Volino v. Progressive Casualty Insurance Company

Background

The opinion addresses consolidated class-certification proceedings involving claims by John Plotts, Kevin Lukasik, Lorenzo Costa, Zachary Goodier, James England, Michael Verardo and Lori Lippa against Progressive Advanced Insurance Company, Progressive Specialty Insurance Company, Progressive Max Insurance Company and Progressive Casualty Insurance Company. The plaintiffs alleged that Progressive systematically paid less than the actual cash value promised by its automobile-insurance policies when covered vehicles were declared total losses.

The plaintiffs challenged Progressive’s use of a “Projected Sold Adjustment,” or PSA, in valuation reports prepared using Mitchell International, Inc.’s software. Progressive applied the PSA to the prices of certain unsold comparable vehicles to estimate the reduction from list price to an expected sale price after negotiation. The plaintiffs alleged that Progressive selected data in a way that produced excessive downward adjustments and that the used-car market no longer generally depended on negotiation in the way the PSA assumed.

All plaintiffs asserted claims under New York General Business Law § 349, which prohibits materially deceptive business practices, and sought a declaratory judgment for themselves and a proposed class. All plaintiffs except James England also asserted breach-of-contract claims for themselves and a proposed class. The proposed breach-of-contract class covered certain first-party claims from July 28, 2015, through the date of class certification. The proposed General Business Law § 349 class covered certain first- and third-party claims from July 28, 2018, through the date of class certification. The plaintiffs also sought four insurer-specific subclasses for each class.

Expert motions

Progressive moved to exclude the opinions of Jason Merritt, Thomas M. Gibbs, Jr. and Kenneth Volz under Federal Rule of Evidence 702, which governs expert testimony. The court explained that, at the class-certification stage, the expert objections principally concerned the weight of the opinions rather than whether a jury should hear them.

The court denied the motions as to all three experts. It found that Merritt’s experience appraising vehicles qualified him to address ordinary appraisal practices and the use of PSA-like adjustments. It found that Gibbs’s more than fifty years in new- and used-car sales and Volz’s nearly twenty-five years operating a used-car dealership qualified them to address how dealers price vehicles. The court did not rely on or resolve challenges to opinions that were unnecessary for class certification, including opinions about the inner workings of Progressive’s software.

Class certification

The court granted certification of the breach-of-contract class, the General Business Law § 349 class, and all requested insurer-specific subclasses under Rule 23(b)(3). Rule 23(b)(3) requires that common questions predominate over individual questions and that a class action be superior to other methods of resolving the dispute. The court also considered Rule 23(a)’s requirements, including numerosity, commonality, typicality and adequacy, as well as the requirement that the class be defined using objective criteria.

The court found the classes ascertainable because membership depended on objective criteria, including the type and timing of the insurance claim, the use of a Mitchell report, and whether the vehicle’s actual cash value was reduced by a PSA. Using Progressive’s claims data, the plaintiffs’ expert estimated that each class and subclass contained at least several thousand people. The court found the named plaintiffs’ claims typical and their representation adequate, rejecting Progressive’s arguments based on differences involving vehicle salvage, negotiated payments and other aspects of the valuation process.

The court found that common issues predominated. The central questions were whether the PSA was a legitimate valuation method, whether Progressive misled insureds about the PSA, and whether applying the PSA caused payments below actual cash value. The court held that these questions did not depend on whether a particular PSA prediction happened to match a particular vehicle’s later sale price. The plaintiffs’ theory was that the PSA should not have been applied in the first place because its underlying data was manipulated or did not reflect the market.

The court also found that Progressive’s own valuation data could provide common proof of actual cash value. Under the plaintiffs’ proposed method, the valuation would be recalculated using Progressive’s process but without the PSA. The court concluded that this method matched the plaintiffs’ theory that the PSA should be eliminated and could provide a common way to calculate damages, even if some individual review were later necessary.

The court rejected arguments that some class members lacked injury because no PSA was applied, a settlement was negotiated, or gap insurance paid an outstanding loan. The class definitions excluded people whose payments were not based on a Mitchell report, people whose payments were not reduced by a PSA, and people who did not receive compensation for the vehicle’s total loss. The court also found that Progressive’s records could address any remaining membership questions without requiring individual trials for each claim.

The court did not address certification under Rule 23(b)(2) because it certified both classes under Rule 23(b)(3). It appointed the designated plaintiffs as class representatives for the classes and insurer-specific subclasses described in the order. The parties were directed to confer about notice, and the plaintiffs were directed to submit a proposed class-notification form for the court’s review within twenty-one days.

Class counsel and disposition

The court granted in part and denied in part the motion to appoint class counsel. It appointed Carney Bates & Pulliam, PLLC as class counsel for all classes and subclasses. It denied without prejudice the request to appoint the other firms representing the plaintiffs, because the supporting submissions provided insufficient detail about several lawyers’ experience and each firm’s role in the litigation.

The court’s final dispositions were: Progressive’s motions to exclude the three experts were denied; the motions to certify the breach-of-contract class, the General Business Law § 349 class and their respective subclasses were granted; and the motion to appoint class counsel was granted in part and denied in part. Judge Lorna G. Schofield directed the clerk to close the motions at docket numbers 172 and 199.