that have faced different types of alleged wrongdoing by their insurer, such as improper depreciation deductions, incorrect adjustment of damage to the home, untimely payment of insurance claims, and other individualized issues. Additionally, each insured home or property has been adjusted differently. The insurer may have sent an independent adjuster, a structural engineer, a construction consultant, or other expert to each policyholder's property.

As one court aptly noted, 'no two investigations will be the same … [T]he existence of damage, the cause of damage, and the extent of damage would have to be determined on a case-by-case basis.' Basurco v. 21st Century Insurance, 108 Cal.App.4th 110 (Ca. App. 2003). Accordingly, because all of the foregoing diverse factors are necessarily encompassed in a class action suit against an insurer for property damage resulting from a catastrophic event, such suits will never meet the 'commonality,' 'predominance,' and 'superiority' requirements outlined by F.R.C.P. Rule 23.

Rachel A. Meese is an associate with the New Orleans firm of Lugenbuhl, Wheaton, Peck, Rankin and Hubbard. Meese practices primarily in the areas of insurance coverage, insurance defense, and trial and appellate litigation.

The 2005 hurricane season, including the devastation wreaked by Hurricane Katrina, caused estimated losses of $75 billion. The insured property damage from the five major hurricanes in 2005 reached $52.7 billion. Hurricane Katrina alone caused more property loss than had occurred in the entire prior year, posting $27.3 billion. See http://insurancenewsnet.com/article.asp?a=top_news&id=73930. In light of these unprecedented losses, a record number of lawsuits have been filed stemming from damage caused by the 2005 storms. Predictably, an equally high number of class action suits have been filed, purportedly on behalf of those affected by the storms. Despite this flurry of class action suits, the requirements of Federal Rule of Civil Procedure 23 and its state counterparts clearly limit the use of class action suits to very specific, enumerated circumstances that simply do not include first-party insurance disputes, widespread property damage claims, or claims for bad faith and/or unfair trade practices in the adjustment of insurance claims, even where the damage was due to a common weather event.

Under the Federal Rules of Civil Procedure, plaintiffs seeking class certification must satisfy the requirements of F.R.C.P. 23. Under F.R.C.P. 23(a), a plaintiff must first establish the four elements commonly referred to as numerosity, commonality, typicality, and adequacy of representation. F.R.C.P. Rule 23(a). Rule 23(a)(2), the 'commonality requirement' instructs that issues of law or fact must be common to the entire class. The commonality requirement is satisfied if at least one issue's resolution will affect all or a significant number of class members. James v. City of Dallas , 254 F.3d 551, 570 (5th Cir. 2001). However, even if a plaintiff class meets the requirements outlined in F.R.C.P. 23(a), plaintiffs must also demonstrate that one of several other enumerated factors is applicable. In most instances, class litigants rely on subsection 23(b)(3), which requires a court determination that questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is the superior method for the fair and efficient adjudication of the controversy. In making this determination, F.R.C.P. 23 instructs the court to consider the interest of the members of the class in individually controlling the prosecution of separate actions, the extent and nature of any litigation concerning the controversy which has already commenced, the desirability or undesirability of concentrating the litigation of the claims in a particular forum, and the difficulties likely to be encountered in managing the class action. F.R.C.P. 23(b)(3) is typically referred to as the 'predominance and superiority' test. Furthermore, while subsection 23(b)(3) does not necessarily exclude cases where individual damages are high, 'the Advisory Committee had dominantly in mind vindication of the rights of groups of people who individually would be without effective strength to bring their opponents into court at all,' or those whose individual claims would be too small to warrant litigation. Achem Products, Inc. v. Windsor , 521 U.S. 591, 617 (1997); Smilow v. Southwestern Bell Mobile Systems, Inc. , 323 F.3d 32 (1st Cir. 2003).

