Shelter Mutual Insurance Company v. Baggett

• Court: Arkansas Supreme Court
• Writing for the Court: RHONDA K. WOOD, Associate Justice
• Citation: Shelter Mutual Insurance Company v. Baggett, 2022 Ark. 149, 646 S.W.3d 106 (Ark. 2022)
• Decision Date: 23 June 2022
• Docket Number: CV-21-536
• Parties: SHELTER MUTUAL INSURANCE COMPANY, Appellant v. Samuel BAGGETT and Jana Lee, on Behalf of Themselves and All Similarly Situated Persons and Entities, Appellees

2022 Ark. 149

646 S.W.3d 106

SHELTER MUTUAL INSURANCE COMPANY, Appellant

v.Samuel BAGGETT and Jana Lee, on Behalf of Themselves and All Similarly Situated Persons and Entities, Appellees

No. CV-21-536

Supreme Court of Arkansas.

Opinion Delivered: June 23, 2022

Friday, Eldredge & Clark, LLP, Little Rock, by: Kevin A. Crass and Martin A. Kasten ; and Munson, Rowlett, Moore & Boone, P.A., by: Elizabeth Fletcher and Sarah E. Greenwood, Little Rock, for appellant.

Thrash Law Firm, P.A., by: Thomas P. Thrash Little Rock, and Will T. Crowder ; and Taylor A. King, P.A., by: Kenneth "Rusty" Mitchell, Arkadelphia, for appellees.

RHONDA K. WOOD, Associate Justice

This is a class action against an auto-insurance company. Plaintiffs were insureds and incurred medical expenses because of car accidents. But the insurance company declined to pay the plaintiffs for the full amount of billed medical expenses and instead simply reimbursed them for the actual amount they owed their medical providers after all discounts had been applied. Plaintiffs asserted this practice constituted breach of contract and unjust enrichment. The circuit court certified a class action. We affirm because the court did not abuse its discretion in concluding that the prerequisites of a class action had been satisfied.

I. Factual Background

The lead plaintiff, Samuel Baggett, was injured in a car wreck and incurred medical expenses. Baggett had medical-payments insurance coverage as part of his automobile coverage with Shelter Mutual Insurance Company. The coverage had a $5000 policy limit. Although Baggett's initial medical bills for his injuries exceeded $5000, Shelter issued him two checks totaling almost $2000. Shelter determined this amount equaled Baggett's out-of-pocket medical expenses. But Baggett contended Shelter owed him the entire $5000. He thus filed a class action against Shelter, alleging it had a practice of reducing its medical-payments coverage from the original billed amount to a discounted amount that embraced credits, write-offs, and payments from third parties like other medical insurance companies. Baggett asserted two causes of action: (i) breach of contract and (ii) unjust enrichment.

The other named plaintiff was Jana Lee. She also had a $5000 policy limit for medical-payments coverage from Shelter. As a result of a car wreck, Lee suffered a physical injury and incurred medical expenses of around $4000. But Shelter, Lee alleged, failed to pay the full amount. Like Baggett, Lee claimed this deficiency resulted from Shelter's policy and practice of illegally deducting other plan payments from its reimbursements.

The court agreed to certify a class action. The court defined the class, in relevant part, as follows:

All Arkansas residents, including Plaintiffs and all similarly situated persons for the period from March 13, 2013 to the [to be determined by further order of the Court] (the "Class Period"), who have or had automobile insurance with medical payments coverage issued by Shelter and who requested a medical payment from Shelter as a result of a covered accident, and did not receive the full medical payment requested due to payments or adjustments made by another insurance plan or collateral source.

The court also issued findings of fact and conclusions of law. The court noted the lawsuit contained common questions, including the following:

• Whether Shelter engaged in a scheme to reduce its med pay coverage by taking into consideration other insurance plans?

• Whether Shelter's conduct constitutes a breach of contract?

• Whether Shelter's conduct violated Arkansas law?

• Whether the class is entitled to damages and, if so, the amount of such damages?

The court noted the claims originated from Shelter's alleged course of conduct, a predominating issue—namely, the following: "Can Shelter reduce its primary coverage for Medical Payment benefits under its Auto policies because medical payments or adjustments have been made by another insurance company or another collateral source?" The court cited an affidavit from a Shelter representative who estimated the class could be as large as fifteen thousand. The court also found that Baggett and Lee had typical claims and were adequate class representatives. Finally, the court noted a class action provided superior method of adjudication because it was more efficient than having each class member file separate lawsuits.

II. Law and Analysis

Arkansas Rule of Civil Procedure 23 imposes six prerequisites for certification of a class-action complaint: (1) numerosity; (2) commonality; (3) typicality; (4) adequacy; (5) predominance; and (6) superiority.

