Absence Of The Automobile Bars A Class Claim
March 02, 2011
The 7th U.S. Circuit Court of Appeals, construing Illinois law, recently upheld the dismissal of class-action claims against an insurer for alleged systematic failure to restore damaged automobiles covered by the insurer's policies to their pre-loss conditions, because of the unavailability of the class representative's automobile due to his having donated it to charity. Greenberger v. Geico General Insurance Co., 2011 WL 62809 (7th Cir. Jan. 10, 2011).
The plaintiff was represented by Michael S. Hilicki of the Walner Law Firm Ltd. Sheila Carmody and Andrew Jacobs of Snell & Wilmer, based respectively in Phoenix and Tucson, Ariz., represented the insurer, Geico.
Background
The plaintiff and class representative, a professor at DePaul University College of Law, sustained damage to his automobile in 2002. The day following the damage, a Geico adjuster inspected the car and wrote him a check for the damage less the deductible, for a total of about $3,200. The plaintiff cashed the check but never had his automobile repaired.
A few months later, in connection with the possible sale of the vehicle, a mechanic estimated the damage at about $1,150 higher than Geico's estimate. The sale, however, did not go forward, and the plaintiff ended up donating the car to charity.
Three years later, the plaintiff brought the instant lawsuit in state court claiming that Geico systematically underpaid on its auto-accident claims by omitting necessary repairs from vehicle-damage estimates. The lawsuit was brought as a class action and claimed consumer fraud, common law fraud and breach of contract.
Geico removed the case to federal court under the Class Action Fairness Act, 18 U.S.C. §1332(d) (CAFA). The district court subsequently dismissed the consumer fraud count and it entered summary judgment for Geico on the other counts. The court did not address class certification. The plaintiff appealed.
Jurisdiction
In an opinion by Judge Diane S. Sykes, the 7th Circuit affirmed. She first addressed the question of jurisdiction and specifically whether, with the district court not having certified the class, jurisdiction remained in federal court under CAFA. She found that it did in accordance with Cunningham Charter Corp. v. Learjet, Inc., 592 F.3d 805 (7th Cir. 2010), which held that a denial of class certification did not oust the federal court's subject-matter jurisdiction.
Contract Claim
She then addressed the plaintiff's breach of contract claim. She noted that for the plaintiff to prevail on the claim, he needed to prove that the amount Geico paid on his auto-collision claim was insufficient to restore his car to its pre-loss condition, in accordance with Geico's contractual obligation. Under Avery v. State Farm Mutual Automobile Insurance Co., 216 Ill. 2d 100, 835 N.E.2d 801 (2005), however, Sykes said, he could not make such a showing without having possession of the actual car.
Avery involved the question whether an insurer's practice of not using original equipment manufacturer parts to restore its insureds' vehicles to their pre-loss conditions, amounted to a breach of its obligations to its insureds. The Illinois Supreme Court said a necessary first step would be to examine each class member's vehicle to determine its pre-loss condition. Sykes said the same principle applied here.
The plaintiff tried to distinguish Avery on the ground that it involved the quality of repairs, while the plaintiff here was claiming that Geico omitted certain repairs. Sykes responded that this distinction was immaterial and that, moreover, the nature of the repairs allegedly omitted by Geico made an examination necessary.
She further rejected the plaintiff's arguments that the omission of repairs could be proved through the subsequent mechanic's estimate that came in $1,150 higher than Geico's estimate and through an application of supposed "industry standards." Since the claim was based on the pre-loss condition, Sykes said an examination of the actual vehicle was necessary, and the plaintiff could not produce it.
Fraud Claims
She then took up the plaintiff's fraud claims. The plaintiff claimed consumer fraud based on Geico's alleged false promises to restore its insureds' vehicles to their pre-loss conditions and failing to disclose to policyholders that it would not keep this promise. Sykes again turned to Avery which, she noted, held that a consumer fraud claim required something more than a garden-variety breach of contract.
Specifically, she said, Avery requires that a plaintiff prove that the defendant engaged in deceptive acts or practices distinct from a mere promise to do something and then a failure to do it, which would constitute a breach of contract. Even with respect to "widespread" or "systematic" conduct, as alleged by the plaintiff, he still must establish unfair or deceptive conduct distinct from an alleged breach of a contractual promise, for example, "some stand-alone allegation of a fraudulent act." This the plaintiff failed to allege.
According to Sykes, the plaintiff's common law fraud claim suffered from the same defect and was just a reformulation of the contract claim.
In addition, to the extent the plaintiff was claiming a fraudulent concealment of facts, the plaintiff would be required to allege a duty to disclose. A duty to disclose might arise, said Sykes, if a fiduciary relationship existed between the plaintiff and Geico, but none was here alleged and insurers are not ordinarily fiduciaries of their insureds in any event.
The court, therefore, affirmed the dismissal and summary judgment in favor of Geico.
Key Points
(a) A insured's claim against an insurer based on the insurer's failure to restore the insured's property to its pre-loss condition requires that the insured have the property available for inspection.
(b) Statutory and common law fraud claims require that the plaintiff allege and prove more than just breach of contract.
(c) No fiduciary relationship ordinarily exists between an insurer and insured.