History of Rejection

Long before the 2005 hurricane season and the most recent outbreak of class action activity, several courts had considered class certification as it related to individual property damage claims and associated allegations of bad faith and found the two mutually exclusive. Courts have consistently rejected class certification in such cases, holding that the individual nature of the claims asserted by the plaintiffs simply cannot overcome the 'predominance and superiority' test of F.R.C.P. 23(b)(3). For instance, in Pollet v. Travelers Property Cas. Ins. Co., 2001 WL 1471724 (E.D. La. 2001), the court considered class certification of property damage claims arising out of a severe hail storm that struck New Orleans. More than 20,000 residents filed insurance claims for hail damage to their cars and rooftops. A class action suit was filed alleging that the insurance company had intentionally failed to adequately compensate its policyholders for legitimate hail damage claims. The court found that certification of the matter as a class action was inappropriate because 'the need for individualized proof on thousands of separate claims strongly counsels against maintaining a class action.' Id. at 2. The court observed that each claimant had a different roof and damage in a different location. Further, the court noted that any claim that the insurance company had acted in bad faith by intentionally failing to pay legitimate claims necessarily required individual investigation into the damages, terms of the policy, and the insurer's actions in adjusting the claims. The court similarly dismissed class claims of misrepresentation and deceptive business practices as requiring fact-specific evidence of individual policies and promises made to each class member. In denying class certification, the court stated that, 'even assuming that the numerosity, commonality, typicality and adequacy of representation requirements have been met,' plaintiffs had failed to establish that common questions of law or fact predominated over individual questions or that a class action was the superior method for resolution of plaintiff's claims under F.R.C.P. 23(b). Id. at 2.

'Katrina' Cases

One of the first 'Katrina' cases to address the issue of class certification for property damage claims was that of Comer v. Nationwide Mutual Insurance Co., et al., 2006 WL 1066645 (S.D. Miss. 2/23/06). There, plaintiffs sought class certification as representatives of all 'similarly situated' property owners in Mississippi with insurance claims pending against the defendant insurance companies. Comer at 1. In denying class certification, the court succinctly outlined its reasons. First, each property owner is 'uniquely situated,' having suffered different losses, different types of property damage, and owning different types of property. Although the property damage arose from a common cause, Hurricane Katrina, the damage varied greatly depending on the pre-storm condition of the property and the combination of forces that caused the damage. Thus, the court opined that each individual claim would require evidence to establish the cause and extent of the loss. Second, the district court noted that the particular terms of the insurance policy and the coverage afforded under it varied from one company to the next. Finally, varying relationships between mortgage holders and owners based upon the terms of their mortgage agreements needed to be individually considered. The court specifically held that the proposed class did not meet the predominance and superiority standards of F.R.C.P. 23(b) stating, 'the questions of law and fact common to the members of the plaintiff class do not predominate over the questions affecting individual members … [and] I do not believe that a class action of this nature is a superior method of resolving the issues that will arise with respect to the insurance defendants.' Id. at 3.

The same court similarly denied class certification in a separate suit arising from 'slab cases' where the entire house had been destroyed by Katrina, leaving nothing but the home's foundation. The court observed that 'there are as many differences between the 'slab cases' as there are similarities in terms of the evidence available to ascertain the cause of the destruction and damage to the properties,' and that, therefore, there was no reason to treat the cases together as a class action. The judge stated in his opinion that, after having tried several 'slab' cases, he had learned that:

1) the forces exerted by Hurricane Katrina varied substantially from one location along the Mississippi Gulf Coast to another; 2) the forces exerted against a particular building varied substantially depending on the building's proximity to the shore line; 3) the damage any given building may have sustained varied substantially depending on its age, quality of construction, and even its design and orientation to the forces exerted by the storm, particularly the wind; and 4) claims were handled by Defendant in a variety of ways.

Accordingly, the judge denied class certification because, ultimately, he was not convinced that it was the superior method of resolving the claimants' issues. Guice v. State Farm, 2007 WL 912120 (S.D. Miss. 3/22/07).