Koppers, Inc. v. Trotter , 2020 Ark. 354, at 3, 2020 WL 6375918. Besides the requirements of Rule 23, the class definition must be "sufficiently definite" for a court to determine who falls inside the class; put another way, "the identity of the class members must be ascertainable by reference to objective criteria." Teris, L.L.C. v. Golliher , 371 Ark. 369, 373, 266 S.W.3d 730, 733 (2007) (cleaned up). Circuit courts have broad discretion over class certification, and we will not reverse a circuit court's decision to grant or deny class certification absent an abuse of discretion. Gen. Motors Corp. v. Bryant , 374 Ark. 38, 45, 285 S.W.3d 634, 640 (2008). Here, Shelter challenges every class-action requirement on appeal and argues that the class definition isn't readily ascertainable. We disagree and conclude the court did not abuse its discretion when it certified this case as a class action.

A. Class Definition

Shelter argues the class cannot be readily ascertained because identifying each member requires a review of each member's claim file maintained by Shelter. This inquiry, Shelter argues, means determination of the class cannot be obtained by objective criteria. Shelter highlights that class members are those who have had their claims reduced "due to payments or adjustments made by another insurance plan or collateral source," a complicated inquiry that could have resulted from pre-existing conditions, unnecessary treatment, or otherwise unreasonable expenses.

Generally, we have noted problems with a class definition when it involved substantive merits issues or required complicated, fact-based, and often subjective inquiries. For example, we affirmed a circuit court's refusal to certify a class when membership involved five criteria that required the court to conduct an inquiry, in part, into a particular class member's intent. See Ferguson v. Kroger Co. , 343 Ark. 627, 633–34, 37 S.W.3d 590, 594 (2001) (finding that the class plaintiffs’ "ability to define the class [was] all but insurmountable").

Likewise, in State Farm Fire & Casualty Co. v. Ledbetter , the class was defined as follows: "All those insureds of [State Farm] under Form FP7955 who have a property damage claim or who have had an unpaid property damage claim under said policy that involves a common question of law or fact with the Plaintiff. " 355 Ark. 28, 36, 129 S.W.3d 815, 820–21 (2003) (emphasis added). As we held, the definition would force the circuit court to "inquire into the facts of each insured's case in order to determine whether that person is a suitable class member." Id. at 37, 129 S.W.3d at 821. And the definition failed to contain "objective criteria," instead tautologically encompassing all those whose claims involved a common question of law or fact with the lead plaintiff. See id. This definition would have impermissibly required a substantive legal determination as part of deciding which class member was in or out.

But another insurance case, Farmers Insurance Co. v. Snowden , compares favorably with the class definition proposed here. There, the class was defined as those who (i) had auto insurance coverage with Farmers Insurance Company; (ii) made a claim for physical damage which included estimates for structural repair or paint work; (iii) received payments on the insurance exceeding $500; and (iv) did not receive payment for diminished value (i.e., depreciation). 366 Ark. 138, 141–42, 233 S.W.3d 664, 666 (2006). This class survived a class-definition challenge because to fall within the class, the court need only "ensure that the claimant had a specific coverage with Farmers, made a certain type of damage claim to their insured vehicle, received payment within a certain time frame, and did not receive any payment for diminished value." Id. at 148, 233 S.W.3d at 670.

Here, the class definition is not like the one in Kroger , where class membership depended on subjective intent and expectation. Nor is it like the class definition in Ledbetter , where the class required the court to conduct a cumbersome analysis whether each member had "common questions of law or fact with the Plaintiff." 355 Ark. at 36, 129 S.W.3d at 821. Instead, here, a class member can be determined by reviewing whether the requested payment and the received payment were different. We affirmed on a nearly identical fact pattern in Snowden . And this holds true even if the court must consider facts not contained in the insured's claim files with Shelter. See Baptist Health v. Hutson , 2011 Ark. 210, at 6, 382 S.W.3d 662, 667.

Last, Shelter claims that the class definition is problematic because it lacks an end date. But this open-date format occurs often. And we have addressed this issue before. When it was raised in Asbury Automotive Group, Inc. v. Palasack , we explained it was an issue of first impression, and "neither party cite[d] this court to any law on the time boundaries for a potential class definition." 366 Ark. 601, 613, 237 S.W.3d 462, 471 (2006). The Palasack court then declined to reject the class definition for lack of an end date, explaining "it would fly in the face of judicial economy to close the class prematurely." Id. at 614, 237 S.W.3d at 471.

If class actions are to promote judicial economy, then prematurely trying to determine an end date at the outset of the case...