Actual cash value case against Progressive loses class action status
In another undervalued actual cash value (ACV) case against Progressive, the United States Court of Appeals for the Seventh Circuit has reversed class action status and remanded the case to the District Court.
The Southern Indiana case is brought by two Progressive policyholders, Heather Schroeder and Misty Tanner, who argue the insurer based their total loss vehicle ACVs on “Projected Sold Adjustments.”
The District Court “concluded that each putative class member could use common evidence to establish that Progressive employed an unacceptable method for calculating the actual cash value payments it offered insureds by applying Projected Sold Adjustments [and] certified a class on this basis,” according to the Seventh Circuit’s opinion.
“To estimate a car’s actual cash value from the list prices of comparable cars, Progressive adjusts list prices to account for typical negotiation between car buyers and sellers (it applies ‘Projected Sold Adjustments’ to list prices). Schroeder argues that by applying these adjustments, Progressive breached its undisputed contractual duty to pay the putative class members the actual cash value of their totaled cars, as well as a disputed duty to calculate actual cash value payments using a particular method or formula.”
A panel of three appellate judges concluded that the District Court abused its discretion by resting its analysis of commonality and predominance, and thus its class certification decision, “on an erroneous legal conclusion about the duties contained in Progressive’s standard-form Indiana auto insurance policy.”
Schroeder, on behalf of a class of Indiana residents, claims Progressive breached its contract and its duty of good faith.
Citing case law, the judges concluded that Progressive didn’t breach either since a breach of contract is “‘a failure, without legal excuse, to perform any promise that forms the whole or part of a contract,'” and breaching duty of good faith would require a denial of liablity “‘knowing that there is no rational, principled basis for doing so.'”
The opinion states, “Progressive asserts that its sole contractual duty is to pay insureds the actual cash value of their cars after a total loss. Schroeder, however, sees a second duty in Progressive’s policy: a duty to ‘determine [actual cash value] based on market value.’ If the relevant duty is a duty to pay insureds the actual cash value of their totaled cars, each class member must show that Progressive underpaid her to prove the breach element of her breach-of-contract claim… Damages follow from underpayment, so a class member who proves the breach element of her claim simultaneously proves that she suffered damages resulting from the breach.
“If the relevant duty is a methodological duty, each class member must show that Progressive used an invalid method to calculate actual cash value — independent from the result of the calculation — to prove a breach… Where plaintiffs claim that an insurer breached a methodological duty by applying an invalid adjustment, as Schroeder does here, courts have reached different conclusions about the evidence required to prove resulting damages.”
Therefore, the judges concluded that Progressive’s duty was to compensate each policyholder after a total loss for the price it would sell for at the time of loss, accounting for the car’s age and condition, among other factors, less the applicable deductible.
“The truth or falsity of whether cars sell for their list prices will not resolve whether Progressive breached this duty by applying Projected Sold Adjustments,” the opinion states. “Even if a jury found that cars always sell for their list prices, this finding would not establish that Progressive underpaid each putative class member.
“It would remain possible that the comparable cars in a given valuation report for a putative class member’s totaled car were more valuable than the totaled car in ways that Progressive’s other adjustments did not capture, offsetting any negative effect from applying Projected Sold Adjustments… Because each Projected Sold Adjustment has different inputs, the amount of distortion in each one would depend on how
many records J.D. Power removed from the data it used to calculate the adjustment. In this scenario, then, the jury would not only need to consider individualized evidence about each putative class member’s car and the comparable cars included in her car’s valuation report but also individualized evidence about how J.D. Power derived each Projected Sold Adjustment included in her car’s valuation report.”
Two similar class action lawsuits against Progressive, also filed in 2022 but in Ohio and Pennsylvania, moved out of Appellate Courts in July with opposite decisions.
The Ohio court ruled that the trial court “did not engage in rote acceptance of the plaintiffs’ claims,” as Progressive claimed in its appeal of the case. It also ruled that the lower 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.”
In the Pennsylvania case, the Appellate Court reversed the lower court’s class certification. The lawsuit is similar to the ones filed in Ohio and Indiana, stating that Progressive “systemically thumbs the scale” when calculating ACVs by applying PSAs to comparable used vehicle prices.
“We conclude that proving whether Progressive undercompensated each class member is an individual issue incapable of proof on a class-wide basis,” the opinion states. “And 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. So the District Court abused its discretion in certifying the classes. Accordingly, we will reverse and remand.”
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