Title Insurance Class Action on Reissue Premium Discounts: Kentucky Court of Appeals Affirms Class Certification
Numerous class actions have been filed against title insurance companies claiming that they failed to properly discount rates when policies were reissued, typically in connection with refinancing of properties. (For more on this, see, for example, my August 2, 2012 post.) Contrary to some prior decisions in federal courts, the Kentucky Court of Appeals recently affirmed a class certification order.
In Stewart Title Guaranty Company v. Finney, No. 2011-ca-000499-me, 2012 Ky. App. Unpub. LEXIS 817 (Ky. Ct. App. Nov. 2, 2012), the claim was that the title insurer improperly charged rates based on an unapproved 1994 rate manual rather than a 1999 rate manual, and failed to apply a reissue discount. The Kentucky Court of Appeals applied what it described as a “very limited review” standard under which it would have to find a “clear abuse of discretion” in order to reverse the class certification order. Id. at *5. The court also suggested that “there exists a presumption in favor of class certification,” relying on a 1968 decision of the Tenth Circuit (there is no such presumption in modern federal law). Id. at *8. On the key issues of predominance and superiority, the court reasoned as follows in distinguishing federal decisions:
Stewart suggests that the only way it is capable of gathering the necessary evidence to litigate its liability with respect to each prospective subclass member is to conduct a very intensive, very costly canvass of its agents' records. Stewart repeatedly emphasizes the difficulty of proving these facts for each class member due to the nature of their relationship to their agents. The circuit court concluded, to the contrary, that Stewart possessed the ability to perform audits and reviews of its agents' records and was therefore easily capable of gathering this information. The Finneys contend Stewart should not be rewarded for less than the best business practices, and that any other issues, like the rates and discount used for Stewart's customers, may be resolved by generalized proof. Since the parties' arguments give rise to the possibility that this case includes both common questions resolved by generalized proof and individualized inquiries needed for Reissue Subclass eligibility, the dispute is resolved by determining whether individualized inquiries predominate over the common questions.
. . .
The Finneys' claim is based upon common questions relating to the 1994 Rate Manual, which do not require resolution by individualized inquiries. Where, as here, giving the rate discount to an eligible insured is mandatory, resolution of the question is routine. Which customers should have received the discount is determinable by the criteria Stewart itself created in its 1999 Rate Manual.
. . .
The improper application of the 1994 Rate Manual and the resulting failure to give insureds the proper reissue discount are provable by general proof of directives which the "agents monolithically followed." Thus, the circuit court did not abuse its discretion.
. . .
The circuit court found the class action to be manageable. More specifically, it found that Stewart had the ability to audit and identify the eligible members, even if it must sort through thousands of closing files, which its agents are contractually required to keep. It found that a large class size is not sufficient to deny certification. We agree.
Id. at *14-17, 21.
Unlike most federal courts, the Kentucky Court of Appeals was comfortable imposing a substantial burden on the insurer to review thousands of files to identify class members and perhaps for other purposes as well. What the court does not address is what the trial would look like. Once the insurer performs the onerous review, presumably the insurer will have a defense to many of the claims and would want to put on those individual defenses at trial, leading to what would not be truly a class action trial but a mass-trial of individual claims.