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Defendant's Attorney: Jamie Huffman Jones, Lori McAllister, Todd Noteboom, William Thomson

Description: Fort Smith, Arkansas insurance law lawyers represented Plaintiff, which sued Defendant personal injury theory.


Plaintiff is an Arkansas limited liability company operating an auto body shop in Fort Smith, Arkansas. Defendant issued Plaintiff an insurance policy, policy number 17502470545480-18 (the “Policy”), which provided coverage to Plaintiff's property with a limit of $399,200. The Policy's declarations also included a Coinsurance percentage of 80% and a deductible of $5,000.

According to Defendant, “[c]oinsurance is a common feature of property insurance, which is designed to discourage policyholders from underinsuring their property.” (Doc. 32, p. 3). Because most losses are partial losses and not total losses, insureds are often incentivized to insure less than the full value of their property in exchange for lower premiums. “As a result, insurers end up paying a higher percentage of claims at the upper end of a policyholder's limit of insurance but receive relatively low premiums in return.” Id. To address this, coinsurance provisions are added to policies. The coinsurance provision the Policy reads:

1. Coinsurance

If a Coinsurance percentage is shown in the Declarations, the following condition applies:

a. We will not pay the full amount of any loss if the value of Covered Property at the time of loss times the Coinsurance percentage shown for it in the Declarations is greater than the Limit of Insurance for the property.

Instead, we will determine the most we will pay using the following steps:

(1) Multiply the value of Covered Property at the time of loss by the Coinsurance percentage;

(2) Divide the Limit of Insurance of the property by the figure determined in Step (1);

(3) Multiply the total amount of loss, before the application of any deductible, by the figure determined in Step (2); and

(4) Subtract the deductible from the figure determined in Step (3).

We will pay the amount determined in Step (4) or the Limit of Insurance, whichever is less. For the remainder, you will either have to rely on other insurance or absorb the loss yourself.

(Doc. 8-1, p. 64).

In most polices Defendant issues, foundations are excluded from coverage. For example, the Policy includes the following exclusion:

2. Property Not Covered

...

g. Foundations of buildings, structures, machinery or boilers if their foundations

2

are below:

(1) the lowest basement floor; or

(2) The surface of the ground, if there is no basement;

Id. at p. 55.

Though below-grade foundations are excluded from coverage under the Policy, the exclusion of below-grade foundations “from the total replacement cost is an underwriting philosophy rather than an element or function of the valuation process, [and] the deduction of [below-grade foundations] is left to the discretion of the [adjuster].” (Doc. 28-2, p. 2). To exclude below-grade foundations from the valuation, the adjuster must “click the Separate Insurance Exclusion Box.” Id. Because an adjuster must manually “click the Separate Insurance Exclusion Box,” the value of a below-grade foundation is commonly included when determining the total value of Covered Property even though the foundation itself is not Covered Property as defined by the policy.

Plaintiff's individual claims arise from a May 18, 2019, tornado that allegedly damaged Plaintiff's real and personal property. Plaintiff filed a claim with Defendant and was issued partial payment for the damages. Plaintiff's claim was reduced by the Coinsurance premium as outlined in the Policy. However, in determining the value of Covered Property, Defendant included the value of the property's foundation, though the foundation was an exclusion in the Policy. Plaintiff argues that because the foundation was not Covered Property it should not have been included in determining the value of Plaintiff's Covered Property at the time of the loss, and by including the foundation Defendant paid $18,000 less than it should have if the foundation had not been included when calculating the Coinsurance premium. See Doc. 8, p. 7.

Plaintiff filed the instant lawsuit alleging individual claims for breach of contract and bad faith, and seeks to pursue class actions for declaratory judgment, breach of contract, and unjust enrichment. Plaintiff filed the instant motion seeking to certify a multi-state class or, in the alternative, an Arkansas-only class under Rule 23(b)(2) or Rule 23(b)(3). The multi-state class is proposed to include the 20 states in which Defendant does business: Alabama, Arkansas, Georgia, Idaho, Iowa, Illinois, Indiana, Kansas, Missouri, North Carolina, North Dakota, Nebraska, Ohio, Pennsylvania, South Carolina, South Dakota, Tennessee, Utah, Virginia, and Wisconsin. Defendant opposes the certification of any class action.

Outcome: IT IS THEREFORE ORDERED that Plaintiff Mason's Automotive Collision Center LLC's motion (Doc. 27) is GRANTED IN PART, as stated herein. This case will be bifurcated, with the claim of the Rule 23(b)(2) class to be adjudicated in phase one, and the claims of the Rule 23(b)(3) class to be adjudicated in phase two. Plaintiff's counsel is appointed as class counsel for both the Rule 23(b)(2) and Rule 23(b)(3) classes.

IT IS ORDERED.
Mason's Auto. Collision Ctr. v. Auto-Owners Ins. Co. (W.D. Ark. 2022)

Plaintiff's Experts:

Defendant's Experts:

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