Justices Eye Class Action in Homeowner Insurance Case (The Legal Intelligencer)
July 6, 2010

Amaris Elliott-Engel
The Legal Intelligencer

Allocatur Watch

The state Supreme Court will have an opportunity to consider whether certification of five class action claims against homeowner insurers over the payment for general contractor overhead and profit in homeowner property damage claims should have been denied because individual issues, not common issues, were predominant in the litigation.

The state Superior Court, affirming Philadelphia Common Pleas Judge Mark I. Bernstein, ruled against the certification of five class action claims seeking the automatic payment of general contractor overhead and profit by insurers in homeowner property damage claims when more than one trade was involved in repairs.

The state Supreme Court granted allocatur in Salera v. State Farm Fire and Casualty Co. and four other cases in an order June 17. Justice Joan Orie Melvin did not participate in the decision.

Bernstein ruled in 2008 that the plaintiffs did not meet the predominance of commonality prerequisite of class certification and that the plaintiffs' evidence, presented during a certification hearing, did not support an "absolute rule" that if more than one trade is involved in a repair that a general contractor's overhead and profit is reasonably likely to have occurred and should be paid as part of a claim.

"Plaintiffs' experts have failed to even demonstrate prima facie any construction industry standard exists regarding the use of a general contractor in Pennsylvania," Bernstein wrote in his March 25, 2008, opinion. "Since payment of general contractor overhead and profit must be determined on a 'case-by-case' basis which is dependent upon the facts of each claim, plaintiffs cannot satisfy the core requirement for class certification that common questions predominate over individual questions.

The insurers are State Farm Fire and Casualty Co., Safeco Insurance Co. of America, Encompass Insurance, Allstate Insurance Co. and The Travelers Property and Casualty Insurance Co.

The cases were consolidated for purposes of determining class certification.

The five cases are Helo v. Encompass Insurance a/k/a Continental Insurance Co., DiCicco v. Allstate Insurance Co., Salera v. State Farm Fire and Insurance Co., Mee v. Safeco Insurance Co., and Crowley v. Travelers Property Casualty Insurance Co.

The plaintiffs argued general contractors' services are reasonably likely to be used whenever more than one trade is involved in repairs. The defendants argued that an insurer may determine on a case-by-case basis whether to pay overhead and profit. The defendants also argued that factors such as the degree of the coordination of trades should determine if the use of a general contractor is reasonably likely.

Bernstein previously ruled that prior case law established a case-by-case test on whether the use of a general contractor is reasonably likely and the variance between individual property damage claims, including the number of trades needed to make repairs and the nature and the extent of the damage, prohibited class action treatment.

Plaintiff counsel Thomas M. Marrone of Feldman Shepherd Wohlgelernter Tanner Weinstock & Dodig said the issue of insurance companies paying general contractor overhead and profit is a common issue that predominates the proposed class action because whether or not that decision by homeowners' insurers is proper should be answered for everyone in the class.

Homeowners think they are being made whole when they get a check in the mail from their insurers, but Marrone argues that they are not being made whole because many homeowners are not being paid overhead and profit.

"They're never going to be able to go and get a lawyer to handle a claim for a few hundred dollars and I think the insurance companies know that," Marrone said.

The case has been to the Superior Court twice, Marrone said.

Defense counsel James T. Moughan, of Britt Hankins & Moughan and an attorney for State Farm; Charles E. Leasure III of Hines Smith Carder Leasure, an attorney for Safeco; Mark J. Levin of Ballard Spahr, an attorney for Allstate; and Daniel T. Fitch, of Stradley Ronon Stevens & Young, an attorney for Travelers, could not be reached for comment.

The state Superior Court panel that affirmed the trial judge included Judge Correale F. Stevens and retired Judges Richard B. Klein and John M. Cleland.

The state Supreme Court has said it will consider: "Whether the Superior Court, in affirming the denial of a request for class certification, improperly held that petitioners did not satisfy the predominance of common questions requirement of Pa.R.C.P.1702 and 1708(a)(1), as applied by this court in Liss & Marion, P.C. v. Recordex Acquisition Corp."