Two lawsuits against Progressive over undervalued actual cash value move out of Appeals Courts with opposite rulings

Two class action lawsuits filed against Progressive that allege undervalued actual cash values (ACVs) of total loss vehicles are moving forward with different outcomes.

Both were filed in 2022, one in Ohio and the other in Pennsylvania. Progressive appealed the Ohio case after the lower court granted class certification.

According to a July 10 Court of Appeals opinion from the Eighth Appellate District County of Cuyahoga, Progressive sought an appeal “to determine whether the trial court abused its discretion by granting the plaintiffs’ motion for class certification.”

“After a careful and thorough review of the facts and pertinent case law, we find that the trial court did not abuse its discretion and affirm its judgment,” the opinion states.

According to the background of the case given in the opinion, ACV is based on the market value, age, and condition of the vehicle under the policies in question at the time a loss occurs. Progressive used valuation reports prepared by Mitchell International to determine the ACVs.

Mitchell used projected sold adjustments (PSAs) in calculating ACVs. According to the plaintiffs, the PSAs are arbitrary, contrary to appraisal standards and methodologies, not based in fact as they are contrary to the used car industry’s market pricing and inventory management practices, not applied by the major competitor of defendants’ vendor Mitchell, and aren’t applied by defendants and Mitchell to insureds in other states, like California and Washington.

The Mitchell reports were generated by Mitchell’s WorkCenter Total Loss (WCTL) platform by identifying comparable vehicles that were listed for sale or recently sold.

“When a comparable vehicle in the WCTL database featured a list price — and was not listed by what Mitchell refers to as a ‘non-haggle’ dealer — Mitchell automatically applied a PSA to reduce the comparable price used to generate its report,” the opinion states. “Progressive maintains that the deduction reflects consumer behavior; that is, the assumed consumer practice of negotiating a price lower than the list price.

“In addition to the PSAs, the Mitchell reports made other adjustments based on observed differences between an insured’s vehicle and a comparable vehicle, such as for mileage, trim, and equipment. The WCTL then averaged the adjusted prices of all the comparable vehicles identified to generate the loss vehicle’s ‘base’ market value. Further adjustments were made, as needed, for considerations such as aftermarket parts, refurbishment, condition, and prior damage. After all of these adjustments, Mitchell arrived at the ACV for the insureds’ totaled vehicles.”

Taxes, fees, and deductibles were then automatically calculated and applied to the ACV to determine each claim payment.

According to testimony on behalf of the plaintiffs from three “experts,” Mitchell’s claim evaluations followed the industry standard with the exception of the PSA deduction.

“…one of the plaintiffs’ experts opined that the deduction was not based on observed, verified data; rather, he believed the deduction was speculative — it was based on conjecture about consumer negotiation, premised on manipulated data,” the opinion says. “The expert believed that removing the PSA deduction from the Mitchell reports would result in the vehicles’ ACVs.”

Progressive contends that the policies are silent on whether they must use any particular adjustment to determine the value of a totaled vehicle, according to the opinion.

“Progressive maintains that there were numerous other legitimate methods it could have used to estimate the ACV for the vehicles and those methods often produce a range of different values,” the opinion says.

“Progressive further contends that determining a vehicle’s ACV requires consideration of factors specific and individual to each car. Moreover, Progressive maintains that the plaintiffs failed to present evidence that PSAs are categorically inaccurate, and even one of plaintiffs’ experts opined that vehicles often do sell for less than list price. Progressive presented expert evidence that the Mitchell valuations are individualized and based on ‘hard data’ from real transactions, specifically, data from J.D. Power. Thus, according to Progressive, PSAs are not blanket reductions uniformly applied.”

In its appeal, Progressive argued the following:

• 1. “The trial court erred by finding in its August 15, 2024 order granting Plaintiff’s motion for class certification that it must ‘accept the allegations [in the class certification motion] as true.’
  2. “The trial court erred and abused its discretion by granting class certification and finding that common questions predominate for the class even though Plaintiffs cannot establish liability, standing, or damages without an individualized inquiry into the actual cash value of each class member’s vehicle.
  3. “The trial court erred in concluding that the question of whether PSAs are valid is common.”

Regarding the first allegation, the court ruled that the trial court “did not engage in rote acceptance of the plaintiffs’ claims.”

The court overruled Progressive’s other two arguments, stating that “the trial court did not abuse its discretion by finding that plaintiffs’ contention about the PSA deduction as a means of valuing their claims raises common issues that predominate this litigation.”

“We note that four federal circuit courts have held that insureds’ challenge to a line-item deduction as categorically improper is a common, predominate liability issue,” the opinion says. …[From Hicks v. State Farm] Regarding predominance, the court noted that individual damages calculations do not preclude class certification, but the plaintiffs must ensure that their formula calculates damages based only on their theory of liability.

“Similar to Hicks, the plaintiffs in the instant case challenge a one-line item deduction — the PSAs — and that line item predominates over individual questions. Moreover, as with Hicks, should the plaintiffs here prevail, calculation of their new payments should be a relatively straightforward process, i.e., removal of the PSA deductions.”

The court also notes at least two cases Repairer Driven News has previously reported on, Volino v. Progressive and Sampson v. USAA.

