Your Source for Up-To-Date News and Research on the Collision Repair Industry 

 

click here to subscribe to the FREE INSIGHT Editor's Desk News Alert Email

SUBSCRIBERS-ONLY
Today's News
INSIGHT This Month
INSIGHT Archives
Survey Center
Letter to the Editor

Business Tools
Subscription Information
CSI Reporting
Financial Analysis
IRS Audit Guide

Management/
Technical Info
Market Watch Rates
INSIGHT Inside this month's issue...

Feedback
Letter to the Editor

Ohio Superintendent of Insurance Files Amicus Curiae Brief in Augustus v. The Progressive Corporation

Eric Augustus, a Kentucky resident, filed a putative nationwide class action lawsuit against his insurer, Progressive Insurance Company, in Cuyahoga County, Ohio in 1999 due to his dissatisfaction with repairs made to his vehicle. Augustus accuses Progressive of not fulfilling its contractual duty to return his vehicle to "pre-loss condition" because the insurer allowed the use of two non-original equipment manufacturer ("non-OEM") parts.

Ohio law permits the use of non-OEM parts and requires insurers and repair facilities to notify a consumer when an estimate for repairs is based in whole or in part on the use of non-OEM parts.

The trial court ultimately refused to certify the class, ruling that the case did not meet the standard for class action status because common questions of law do not predominate over the class members' claims, the litigation is not manageable, the identity of proper class members is based on many factual variables, and the class mechanism is not the superior method of adjudication.

Augustus subsequently appealed to the Court of Appeals for the Eighth Appellate District in Cuyahoga County, Ohio.

In an amicus curiae brief filed on September 16, 2002, Ohio Insurance Superintendent Lee Covington and the Ohio Department of Insurance ask the Court of Appeals to affirm the trial court's order denying class certification.

In the brief, Covington states that a decision to grant class certification in the present case "would result in higher premiums for Ohioans and could impede sister states' ability to enforce their own laws and regulations concerning the use of non-OEM parts."

Further, Covington and the Department contend that the prerequisites of Civ.R.23(B)(3) were not met since common questions of fact and law do not predominate. While the brief points out that Ohio law expressly permits the use of non-OEM parts, it goes on to note that this fact alone does not alleviate the insurer's duty to restore an insured's vehicle to its "pre-loss condition." Covington and the Department note that whether the insurer "met its contractual duty can only be determined on a case-by- case analysis of each repair while taking into account the applicable state's law."

Finally, Covington and the Department assert that a class action is not the superior method for the fair and efficient adjudication of the insured's claims. Rather, they contend that given the insured's inability to demonstrate that common questions of law or fact predominate, an individual action is superior to a class action in this case.

In addition, Covington and the Department contend that "further support for the inferiority of the class action mechanism comes from the preexisting availability of a superior administrative remedy that could achieve the same results."

The Superintendent notes that he has the ability to commence an administrative proceeding under Ohio's Unfair and Deceptive Practices Act (R.C. 3901.20 et seq.) upon the complaint of one or more consumers, but that the insured did not attempt to avail himself of this option before filing suit. The brief lists a number of remedial options available to the Superintendent to redress a violation of R.C. 3901.20, including: cease and desist orders, fines, costs, restitution, injunctive relief, license revocation, and the authority to institute a class action to enforce his orders. The Superintendent concludes by stating that "the ready availability of a speedy and efficient administrative remedy mitigates against the certification of a national class action."

An Alliance of American Insurers press release said that the Alliance is very encouraged by Superintendent Covington's willingness to file an amicus brief in this case. The Alliance along with other industry groups have been urging the National Association of Insurance Commissioners to become more active in class action litigation against the insurance industry by filing amicus briefs in cases that have the potential to undermine state insurance regulation. The NAIC is currently in the process of drafting a white paper on the issue.

It remains to be seen whether regulators in other states will follow suit by filing amicus briefs in certain cases. Superintendent Covington has a history of advocacy in this area as he sought to intervene in a New Mexico lawsuit last February concerning modal payments. The suit, Enfield v. Old Line Life Insurance Company of America, was filed in district court in Bernaillo County, NM, by plaintiffs who sought to have the case certified as a national class action. Covington wanted to intervene to prevent the case from reaching class action status, noting that he is fundamentally opposed to having a court in New Mexico or any other state set policy that affects Ohio insureds and insurers.

The Alliance is particularly encouraged by the portion of Covington's brief that discusses the administrative remedies available to insureds, as this is one piece of our state class action reform agenda.

©2002 Collision Repair Industry INSIGHT
All Rights Reserved

FEATURED
LINKS:

INSIGHT Supports the NABC!
Do You?