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Insurance Law: Ninth Circuit Denies Class Action Certification in ‘Total Loss’ Auto Value Claims

March 16, 2022 – Matt Albrecht

Insurance Law: Ninth Circuit Denies Class Action Certification

On February 11th, 2022, the United States Court of Appeals for the Ninth Circuit denied class action certification in the case of Lara v. First National Insurance Company of America—an insurance denial dispute arising out of Washington State. The case centered around the alleged undervaluation of ‘total loss’ vehicle damage claims by an insurance company. Here, our Spokane insurance lawyers provide a more detailed analysis of the decision from the Ninth Circuit Court of Appeals.

Case Review: Lara v. First National Insurance Company of America

The Facts

The lawsuit in this case was initially brought against Liberty Mutual and an additional third party vendor (CCC Intelligent Solutions) that helped the company develop a system for valuing automobile damage in total loss claims. The plaintiffs alleged that Liberty Mutual violated Washington state’s bad faith insurance law by systematically undervaluing vehicles that were deemed a total loss. In Washington, a car is determined to be a total loss when it costs more to fix it than its pre-accident value.

The Legal Issue

The plaintiffs in this case wanted to pursue a class action insurance claim against Liberty Mutual and the related defendants. Specifically, the plaintiffs argued that the formula developed by CCC Intelligent Solutions—and used by Liberty Mutual—undervalued their cars. The insurance company would determine “fair market value” for a totaled vehicle by doing research to see recent sale prices for similar vehicles. Once that baseline was established, downward adjustments were sometimes made to account for the vehicle’s condition.

The plaintiffs filed a lawsuit on the grounds that the downward adjustment constitutes an unfair trade practice under Washington’s bad faith law. They sought class action certification. The lawsuit itself survived a motion to dismiss from the defendant. However, the court in Washington State denied class action certification on the grounds of a lack of predominance of common issues among the proposed class members.

The Decision

After reviewing the case, the Ninth Circuit Court of Appeals affirmed the lower court’s decision and declined to certify a class action lawsuit against the insurance company. Citing previous insurance law cases arising out of state and federal courts, the Ninth Circuit noted that the core issue raised by plaintiffs is one of damages. As the damages issue involved many unique factors, class action certification was not appropriate.

Of course, the unfavorable ruling does not mean that policyholders are without options. Any insurance policyholder who is subject to an unfair market valuation of their vehicle after a total loss has a right to pursue an individual claim against their insurance company. If you believe that your total loss vehicle was significantly undervalued by an insurer, an experienced attorney can help protect your rights and interests.

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