Regarding Volino, the court states, “The New York district court rejected Progressive’s contention that individualized issues predominated over common questions. The court found that ‘[t]o the extent Progressive has identified individual issues that may need to be worked out at the margins, the critical common questions identified by Plaintiffs predominate over those individual inquiries.'”

Progressive settled the suit for $13.8 million in March.

And about Sampson, the court wrote, “[T]he plaintiffs alleged the defendants United States Auto Association and USSA General Indemnity Company (“USAA”) breached their contract by valuing cars using the CCC One Market Valuation Report (“CCC”) which was allegedly illegal to use under a Louisiana regulation because it was not a “recognized used auto industry source.” Id. at 417. The plaintiffs contended that the
National Automobile Dealers Association guidebook (“NADA”) was a recognized source. The plaintiffs claimed that USAA was liable for not using that guidebook. However, the plaintiffs admitted that their liability theory was arbitrary because NADA was one of several sources allegedly permitted by Louisiana law.

In another ongoing case against Progressive over ACVs, the United States District Court for the Eastern District of Pennsylvania has reversed the lower court’s class certification. The lawsuit is similar to the one filed in Ohio, stating that Progressive “systemically thumbs the scale” when calculating ACVs by applying PSAs to comparable used vehicle prices.

The plaintiffs allege that the adjustments are “deceptive and unexplained,” and are “not based in fact, as they are contrary to the used car industry’s market pricing and inventory management practices.”

The suit was filed three days after a similar complaint was filed against State Farm in Illinois.

Now, the United States Court of Appeals for the Third Circuit has reversed and remanded the lower court’s class certification, stating that “proving whether Progressive undercompensated each class member is an individual issue incapable of proof on a class-wide basis.”

“Because that individual issue is the dispositive question of Progressive’s liability for breach of contract, we hold both classes fail to clear Rule 23(b)(3)’s requirement that common issues predominate over individual ones,” the July 7 opinion states. “The District Court abused its discretion in certifying the classes.”

According to the Appeals Court, Progressive follows several steps to calculate final total loss settlements using Mitchell and NADA data.

“[T]he final settlement value includes three types of adjustments: (1) the PSA, applied to the Mitchell base value; (2) NADA’s adjustments to the NADA Eastern retail value; and (3) Progressive’s final adjustments to the dual source base value. The final settlement value also subtracts
any non-waived deductible specific to the insured’s policy,” the court wrote.

“Plaintiffs object to just the first of the three adjustments involved in Progressive’s total loss settlement process. They contend the PSA should not be applied to the Mitchell base value because it results in a lower final settlement value. If that final settlement value is less than ACV, then Progressive would be in breach of its form insurance contracts. Plaintiffs further allege Progressive’s breach follows from its ‘manipulati[on of] the data used to determine the ACV of the vehicles.’  …Accordingly, plaintiffs pleaded breach of contract and actual damages on the basis of underpayment… plaintiffs contend ACV calculations should exclude PSAs because those adjustments create ‘an outdated and false characterization of the market.'”

The Appeals Court ruled that the District Court failed to recognize that the plaintiffs’ theory of liability hinged on proving Progressive breached its insurance agreement with policyholders by underpaying them for their totaled vehicles.

“[T]he court did not consider that many class members’ breach-of-contract claims would be thwarted by their receipt of a final settlement value equivalent to or greater than ACV, in spite of Progressive’s application of PSAs, as a consequence of other steps in the settlement methodology described above,” the opinion states. “The District Court would need to evaluate plaintiff-by-plaintiff proof to ascertain which plaintiffs Progressive actually underpaid and, accordingly, to which plaintiffs Progressive is liable for breach of contract.”

Instead, the Appeals Court says that the District Court should’ve analyzed whether common issues predominate over individual issues for proving the elements of breach of contract, because Progressive could meet its contractual obligation to pay vehicle ACVs in several ways.

The court listed three scenarios:

1. 1. “Progressive could scrap PSAs altogether, as plaintiffs urge, and pay the insured the average of the Mitchell base value — without a PSA — and the NADA value. This average could conceivably approximate ACV.
   2. “Progressive could follow its current methodology and average the Mitchell value (which includes a PSA) and the NADA value (which includes various NADA-specific adjustments) — as it actually does — but balance out (or even exceed) any intermediate downward adjustments with several upward adjustments at the final step of the settlement calculation.
   3. “The NADA value could be higher than the Mitchell value, resulting in a final settlement value which, depending on any final adjustments, could match or exceed ACV. This third situation is not uncommon, according to the sworn affidavit of Progressive’s insurance expert.”

The opinion states that, contrary to the plaintiffs’ argument that only the first scenario would preclude a breach of contract, any of the above approaches would allow Progressive to meet its contractual obligation to pay ACV.

“As the Ninth Circuit concluded, when a particular downward adjustment in an insurance valuation is both statutorily unlawful and uniform, proving damages incurred by each plaintiff because of that adjustment is straightforward,” the opinion states. “Here, by contrast, plaintiffs brought a contract claim, so they must show that proving whether Progressive breached its insurance agreement with each class member does not require a plaintiff-by-plaintiff determination as to underpayment. Because they cannot make that showing, we will reverse the District Court’s order certifying the classes and remand for further proceedings consistent with this opinion.”

The Legal Intelligencer reports that Jeff Cashdan of King & Spalding, Progressive’s attorney, said the Fourth, Seventh, and Ninth Circuits are considering similar cases against the insurance company.

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