Williams v. State Farm Mut. Auto. Ins. Co.

• Docket Number: 22 C 1422
• Decision Date: 21 June 2023
• Parties: BERNADETTE WILLIAMS, et al., on behalf of themselves and all others similarly situated, Plaintiffs, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Northern District of Illinois

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BERNADETTE WILLIAMS, et al., on behalf of themselves and all others similarly situated, Plaintiffs, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant.

No. 22 C 1422

United States District Court, N.D. Illinois, Eastern Division

June 21, 2023

MEMORANDUM OPINION AND ORDER

VIRGINIA M. KENDALL, UNITED STATES DISTRICT JUDGE

Plaintiffs are insureds from thirty-two states who totaled their vehicles and then made claims under their insurance policies from State Farm Mutual Automobile Insurance Company. In calculating the actual cash value of Plaintiffs' vehicles, State Farm applied a “typical-negotiation adjustment,” which reduced Plaintiffs' total-loss payments. In this putative nationwide class action Plaintiffs allege State Farm's use of the typical-negotiation adjustment was a fraudulent scheme and a breach of their insurance policies. They bring common-law and statutory claims under the laws of forty-seven states and the District of Columbia. State Farm moves: (1) to dismiss transfer, or stay the claims of ten Plaintiffs in favor of earlier-filed cases in other districts; (2) to compel appraisal of fourteen plaintiffs' claims, or alternatively, dismiss or grant summary judgment on those claims; and (3) to dismiss “headless” claims-meaning, claims under the laws of states where none of the named Plaintiffs resides. (Dkts. 62, 65, 69). State Farm's motion to transfer [62] is granted in part as to six Plaintiffs; the first motion is otherwise denied. State Farm's motion to compel appraisal, dismiss, or grant summary judgment [65] is denied. State Farm's motion to dismiss “headless” claims [69] is also denied.

BACKGROUND

A. Factual Background

Plaintiffs, citizens of thirty-two states, are thirty-three insureds under State Farm uniform automobile insurance policies who submitted claims after totaling their vehicles. (Dkt. 58 ¶¶ 1244).^[1]State Farm's drafted its form insurance policies in Illinois, where it has its headquarters. (Id. at ¶ 62). Under the policies, when repair of an insured vehicle is impossible or uneconomical- rendering it a “total loss”-State Farm may settle the claim by paying the insured the actual cash value of the vehicle. (Id. at ¶ 2; see also Dkt. 58-1). To determine the actual cash values of Plaintiffs' vehicles, State Farm used Autosource Market-Driven Valuation, a system which aggregated prices from online sales and listings of comparable vehicles. (Dkt. 58 ¶ 51; see also Dkt. 58-3). Audatex, a Texas-based third-party vendor provided Autosource to State Farm. (Dkt. 58 ¶¶ 51, 55; Dkt. 63 at 9). At State Farm's directive, Autosource applied a “typical-negotiation” adjustment to the market-value price to decide its total-loss payments-an adjustment reflecting the average difference between the list price and a lower theoretical price that a dealer would accept. (Dkt. 58 ¶¶ 51-52). Actual negotiations did not factor into the typical-negotiation adjustment. (Id. at ¶ 53). Nor did State Farm consult with any dealers or consider that “no-haggle” pricing predominates in the used-car market, especially online. (Id.) At the time State Farm determined the actual cash values of Plaintiffs' vehicles, due to car-parts supply-chain issues during the COVID-19 pandemic, used cars often sold at or above list prices. (Id.)

Nonetheless, in calculating Plaintiffs' vehicles' actual cash values, the typical-negotiation adjustment took 4-11% off the prices of comparable vehicles-in turn, reducing the total-loss payments Plaintiffs received. (Id. at ¶¶ 12-44, 53-55). To determine the value of Brown's car, for example, State Farm applied a 4-6% typical-negotiation adjustment to four comparable vehicles. (Id. at ¶ 23; Dkt. 58-3 at 118-19). Starting with the comparable vehicles' advertised prices of $16,995, $14,991, $15,990, and $14,718, State Farm adjusted “to account for differences in vehicle description” and then reduced by 4-6% to reflect “typical negotiation.” (Dkt. 58-3 at 118-23). State Farm further reduced the comparable vehicles' adjusted values ($16,295, $14,752, $15,851, and $14,495) for differences in mileage to reach their “final market values” ($13,955, $13,497, $13,811, and $13,235). (Id. at 118-19). Averaging the final market values, State Farm calculated the “condition adjusted market value” of Brown's car-$13,625. (Dkt. 58 ¶ 23; Dkt. 58-3 at 119). Adding Louisiana sales tax and subtracting a deductible, the final “net adjusted value” of Brown's car was $13,878.50. (Dkt. 58-3 at 119).^[2]For comparison, the National Automobile Dealers Association (NADA) Fully Adjusted Value of Brown's car was $14,675. (Dkt. 58-3 at 124).

