INSURANCE-RELATED COURT CASES
Digested from case reports published online
COURT DECISIONS
Sorry, you have no class!
Lynn Freeman was involved in an automobile collision. She was insured under a policy issued by Progressive Direct Insurance Company (Progressive). Her insurer considered the damage to her vehicle to be a total loss and began processing settlement accordingly.
Eventually, Freeman accepted payment and paid her policy’s deductible. Normally, this would be the conclusion for a claim; but this was, rather, the beginning.
As it happened, Freeman was bothered with one issue. It was how the value of her totaled car was determined. She believed that Progressive’s payment was less than what she was due. Her position was that the payment constituted a breach of contract, and she sued Progressive. However, she took things a step further by seeking compensation as part of a class action. The group she represented was other policyholders who also held that their recoveries were insufficient.
Progressive offered a countering argument. It held that the process it used, called a Projected Sold Adjustment (PSA), was a proper method of vehicle valuation. After a district court granted certification of the class action, the insurer appealed.
The court hearing in the appeal focused on the primary issue: Did the lower court make the correct decision when it determined that establishing class action status was justified?
Generally, parties that bring suits on the basis of class must share common issues among the group that outweigh individual issues. Specifically, class status exists when evidence that supports a valid argument for one member of an aggrieved group also applies to the other members. In such instances, a single lawsuit can result in a decision that resolves a common (as well as dominant) complaint.
The higher court had reservations. It wished to determine whether Freeman’s argument regarding contract breach under her insurance policy was a relevant, class-wide concern. The court’s focus was upon Progressive’s challenge. It argued whether Freeman had suffered harm from the way her claim was settled.
Without dispute, one common factor did exist. In calculating the payment amounts offered to all the policyholders within the group certified as a class by the lower court, Progressive used PSA. This is a vehicle valuation system that finds information on recent sales and listings for vehicles in the areas that are comparable to the ones that have experienced a total loss. Comparable sales/listing amounts are then averaged. That average (which may be subject to other minor adjustments) becomes the settlement amount.
Freeman argued that the amount was a breach of contract because it did not reflect her vehicle’s actual cash (market) value. The lower court’s class certification accepted that argument as being applicable to the class that it established.
The higher court reviewed relevant class action cases as well as applicable state law. It found the following:
- Freeman failed to demonstrate how the use of PSA caused her financial harm, particularly any proof that the PSA amount was less than a provable higher value for her vehicle.
- Freeman accepted the settlement without attempting to negotiate a higher amount nor did she pursue her rights to an appraisal.
- Freeman failed to demonstrate that her allegation of policy breach was held in common with the issues of other policyholders whose claims were settled involving PSA.
- The use of PSA appeared to be a legitimate method for determining actual cash value for totaled vehicles.
Having found no basis in evidence that a legitimate class existed as well as determining that Freeman did not have legal standing (as she could not prove financial harm), the higher court reversed the lower court’s class certification.
Lynn Freeman v. Progressive Direct Insurance Co.—US Court of Appeals, Fourth Circuit— No. 24-1684—August 25, 2025.
