Scoufos v. State Farm Fire and Cas. Co., 94,395.

• Decision Date: 11 December 2001
• Docket Number: No. 94,395.,94,395.
• Citation: 41 P.3d 366,2001 OK 113
• Parties: Harry G. SCOUFOS IV, Plaintiff/Appellee, v. STATE FARM FIRE AND CASUALTY CO., Defendant/Appellant.
• Court: Oklahoma Supreme Court

41 P.3d 366

2001 OK 113

Harry G. SCOUFOS IV, Plaintiff/Appellee, v. STATE FARM FIRE AND CASUALTY CO., Defendant/Appellant.

No. 94,395.

Supreme Court of Oklahoma.

December 11, 2001.

Clyde A. Muchmore and Harvey D. Ellis, Jr., of Crowe & Dunlevy, Oklahoma City, OK; John A. Gladd and Gail Harris of Gladd, Smith & Harris, Tulsa, OK; and Joseph A. Cancila, Jr. and Heidi Dalenberg of Schiff Hardin & Waite, Chicago, IL, for appellant.

Sean Burrage, Stratton Taylor and Darrell Downs of Taylor, Burrage, Foster, Mallett & Downs, Claremore, OK, and Andrew P. Campbell and Janet R. Varnell of Campbell & Walker, Birmingham, AL, for appellee.

George P. Phillips and Stephen L. McCaleb for Oklahoma Insurance Department, Oklahoma City, OK, amicus curiae.

LAVENDER, J.

¶ 1 Resolution of today's cause requires the Court to measure the trial court's February 11, 2000 class-certification order against the prerequisites for issuing the same enunciated in 12 O.S.1991 § 2023(A) & (B).¹ In so doing we need not reach the merits of Harry Scoufos IV's [Scoufos, plaintiff, class representative or insured] claim. Nonetheless, determining whether the trial court applied the correct legal standards when it assessed § 2023's commonality, predominance and typicality requirements for class certification necessitates identification and review of the core liability issues which the class asserts against State Farm Fire and Casualty Co. [State Farm or insurer]. While we review a trial court's class-certification order for abuse of discretion,² we review de novo whether the trial court applied the correct legal standard to grant certification. If the trial court incorrectly decided a question of law in certifying the class, reversal will be ordered.

I FACTS AND PROCEDURAL HISTORY

¶ 2 In 1997 Scoufos purchased a State Farm "HO-W" replacement-cost homeowners insurance policy to cover a residence he was purchasing in Coweta, Oklahoma. The purchased policy was a multi-peril policy covering losses not only to the primary dwelling but also to detached extensions such as garages, sheds, fences and other structures. The extension coverage was in an amount equal to ten percent (10%) of the dwelling's coverage. The policy's terms were approved by the Oklahoma Department of Insurance [ODI] and the charged rates were sanctioned by the Board of Property and Casualty Rates. Scoufos purchased $83,000 of coverage to satisfy his mortgage-lender's coverage-requirements. The amount of replacement-insurance purchased exceeded State Farm's estimated replacement cost ($79,400) for the subject dwelling.

¶ 3 The gravamen of the class' suit is that State Farm overcharged the insureds for replacement-cost homeowners insurance in contravention of the terms of 36 O.S.1991 § 4804 triggering a statutory right-of-reimbursement. Scoufos — on behalf of himself and like-situated insureds — seeks reimbursement of the costs attributable to the alleged overinsurance (excess premiums) which he defines as equaling the difference between (1) the premiums charged for the issued insurance policy and (2) the costs of a policy with coverage limits equal to State Farm's estimate of replacement costs (measured at the time of the policy's purchase).³ The class contends that the terms of 36 O.S.1991 § 4804⁴ preclude State Farm from issuing replacement-cost insurance policies with coverage amounts which exceed at the time of the policy's issuance the "fair value of the property" insured.

¶ 4 When the present case was filed, Scoufos was employed as a lawyer by one of the firms representing the putative class. Also, his father — a senior partner in the same firm — was one of the plaintiff's counsel. [While today's case was pending on appeal, the elder Mr. Scoufos resigned as counsel for the certified class.⁵] State Farm objects to Scoufos' designation as class-representative, arguing that his employment coupled with his father's services to the class presents a potential conflict of interest which disqualifies him from serving in the designated capacity.

