Numerous class action suits have been filed against auto insurers regarding the valuation of vehicles that are total losses. These cases typically allege that insurers are undervaluing vehicles in some common way or in violation of a state regulation. The Ninth Circuit recently affirmed the denial of class certification in a published decision that I expect will be helpful to insurers defending these cases and others involving different lines of insurance but similar issues.

In Lara v. First National Insurance Company of America, No. 21-35126, — F.4th –, 2022 WL 414691 (9th Cir. Feb. 11, 2022), the plaintiffs sued Liberty Mutual companies and CCC Intelligent Solutions, a vendor that assists insurers in valuing vehicles, alleging breach of contract as to Liberty Mutual and an unfair trade practices claim against all defendants. The insurance policy required payment of the “actual cash value” of the vehicle, which was defined by a Washington regulation as “fair market value.” CCC researches the prices at which used vehicles sell at car dealers, and then makes adjustment based on the pre-loss condition of the insured vehicle and the difference between prices paid for vehicles purchased from private parties rather than dealerships. The insurance adjuster then in some cases adjusts the value shown on the CCC report. Plaintiffs claimed that the “condition adjustments” on the CCC reports violated a Washington regulation. The case survived a motion to dismiss, but the district court denied class certification under Rule 23(b)(3), based on lack of predominance of common issues and because a class action would not be a superior method of resolving the dispute.

In affirming, the Ninth Circuit concluded that whether the condition adjustment violated the regulation was a common question, but liability and injury would require individualized adjudication of each claim. The court explained that “[b]ecause Liberty owed each putative class member the actual cash value of his or her car, if a putative class member was given that amount or more, then he or she cannot win on the merits,” and determining that “would involve looking into the actual pre-accident value of the car and then comparing that with what each person was offered.” In other words, there would have to be a minitrial on the value of each vehicle.

As plaintiffs often do in these cases, the plaintiffs here argued that the value of the vehicles involved “damages issues,” and some courts have said that if the only individualized issues involve damages, that should not defeat class certification. But, as the Ninth Circuit explained here, “if there’s no injury, then the breach of contract and unfair trade practices claims must fail,” and “[t]hat’s not a damages issue; that’s a merits issue.” In other words, if the ultimate amount paid was sufficient, it doesn’t matter how you get there. As the court put it, “the district court was correct to apply ‘the old basketball phrase, ‘no harm, no foul.’” The court also agreed with the district court that the superiority requirement was not satisfied because individual trials would be preferable given the nature of the issues to be decided.

Insurers will want to cite this opinion in cases involving other lines of insurance as well, such as property. Property insurance class actions often involve disputes over actual cash value or replacement cost value, and the same principle should apply. Disputes over whether a few hundred dollars more were owed for damage from a hail storm, for example, are individualized. As in this case, those disputes may be best resolved by the appraisal process provided for in these policies, or in small claims court, and often fail to satisfy the requirements for a class action.