Horvitz & Levy LLP successfully defended the trial court’s ruling denying class certification in this insurance bad faith action. H&L represented an insurance company that issued property insurance policies that promised to pay the actual cash value of the damage to an insured’s property pending repair or replacement, and to pay the replacement cost value of the damage once repair or replacement was complete. The policy’s definition of actual cash value expressly excluded reimbursement for general contractor overhead and profit. The plaintiff-insured experienced water damage to his home and submitted a claim for the actual cash value of the damage to his home without conducting repairs, hiring a general contractor, or seeking reimbursement on a replacement cost value basis. Claiming that the actual cash value definition in the insurer’s policy violated California law, plaintiff brought claims for breach of contract, bad faith, and violation of Califorina’s Unfair Competition Law. Plaintiff sought to certify a class consisting of all insureds who sought actual cash value payments for damage to their homes, had general contractor overhead and profit withheld from those payments, and did not later hire a general contractor or seek reimbursement on a replacement cost value basis. The trial court denied class certification, finding that plaintiff had failed to prove the existence of an ascertainable class, to show that common issues predominated over individualized questions going to liability, or to demonstrate that a class action would be the superior method of adjudicating the claims at issue.
In an unpublished opinion, the Court of Appeal (Second Appellate District, Division Two) affirmed. The appellate court held that plaintiff’s proposed class definition was overbroad in including insureds with no right to recover because the insurer’s actual cash value estimates overpaid some insureds’ damages while underpaying others. The plaintiff’s failure to offer any means to distinguish one group from the other meant that he could not prove the existence of an ascertainable class. The Court of Appeal also held that common issues did not predominate over individualized questions because, in order to adjudicate the insurer’s liability to each class member under the claims at issue, the court would have to examine each insured’s unique claims handling experience, which would overwhelm any common questions in the case. Finally, the appellate court agreed with the trial court that a class action would not be the superior means of adjudicating the claims at issue, due to the numerous individualized inquiries involved and the fact that each insured could more efficiently pursue his or her claims through individual claims adjustment or litigation with the insurer.