State Farm did not tell insureds about the typical-negotiation adjustment before they bought their policies. (Dkt. 58 ¶ 52). Instead, when State Farm offered total-loss payments to Plaintiffs, it provided a valuation report showing that, for each comparable vehicle that Autosource factored into the average market price, the “advertised price . . . was adjusted to account for typical negotiation.” (Dkt. 58-3; e.g., id. at 17-18). The report noted further: “[t]he selling price may be substantially less than the asking price,” and “[w]hen indicated, the asking price has been adjusted to account for typical negotiation.” according to each comparables [sic] price.” (Dkt. 58 ¶ 52; e.g., Dkt. 58-3 at 5).

Some Plaintiffs' policies include an appraisal clause like the following:

The owner of the covered vehicle and we must agree upon the actual cash value of the covered vehicle. If there is disagreement as to the actual cash value of the covered vehicle, then the disagreement will be resolved by appraisal upon written request of the owner or us, using the following appraisal procedures:

(a) The owner and we will each select a competent appraiser.

(b) The two appraisers will select a third competent appraiser. If they are unable to agree on a third appraiser within 30 days, then either the owner or we may petition a court that has jurisdiction to select the third appraiser.

(c) Each party will pay the cost of its own appraiser, attorneys, and expert witnesses as well as any other expenses incurred by that party. Both parties will share equally the cost of the third appraiser.

(d) The appraisers shall only determine the actual cash value of the covered vehicle. Appraisers shall have no authority to decide any other questions of fact, decide any questions of law, or conduct appraisal on a class-wide or class-representative basis.

(e) A written appraisal that is both agreed upon by and signed by any two appraisers, and that also contains an explanation of how they arrived at their appraisal, will be binding on the owner of the covered vehicle and us.

(Dkt. 58 ¶¶ 1, 6; Dkt. 58-1 at 12, 153-54, 197, 272-73, 317, 362, 394, 457-58, 534-35, 623, 66869, 708, 754, 785-86).

Plaintiffs' policies also provide: “Legal action may not be brought against us until there has been full compliance with all the provisions of the policy.” (Dkt. 58-1 at 15, 168, 210, 282, 330, 372, 405, 467, 501, 544, 575, 636, 683, 717, 766, 795). Under the policies' choice-of-law provisions, with exceptions not relevant here, the laws of the insureds' home states “will control.” (Id. at 15, 211, 282, 332, 372, 405, 467, 502, 545, 575, 636, 684, 718, 767; Dkt. 68-3 at 11; Dkt. 68-13 at 13).

B. Procedural History

1. This Lawsuit

On March 18, 2022, twenty insured Plaintiffs^[3]brought this putative nationwide class action. (Dkt. 1). The February 14, 2023 First Amended Class Action Complaint added Plaintiffs from Minnesota, New Jersey, and Michigan, among other states. (Dkt. 58 ¶¶ 25, 26, 32). The amended complaint has not added any new claims or changed the proposed class definition from the original complaint. (Compare Dkt. 1 ¶¶ 52-53, 62-2023, with Dkt. 58 ¶¶ 65-66, 75-637). Plaintiffs bring thirty-two claims: breach of contract (Count 2); breach of the covenant of good faith and fair dealing (Count 3); fraudulent concealment (Count 4); fraud in the inducement (Count 5); unjust enrichment (Count 6); declaratory judgment (Count 7); violation of the Illinois Consumer Fraud and Deceptive Business Practices Act (ICFA) (Count 1); and violation of twenty-five other consumer-protection statutes (Counts 8-33). (Dkt. 58 ¶¶ 75-637).^[4] In Counts 8, 10, 12, 18, 21, 28, 30, and 33, Plaintiffs allege violations of the consumer-protection statutes of seven states plus the District of Columbia where none of the Plaintiffs reside. (Dkt. 58 ¶¶ 150-66, 187204, 223-41, 313-30, 365-83, 486-502, 561-78, 620-37).^[5]

Plaintiffs allege State Farm “systematically undervalues total-loss vehicles” by applying the typical-negotiation adjustment. (Id. at ¶ 1). They claim further that the appraisal clause is “[a]n integral part of [State Farm's] fraudulent scheme.” (Id. at ¶¶ 6, 57). Because the appraisal clause requires insureds to bear their own appraisal costs-which can exceed the amount by which State Farm allegedly underpays total-loss claims-Plaintiffs assert that the clause pressures insureds to accept the underpayment and prevents them from “vindicating their statutory and common law rights.” (Id.) Plaintiffs seek actual damages including “the amounts improperly deducted by [State Farm] from their payments to insureds” using the typical-negotiation adjustment. (Id. at ¶ 108). They also seek statutory and punitive damages, restitution, interest, equitable relief, and attorneys' fees. (Id. at ¶ 637).

As to their common-law claims (Counts 2-7), Plaintiffs invoke Illinois law, or in the alternative, the laws of forty-five states and the District of Columbia. (Id. at ¶¶ 65-66).^[6]In total, Plaintiffs bring claims under the laws of forty-eight jurisdictions-including sixteen where no Plaintiffs reside. (Id. at ¶¶ 66, 348-64 620-37).^[7]Plain...