Similarly, federal courts in Louisiana have refused to certify class actions alleging property damage and bad faith practices by insurers following Katrina because the proposed class fails to meet the predominance and superiority requirements of F.R.C.P. 23(b). In Aguilar v. Allstate Fire and Casualty Ins. Co., et al., 2007 WL 734809 (E.D. La. 3/6/07), the proposed class included Allstate insureds who had suffered physical damage to their property as a result of Katrina. The class complaint alleged that loss payments made to each class member included below market unit pricing on numerous items and non-payment of industry standard items, resulting in inadequate compensation to the class members. Id. at 1. In dismissing the class allegations, the judge opined that while Allstate's general internal policies for adjusting claims could arguably constitute a common issue of fact, demonstrating a wrongful pattern and practice of failing to adjust claims would require a fact-intensive review of each class member's claim for damages, 'including the nature and extent of the damage, the timing and adjustment of each class member's claim, how much each class member was paid for his claim and for what damage, and whether that amount was sufficient and timely.' Id. at 3. The judge correctly concluded that the plaintiffs failed to meet their burden under Rule 23(b)(3) of proving that issues common to the class predominated over individual issues. See also Spiers v. Liberty Mut. Fire Ins. Co., No. 2:06-CV-4493, Doc. No. 11 (E.D. La. 2006) (denying class certification because individual questions pertaining to each class member overwhelmed any common issues, making the claims inappropriate for class treatment).

California state court cases arising out of the Northridge Earthquake have reached similar conclusions regarding class action allegations against insurers for property damage and bad faith. The court in Newell v. State Farm General Insurance Co., 118 Cal.App.4th 1094 (Ca. App. 2d. 2004), adeptly laid out the reasons for denying class treatment of individual policyholder claims against insurance companies resulting from the earthquake. The court noted that even if the insurers had adopted improper claims practices across the board for adjustment of earthquake claims, each class member could recover for breach of contract and bad faith only by proving his or her individual claim was wrongfully denied and that the insurer's action in doing so was unreasonable. Id. at 1103 (emphasis in original) citing to Basurco v. 21st Century Insurance Co., 108 Cal.App.4th 110 (Ca. App. 2003). In concluding that the plaintiffs failed to meet the predominance requirement, the court opined that, 'each putative class member's potential recovery would involve an individual assessment of his or her property, the damage sustained, and the actual claims practices employed. In such cases class treatment is unwarranted.' Id. at 1103. The court further concluded that a class action was not the superior means for resolving the litigation, as numerous individual suits were already pending and the trial courts had already established procedures for handling the number of claims arising out of the earthquake.

Similar decisions have been reached by other federal courts with respect to insurance suits arising from catastrophes other than Hurricane Katrina, although not necessarily in the property damage context. For instance, in Guy v. Allstate Floridian Insurance Company, 2007 WL 433508 (11th Cir. 2007), the court of appeal upheld the district court's ruling denying class certification for plaintiffs who had suffered mold damage following Hurricane Charley. The court opined that the proposed class could not meet the predominance and superiority prerequisites of F.R.C.P. Rule 23. Once again, the court determined that the individual issues in each claim were simply too diverse to handle as a class action. Likewise, in Charleswell v. Chase Manhattan Bank , 223 F.R.D. 371 (D.C. Virgin Islands 2004), the court held that the predominance and superiority requirements for class certification were not satisfied with respect to claims of mortgagors that their mortgagees charged excessive hazard insurance premiums by continuing to insure their properties for the full mortgage balance despite the fact that hurricane damage had reduced the values of the properties. The court found that the claims would have required individual analysis of the degree of damage to each property, the extent of repairs to the property, and how much, and for how long, the premiums should have been reduced if the damage to the property had been repaired by the owner. Id.

