A recent decision by the Eastern District of California addressed several significant issues in a putative class action alleging that an insurer improperly failed to cover the cost of replacing seatbelts after serious auto accidents.  In Watts v. Allstate Indemnity Company, No. CIV. S-08-1877 LKK/GGH, 2013 U.S. Dist. LEXIS 7407 (E.D. Cal. Jan. 17, 2013), the court denied the insurer’s motion to compel appraisal, but excluded the plaintiff’s expert witness and, based on the exclusion of the expert, denied class certification.

  • Appraisal:  The insurer demanded appraisal of the named plaintiff’s claim shortly after suit was filed, and moved to compel an appraisal.  In a prior decision, the court had concluded that the appraisal provision was unconscionable under California law in the class action context and therefore unenforceable.  The insurer sought reconsideration based on the Supreme Court’s decision in AT&T Mobility, LLC v. Concepcion.  The court appeared to recognize that the appraisal provision could no longer be deemed unconscionable in light of Concepcion, which held that the Federal Arbitration Act preempted California law on unconscionability.  But the court still denied the motion to compel appraisal on the grounds that the plaintiff’s theory of the case was that the insurer had a practice of never determining whether repair or replacement of seatbelts was appropriate, and pressuring repair shops not to include this in their estimates.  Id. at *10-12.  However, nearly every class action complaint drafted by skilled class counsel alleges some general, purportedly improper practice by the defendant.  Without such an allegation, there could be no colorable claim that the requirements for class certification can be satisfied.  If such an allegation can preclude the right to appraisal, doesn’t that essentially eviscerate the appraisal provision? 
  • Expert Testimony:  The insurer sought to exclude the plaintiff’s expert in support of class certification, who opined that: (1) replacement of seatbelts is necessary for all vehicles that have been in certain types of serious auto accidents; and (2) the expert could, by reviewing certain of the insurer’s electronic claims data, identify claims that involved collisions that, in her view, required replacement of seatbelts.  The court found the first opinion admissible, but excluded the second.  The court concluded that the expert had failed to adequately describe her methodology for analyzing the claim records, and there was no indication that the methodology had been or could be tested, subject to peer review or have a calculable error rate.  The court wrote that “[u]ltimately, [the expert] is asking the court to make an inferential leap from the data in Allstate’s computer systems to the alleged degree of damage to seatbelt systems based solely on her experience, without any explanation of her methods or justification for their reliability.”  Id. at *34-35.  In light of the exclusion of the expert testimony, and the fact that the expert’s opinion was critical to the motion for class certification, the court denied certification, but without prejudice.  The type of expert testimony proffered by the plaintiff here is typical of how plaintiffs try to establish class certification in an insurance case, often unsuccessfully.  This portion of the opinion illustrates how courts are applying Daubert standards more rigorously at the class certification stage, a subject on which the U.S. Supreme Court is expected to rule in the coming months in Comcast Corp. v. Behrend (for more on this case, see my November 9, 2012 blog post about the oral argument, and June 26, 2012 blog post about the grant of certiorari).