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Class Certification In Property Insurance Disputes
The 2005 hurricane season, including the devastation wreaked by Hurricane Katrina, caused estimated losses of $75 billion. The insured property damage from the five major hurricanes in 2005 reached $52.7 billion. Hurricane Katrina alone caused more property loss than had occurred in the entire prior year, posting $27.3 billion. See http://insurancenewsnet.com/article.asp?a=top_news&id=73930. In light of these unprecedented losses, a record number of lawsuits have been filed stemming from damage caused by the 2005 storms. Predictably, an equally high number of class action suits have been filed, purportedly on behalf of those affected by the storms. Despite this flurry of class action suits, the requirements of Federal Rule of Civil Procedure 23 and its state counterparts clearly limit the use of class action suits to very specific, enumerated circumstances that simply do not include first-party insurance disputes, widespread property damage claims, or claims for bad faith and/or unfair trade practices in the adjustment of insurance claims, even where the damage was due to a common weather event.
Under the Federal Rules of Civil Procedure, plaintiffs seeking class certification must satisfy the requirements of F.R.C.P. 23. Under F.R.C.P. 23(a), a plaintiff must first establish the four elements commonly referred to as numerosity, commonality, typicality, and adequacy of representation. F.R.C.P. Rule 23(a). Rule 23(a)(2), the 'commonality requirement' instructs that issues of law or fact must be common to the entire class. The commonality requirement is satisfied if at least one issue's resolution will affect all or a significant number of class members. James v. City of Dallas, 254 F.3d 551, 570 (5th Cir. 2001). However, even if a plaintiff class meets the requirements outlined in F.R.C.P. 23(a), plaintiffs must also demonstrate that one of several other enumerated factors is applicable. In most instances, class litigants rely on subsection 23(b)(3), which requires a court determination that questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is the superior method for the fair and efficient adjudication of the controversy. In making this determination, F.R.C.P. 23 instructs the court to consider the interest of the members of the class in individually controlling the prosecution of separate actions, the extent and nature of any litigation concerning the controversy which has already commenced, the desirability or undesirability of concentrating the litigation of the claims in a particular forum, and the difficulties likely to be encountered in managing the class action. F.R.C.P. 23(b)(3) is typically referred to as the 'predominance and superiority' test. Furthermore, while subsection 23(b)(3) does not necessarily exclude cases where individual damages are high, 'the Advisory Committee had dominantly in mind vindication of the rights of groups of people who individually would be without effective strength to bring their opponents into court at all,' or those whose individual claims would be too small to warrant litigation. Achem Products, Inc. v. Windsor, 521 U.S. 591, 617 (1997); Smilow v. Southwestern Bell Mobile Systems, Inc., 323 F.3d 32 (1st Cir. 2003).
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