Volino v. Progressive Casualty Insurance Company

Background

The opinion concerns two related actions brought by Dominick Volino and others, and by Michael Verardo and others. The body of the opinion identifies the plaintiffs as John Plotts, Kevin Lukasik, Lorenzo Costa, Zachary Goodier, James England, Michael Verardo, and Lori Lippa, who sued Progressive Casualty Insurance Company, Progressive Advanced Insurance Company, Progressive Specialty Insurance Company, and Progressive Max Insurance Company. The plaintiffs sought to represent a proposed class of people in New York who received payments after their vehicles were declared total losses.

The plaintiffs alleged that the Progressive companies used valuation reports prepared by Mitchell International, Inc. to calculate the actual cash value of totaled vehicles. The reports applied a “Projected Sold Adjustment,” or PSA, to the prices of comparable vehicles listed for sale. According to the complaint, the PSA reduced comparable-vehicle values by 4.6% to 11.7% and was described in the reports as an adjustment reflecting consumer negotiation of listed prices.

The complaint alleged that the PSA did not reflect current used-car market conditions, relied on improperly selected data, and was used to reduce total-loss payments. The first-party plaintiffs—everyone except James England—asserted breach-of-contract claims. All plaintiffs asserted claims under New York General Business Law § 349, which prohibits materially deceptive consumer-oriented practices, and sought a declaration concerning their rights.

Defendants’ motion to dismiss

The defendants moved to dismiss the consolidated amended complaint. On a motion to dismiss, the court accepts well-pleaded factual allegations as true and asks whether they plausibly support legal relief, rather than deciding whether the allegations have ultimately been proven.

Breach of contract

The court denied dismissal of the first-party plaintiffs’ breach-of-contract claims. The complaint alleged that the insurance policies promised payment of the vehicles’ actual cash value and that the PSA was the measure of the alleged underpayment. The plaintiffs did not challenge the remainder of the Mitchell valuation method; they alleged that applying the PSA systematically reduced payments and did not reflect market realities or customary automobile-dealer practices.

The court also rejected the argument that the claims improperly attacked an earlier approval of the Mitchell database by New York’s Superintendent of Insurance. The court reasoned that the approval did not permanently prevent a challenge alleging that the database no longer produced statistically valid fair-market values. The court further stated that whether the defendants fulfilled their contractual promise to pay actual cash value was a legal question for a court, not a matter that had to be resolved first by the Superintendent.

New York General Business Law § 349

The court denied dismissal of the § 349 claims. It found that the complaint plausibly alleged consumer-oriented conduct, a materially misleading representation, and injury. In particular, the plaintiffs alleged that the defendants represented that the PSA reflected consumer purchasing behavior while actually using it as an improper device to reduce payments.

The court rejected the argument that disclosure of the PSA’s amount and stated rationale defeated deception as a matter of law. The complaint alleged that the explanation itself was misleading and that plaintiffs could not see the underlying data showing whether the adjustment was justified. The court also held that the plaintiffs sufficiently alleged actual monetary injury from receiving less than the actual cash value of their vehicles. It stated that the § 349 claims were sufficiently distinct from the contract claims, although a plaintiff could not recover twice for the same damages.

The court separately concluded that James England’s § 349 claim could proceed. England allegedly received a total-loss settlement that misrepresented the PSA and therefore allegedly suffered injury from deceptive conduct, even though he was not one of the first-party plaintiffs asserting a breach-of-contract claim.

Agency liability

The court held that the claims could proceed against Progressive Casualty Insurance Company even when another Progressive company was named on a plaintiff’s policy. Although breach of contract ordinarily requires a contractual relationship between the plaintiff and defendant, an agent may bind a principal when the agent has actual or apparent authority. At the pleading stage, the plaintiffs needed only to allege facts supporting a reasonable inference that an agency relationship existed.

The complaint alleged that the Progressive companies shared a website, address, and telephone number; reported financial results as the Progressive Group of Companies; registered with New York’s Department of Financial Services under the same group name and number; and used reports identifying the Progressive Group rather than an individual company. It also alleged that Progressive Casualty Insurance Company owned group assets and controlled claims adjustment, including the hiring of adjusters, investigation of claims, and contracting with Mitchell. The court found those allegations sufficient to support an inference that Progressive Casualty Insurance Company controlled the issuance and payment of claims on the other companies’ policies.

The court rejected the plaintiffs’ separate “common enterprise” theory because it rested on a doctrine associated with the Federal Trade Commission Act. The court nevertheless allowed the claims against Progressive Casualty Insurance Company to proceed under the agency theory.

Disposition

Judge Lorna G. Schofield denied the defendants’ motion to dismiss. The clerk was directed to close the motion at Docket Number 124.