Refusal to Certify Class Outside Insurance Context

Even outside the context of insurance litigation, courts are hesitant to certify a class where allegations of diverse property damage result from a catastrophic event. In these cases, the courts have focused on the plaintiffs' inability to establish 'commonality' or 'common questions of law or fact.' For example, in Eaton v. Ventura Port District , 45 Cal. App. 3d 862 (Ca. App. 2d 1975), boat owners brought a class action against the Port Authority and other governmental entities for property damaged or destroyed as a result of flooding of the Santa Clara River and marina. In holding that the case could not be maintained as a class action, the court noted that the complaint alleged various causes of action such as negligence, conversion, breach of contract, breach of warranty, and strict liability. The court further observed that all of the plaintiffs were not 'similarly situated,' as some plaintiffs were lessees who leased space in the marina while some were not. Certain plaintiffs had damaged boats, while others lost their boats altogether. Some plaintiffs suffered damage to other types of personal property and some suffered personal injury, while others did not. Accordingly, the court found that the trial court had properly held that the number, variety, and diversity of the claims, theories, and named defendants precluded certification as a class action. Id. at 751.

Likewise, in the case of Cook v. Highland Water and Sewer Authority , 530 A.2d 499 (Pa. Cmwlth. 1987), the court refused to certify a class of plaintiffs seeking damages for personal injury and property damages resulting from the collapse of two dams and the washout of a state highway, allegedly caused by the negligent design and maintenance of the dams by various government entities. In determining that the plaintiffs had failed to meet the 'commonality' requirement for a class action, the court pointed to several factors which could have caused plaintiffs' damages including runoff water, various 'damming' effects, overflow of water channels, the location and elevation of each property, as well as unprecedented rainfall. According to the court, 'where there exist various intervening and possible superseding causes of the damage, liability cannot be determined on a class-wide basis,' and plaintiffs could not, therefore, establish commonality. Id. at 234.

Conclusion

Catastrophic weather events giving rise to insurance property damage claims and the associated allegations stemming from them, i.e., improper claims handling, bad faith, misrepresentation, deceptive business practices, and the like, simply do not yield a cause of action suitable for class treatment. First, such plaintiffs rarely fall into the category of claimants with 'claims too small to warrant litigation,' and in most instances, such claimants have a strong interest in controlling their own case. Second, by the time class actions are brought before the court system, it is likely that thousands of individuals will have already begun pursuing their own individual suits. (For instance, estimates indicate that more than 1000 individual Katrina lawsuits against insurance companies are pending in Mississippi federal courts with a similar number of suits pending in Louisiana federal courts.) Third, most catastrophic events involve a combination of factors leading to property damage and, therefore, the claimed damage cannot easily be attributed to one cause. For instance, in New Orleans following Hurricane Katrina a typical homeowner's claim will likely involve both wind and flood damage. The wind damage may be attributable to the hurricane force winds, or an associated tornado. The flooding may have been caused by excessive rainfall, overtopping or breaching of the levee system, ineffectual or over-powered pumping stations, or a combination of all of these factors. Finally, the proof required to establish a valid cause of action against an insurer is, by its nature, individualized. A proposed class of plaintiffs may include insureds that have faced different types of alleged wrongdoing by their insurer, such as improper depreciation deductions, incorrect adjustment of damage to the home, untimely payment of insurance claims, and other individualized issues. Additionally, each insured home or property has been adjusted differently. The insurer may have sent an independent adjuster, a structural engineer, a construction consultant, or other expert to each policyholder's property.

As one court aptly noted, 'no two investigations will be the same … [T]he existence of damage, the cause of damage, and the extent of damage would have to be determined on a case-by-case basis.' Basurco v. 21st Century Insurance, 108 Cal.App.4th 110 (Ca. App. 2003). Accordingly, because all of the foregoing diverse factors are necessarily encompassed in a class action suit against an insurer for property damage resulting from a catastrophic event, such suits will never meet the 'commonality,' 'predominance,' and 'superiority' requirements outlined by F.R.C.P. Rule 23.

Rachel A. Meese is an associate with the New Orleans firm of Lugenbuhl, Wheaton, Peck, Rankin and Hubbard. Meese practices primarily in the areas of insurance coverage, insurance defense, and trial and appellate litigation.