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Attempt at Class Action Against Insurer Bounce Back to State Court

No court really likes to deal with class action suits, especially when they seek prospective action. In Leroy Mack v. USAA Casualty Insurance Company, No. 19-14958, United States Court Of Appeals For The Eleventh Circuit (April 22, 2021) Leroy Mack totaled his car and was not satisfied with the method his insurer, USAA Casualty Insurance Company, used to calculate what it paid him. He sued USAA on behalf of himself and a putative class for declaratory judgments that USAA’s method was inconsistent with Florida law and the insurance policy. As supplemental relief to those declaratory judgment claims, Mack also asked for USAA to recalculate the class members’ claims using a legal method and make them new offers. Mack conceded, however, that a “correct” calculation method will not necessarily result in higher offers.

THE ISSUES

The question is whether Mack has Article III standing because he requests that USAA make new settlement offers as supplemental relief if his declaratory judgment claim succeeds.

BACKGROUND

Under the policy, USAA will pay up to the “actual cash value” of the covered vehicle in the event of a total loss. To determine that value, USAA uses a third-party service, the CCC ONE valuation system, which purports to automatically calculate actual cash value based on comparable vehicle data from its own computer system and data on the insured’s vehicle input by USAA adjusters. In the event of a disagreement over the amount of loss—which includes actual cash value—the policy allows for either party to demand appraisal.

Mack submitted a claim under the policy, and USAA agreed to coverage. USAA offered to pay Mack the actual cash value of his vehicle as determined by the CCC ONE system, and Mack accepted payment. But about two months after cashing that check, Mack sent USAA a demand letter. He argued that USAA had violated Florida law and breached its policy by failing to pay him license and title transfer fees or a document fee. USAA responded that it was only responsible for “actual cash value and tax.”

USAA interpreted the complaint as contesting its valuation of Mack’s vehicle and invoked its right under the policy to demand appraisal. USAA moved to dismiss the complaint on the basis that it amounted to a dispute over the amount of loss and that the policy required Mack to fully comply with the appraisal and other provisions before filing suit. Mack responded that his claims raised purely legal questions and did not constitute a dispute over the amount of loss, therefore, they were not amenable to appraisal. The district court determined that “[t]his is a case about payment of money,” not “about legal coverage or whether or not a contract provides for anything.” Accordingly, the court dismissed the case without prejudice “pending appraisal.”

After Mack filed his initial brief with this Court, the parties reached a settlement as to the title and license fees claims, thereby mooting the only damages claim. The only remaining count is for declaratory judgment and supplemental relief, in which Mack seeks two declaratory judgments:

  • that USAA’s use of the CCC System violates Florida law and the policy and
  • that Florida law and the policy require that USAA pay dealer fees as part of any total loss settlement.

Supplemental to those declarations, Mack seeks a recalculation of all class members’ total loss claims under a new method and new offers based on those amounts if they are higher than the amount originally offered and an order requiring USAA to offer dealer fees to the class members. Mack insists  that a recalculation of his and other class members’ claims under a new method will not necessarily result in a higher offer by USAA. Instead, he states that “recalculation using a legal method might or might not result in a higher value than the CCC system value” and that he “does not claim his vehicle’s value was greater than USAA’s calculation.”

DISCUSSION

The allegations necessary to establish standing depend on the type of relief sought. To establish standing when seeking retrospective relief, a plaintiff must show that he has suffered “an invasion of a legally protected interest” that is both “concrete and particularized” and “actual or imminent, not ‘conjectural’ or ‘hypothetical.’” But if a plaintiff seeks prospective relief, such as a declaratory judgment, he must “allege facts from which it appears there is a substantial likelihood that he will suffer injury in the future.” Malowney v. Fed. Collection Deposit Grp., 193 F.3d 1342, 1346 (11th Cir. 1999) (citing City of Los Angeles v. Lyons, 461 U.S. 95, 102 (1983)). And that future injury must be “real,” “immediate,” and “definite.”

The possibility that a plaintiff may someday be in another car accident and still be insured by the insurance company under the same or a similar policy being interpreted the same way, thereby having this issue present itself again is too contingent to constitute a substantial likelihood of future injury. The complaint’s allegations  were found to be insufficient to establish the substantial likelihood of future harm necessary to establish standing for a declaratory judgment claim.

The next question is whether Mack has standing to seek, retrospective relief—i.e., more money for his totaled car. Mack chose to frame his claims as seeking prospective relief through requests for declaratory judgments; he specifically chose not to pursue damages for the retrospective harm that he has also arguably alleged.

A court may decide whether Mack is eligible for supplemental monetary relief only after issuing a declaratory judgment in his favor. For a federal court to have jurisdiction to issue a declaratory judgment, a plaintiff must assert a reasonable expectation that the injury they have suffered will be repeated in the future. Because there was no substantial likelihood that Mack will total his car again while insured by USAA, he lacked standing to sue for a declaratory judgment about the method it uses to assess payments under the policy.

If Mack lacks standing to pursue his declaratory judgment claims, then the federal court system is powerless to resolve whether declaratory relief is appropriate to remedy the alleged harm.  Because the District Court had no jurisdiction to entertain this suit, the judgment was vacated and the District Court was ordered to remand the case back to the state court.

ZALMA OPINION

Because Mack tried to turn a declaratory relief action about insurance coverage into a class action that might resolve more money for Mack and the members of the class for additional payments when there was no way the court could grant declaratory relief. He made most of his suit moot by entering into a personal settlement with USAA and simply had no standing to be in federal court. He may still get relief from the Florida court who could easily agree with the Eleventh Circuit’s analysis that he had no standing to go forward.


© 2021 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost

equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

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