Edd King v. National General Insurance Company

Background

Diedre King and Edd King brought a proposed class action against National General Insurance Company, Integon National Insurance Company, Integon Preferred Insurance Company, MIC General Insurance Corporation, and Personal Express Insurance Company. They alleged that the insurers violated California Insurance Code section 1861.16(b), which requires insurers in a common ownership, management, or control group to offer a qualified good driver the lowest available Good Driver Discount policy rate within that group.

The Kings alleged that they purchased a renewal policy from National General Insurance Company on June 2, 2013, but were not offered lower-rate coverage available from Personal Express or an Integon policy. The remaining claims were an unfair and unlawful business-practices claim under California’s Unfair Competition Law and a claim for breach of the implied covenant of good faith and fair dealing.

Expert-evidence rulings

The defendants moved to exclude reports by plaintiffs’ experts Scott Brown and Allan I. Schwartz. The court denied those motions, finding that Brown was qualified and that his actuarial model was sufficiently reliable and useful at the class-certification stage. The court stated that challenges to the model’s error rate, assumptions, and data deficiencies went mainly to the weight of the evidence rather than its admissibility.

The court granted in part and denied in part the plaintiffs’ motion to exclude the report of defendants’ expert Paul Braithwaite. Braithwaite could testify about Brown’s work, insurance-rate analyses, and the defendants’ types of coverage, but could not offer opinions supporting legal arguments about the class definition or consumer choice. The court denied as moot the motion to exclude challenged statements by Larry LaStofka because the court did not rely on those statements. It also excluded specified portions of Jeffrey Nash’s and Joel Laucher’s declarations because they offered legal conclusions.

Standing and Personal Express

The court determined that the Kings’ evidence supported standing against the four insurers referred to as the “NG Defendants”: National General Insurance Company, Integon National Insurance Company, Integon Preferred Insurance Company, and MIC General Insurance Corporation. The evidence showed that a lower-rate Personal Express policy was available when the Kings renewed their policy, but the court found insufficient evidence connecting the National General agent’s conduct to Personal Express. The court also found that the Integon policy would have cost the Kings more after additional fees and that the MIC General policy identified by plaintiffs was not available to them.

The court rejected plaintiffs’ theories that the insurers were jointly liable through agency, a single enterprise, or concerted action as to Personal Express. It found that Personal Express had separate sales and training operations and that plaintiffs had not shown that the National General agent acted for, or with the authority of, Personal Express. The court therefore found that plaintiffs lacked standing to assert a claim against Personal Express and dismissed Personal Express as a defendant. The court stated that information about Personal Express remained relevant to whether the other insurers violated the law while Personal Express was temporarily part of the control group.

Class-certification analysis

The court found that plaintiffs satisfied Rule 23(a)’s requirements of numerosity, commonality, typicality, and adequacy. Plaintiffs’ evidence showed a common question about whether the NG Defendants followed a common policy of failing to offer the lowest rates within their control group. The court also found that records and other common evidence could determine drivers’ good-driver status and whether policies were sold through agents rather than brokers.

For the Unfair Competition Law claim, the court held that individual questions about whether policyholders would have accepted a lower-priced policy did not defeat predominance. The claim proceeded under the unlawful and unfair theories, not fraud, and the court concluded that actual reliance was not an element of those theories. The court also found that Brown’s damages model could measure the difference between the offered rate and the lowest available rate on a class-wide basis. Common questions therefore predominated, and a class action was superior to individual lawsuits.

The court reached a different result for the breach-of-implied-covenant claim. It held that this contract-based claim requires damages proximately caused by the alleged breach. The defendants presented evidence that the policies differed in benefits, coverage for non-listed drivers, rental-vehicle coverage, repair coverage, total-loss payment methods, and deductibles. The plaintiffs did not provide a common method for determining whether class members would have accepted the different policies. Individual questions therefore predominated as to causation and damages, and the court denied class certification for that claim.

Other rulings and disposition

The court denied plaintiffs’ requests for judicial notice as moot because it did not rely on the requested documents. It denied Consumer Watchdog’s motion for leave to file an amicus brief, finding the proposed brief unhelpful to the class-certification motion and not a basis for revisiting an earlier ruling. The court granted plaintiffs’ later request to submit a brief about a cited decision solely for that purpose, but did not consider attempts to raise other arguments.

The court granted plaintiffs’ renewed motion for class certification as to the Unfair Competition Law claim alleging unfair and unlawful business practices under California Insurance Code section 1861.16(b), and denied the motion as to the implied-covenant claim. The certified class consists of policyholders of the four NG Defendants who purchased California Good Driver Discount private-passenger automobile policies, including renewals, and were not offered the lowest available rate within the control group. The control group includes the four NG Defendants from January 22, 2011 to the present and includes Personal Express from April 19, 2013 to July 18, 2014.