Supreme Court overturns St. Bernard Katrina class certification

By Steve Korris | Dec 27, 2010


Property owners alleging Lafayette Insurance improperly denied Hurricane Katrina claims can't pursue a class action, the Supreme Court of Louisiana decided on Nov. 30.

The Justices ruled that St. Bernard Parish District Judge Manuel Fernandez committed an error when he certified a class action across eight parishes.

They found individual questions predominated over questions common to the class.

Justice Greg Guidry found the claims so highly individualized that class certification would likely be unfair to those with stronger claims than the class representatives.

"Also militating against class certification is the fact that individual suits raising similar insurance adjusting claims have already been filed widely - and many have been resolved," Guidry wrote.

The Justices reversed Fifth District appeals judges in Gretna, who affirmed Fernandez.

The decision will require individual litigation of about 300 suits that remain out of thousands that policyholders filed against Lafayette.

Plaintiff lawyer Robert Murphy of New Orleans expected to represent thousands, not hundreds, in a class action.

At oral argument in September, he said that without a class action, 7,000 homeowners wouldn't be able to pursue claims.

Justice John Weimer said three percent of the 7,000 ended in litigation.

Murphy said a significant number of the 7,000 would step forward prior to trial.

He called on the Justices to resist a trend away from class actions.

"In federal court the last several years class actions have not been looked on very well, but in Louisiana things have been different," Murphy said.

He said Louisiana's legislature and courts recognize the benefits of class actions.

For Lafayette, Howard Kaplan of Metairie told the Justices that every Katrina adjusting class action in federal court was dismissed.

He said individual issues predominated over class issues.

Justice John Weimer asked if that would be true if no one received an appropriate level of payment.

"That is not the factual testimony," Kaplan said.

Murphy's clients sued Lafayette over adjustment of claims in St. Bernard, Orleans, Jefferson, Plaquemines, St. Tammany, St. Charles, Tangipahoa and Terrebonne parishes.

They claimed Lafayette denied claims by attributing damage to water rather than wind.

They claimed repair payments didn't account for price increases after Katrina.

They claimed repair payments didn't include contractor overhead and taxes.

They claimed Lafayette denied payments for additional living expenses and for civil authority claims that arise when government orders citizens to leave their homes.

When the case reached the Supreme Court, the National Association of Mutual Casualty Insurers opposed a class action as friend of the court.

Adrianne Baumgartner of New Orleans wrote for the association that Fernandez wrested control of ongoing suits from absent class members.

"Unless those individual class members affirmatively opt out of the class, they will be unable to fully litigate their cases to their respective strengths," Baumgartner wrote.

She wrote that their cases would be centrally managed by other attorneys who have significant financial incentives to settle on terms favorable to themselves.

"This judicially endorsed power grab serves class counsel well, but it is detrimental to the many class members whose cases currently await adjudication," she wrote.

Though Murphy said at oral argument that Fernandez found his experts satisfactory, Guidry picked the experts apart.

Guidry wrote that adjuster Wesley Baldwin hadn't written a property estimate in 25 years.

He wrote that Baldwin didn't view properties of the plaintiffs, didn't know the dates of pricing that independent adjusters used, didn't know what software Lafayette adjusters used, and didn't suggest a price list the adjusters should have used.

"He conceded he had seen nothing in the reviewed files indicating adjusters were advised either to adjust claims differently from how they had done so for any of their other client insurance companies or to use a particular pricing profile," he wrote.

Guidry wrote that general contractor Jonathan Drennan testified that the roof on each property should be replaced.

He wrote that Drennan conceded that if a roof required repair rather than replacement, the difference between his estimates and Lafayette's would be less.

Guidry found no evidence that Lafayette instructed jurors to use pre-Katrina pricing.

He wrote that each claim of under pricing would have to be individually examined to determine the extent and scope of damage, whether from wind or storm surge.

He wrote that "whether a claim was in fact knowingly under priced will necessarily turn on a myriad of individual factual issues."

Justice Bernette Johnson dissented in part, finding a class action could have proceeded on claims that Lafayette improperly denied living expenses and civil authority claims.

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