¶ 5 State Farm seeks the class action's dismissal asserting (among other reasons) that the trial court is without jurisdiction to hear the matter. The defendant argues that the ODI is vested with authority to hear the cause and that allowing the same to proceed in the district court contravenes those provisions of the Oklahoma Administrative Procedures Act [OAPA], 75 O.S.1991 §§ 250.1 et seq., which require a plaintiff to exhaust administrative remedies before proceeding to the district court. State Farm also contends that the certification requirements of § 2023 were not met in that individual class-member claims are too varied and distinct from a evidentiary-proof perspective to be litigated as a unit.

¶ 6 After a hearing the trial court certified as a class "all current or former policyholders in the [S]tate of Oklahoma . . . whose residential dwelling was insured by State Farm . . . where State Farm's records assign an insurance to value ratio greater than 100%."⁶ The trial court further found that there were questions of law and/or facts common to the class members which predominate over any questions affecting individual class members. In addressing whether the insureds met the requirements for class certification the trial court identified the rights granted under § 4804's terms and determined as a question of law that these statutory rights extended not only to owners of standard fire insurance policies but also to those persons who had purchased replacement-costs residential policies with multi-peril loss provisions.⁷

II THE TRIAL COURT'S ASSESSMENT OF THE PARAMETERS OF THE STATUTORY RIGHT CREATED BY THE TERMS OF 36 O.S.1991 § 4804⁸ IS FLAWED AS A MATTER OF LAW; HENCE, THE CLASS CERTIFICATION ORDER IS REVERSED

¶ 7 Although the defendant objects to the district court's jurisdiction over the plaintiff's claims [asserting failure to comply with OAPA requirement of exhaustion of administrative remedies], this issue need not be reached because the class-certification issues are dispositive of today's cause. Also, there is no need for the Court to reach the issue whether a private cause of action is in fact authorized by the terms of 36 O.S.1991 § 4804; hence, we do not.⁹ Lastly, in deciding the propriety of the trial court's class-certification order we do not reach the issue whether § 4804's reference to "any fire insurance policy" is broad enough to encompass a homeowner's multi-peril replacement-cost policy.

¶ 8 The trial court based its class-certification order upon a perceived "common right"¹⁰-i.e., entitlement to reimbursement of alleged premium overpayments as defined by the terms of 36 O.S.1991 § 4804 — enjoyed by those insureds owning residential replacement-cost homeowners policies in Oklahoma. Without addressing whether individual class members are entitled to assert the identified statutory right, identifying the parameters of the right which the class representative and putative class members attempt to press is critical to certification. It is against the legal standards articulated by § 4804's terms that the issues of (1) commonality [whether there are common questions of law and fact present among the individuals who would comprise the class] and (2) typicality [whether the class representative's claim and defenses are typical of those which would be asserted by the proposed class] are assayed. If any one of the prerequisites to class certification enunciated in 12 O.S.1991 § 2023(A) is not satisfied, certification is improper.¹¹

¶ 9 In construing the relevant statutory provision (§ 4804) the Court is mindful that if a statute's language is clear and unambiguous, its terms are to be given their reasonable and sensible meaning.¹² When unambiguous statutory language is a case's focus, the law's employed lexicon constitutes the highest proof of legislative intent and further construction is not mandated.¹³ Also, if the statutory provision under review is part of an act, its meaning and legislative intent are ascertained by consideration of the whole act in light of its general purpose and objective.¹⁴ Lastly, when a statutory right not existing at common law is implicated, the legislative intent and conditions imposed by the relevant statutory language are critical components of and predicates to assertion of such rights.¹⁵

¶ 10 The statutory right asserted by the class finds its genesis in the terms of § 4804. The right can be no broader than that intended by the Legislature. Here legislative intent is clearly reflected in the pertinent statutory language which provides:

If buildings insured against loss by fire, and situated within this state, are totally destroyed by fire, the company shall not be liable beyond the actual value of the insured property at the time of the loss or damage, and if it shall appear that the insured has paid insurance premiums on an amount in excess of said actual value, the insured shall be reimbursed the proportionate excess of premiums paid on the difference between the amount named in the policy and said actual value. . . . [Emphasis added.]

What is not reflected in the class representative's understanding of the relevant statutory language is that the right to reimbursement being asserted is conditioned upon the insured property's total destruction by fire.¹⁶ The trial court acknowledges along with the parties that ascertaining the true replacement cost of an insured's property is guesswork until such time as the property is lost. Obviously, the Legislature also understood this when it conditioned an insured's right to reimbursement for excess premiums upon the occurrence of an event of total destruction by fire. Such an event would trigger the replacement provided for by the purchased homeowners replacement-cost policy's terms and would provide a clear temporal marker for the prefatory computations which are necessary to figure the amount of excess premiums, if any, owed...