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Allen-Wright v. Allstate Insurance Co.

December 17, 2008


The opinion of the court was delivered by: Joyner, J.



Plaintiff brings this action on behalf of herself and similarly situated proposed class members. Plaintiff seeks certification of the following class:

All property owners located within the Commonwealth of Pennsylvania who have been issued policies of insurance providing replacement cost coverage for damage to real property by Allstate Insurance Company and/or its subsidiaries, affiliates and/or related entities including but not limited to Allstate Indemnity Company and Allstate Property and Casualty Insurance Company ("Allstate") during the 6 (six) years prior to the filing of this Complaint, whose insured properties sustained a covered loss, where Allstate issued payment to the policyholders for repair of the covered loss but limited the payment of the contractor's overhead and profit to 5%.

Pl. Mot. Plaintiff alleges that in 2003, Defendant All-State Insurance began arbitrarily paying 5% overhead and profit for general contractors, instead of the industry-wide standard of 20- 25%, to claimants covered under Allstate's replacement cost insurance policies. Plaintiff alleges that they did so in breach of contract and in violation of Pennsylvania state law, 42 PA. CONS. STAT. §8371 (2008) and 73 PA. STAT. ANN. §201-9.2 (2008). Defendant denies that it pays 5% overhead and profit to general contractors and claims that the 2003 change in pricing resulted from a change in their internal pricing software. Defendant further asserts that the new software resulted in different claim classifications, including a category that requires the use of a "specialty" contractor, who would receive 5% overhead and profit, and not a general contractor, who would receive 20-25% overhead and profit. Defendant claims that the payments have remained "neutral" but have been computed differently. Plaintiff seeks to certify this class for all clients who were "limited" to 5% "contractor's overhead and profit" in their claims.

Plaintiff originally filed this class action suit in state court, but it was removed to this Court pursuant to 28 U.S.C. § 1332(d)(2) on September 28, 2007.*fn1 Plaintiff sought class certification by motion on October 8, 2008, and Defendant responded in opposition on November 7, 2008.


As this is a motion for class certification, this Court will accept as true the substantive allegations in the Complaint and will not inquire into the merit's of the plaintiff's claim. Cullen v. Whitman Med. Corp., 188 F.R.D. 226, 228 (E.D. Pa. 1999); Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 177-178 (1974). Hence, this Court will focus exclusively on whether the plaintiffs have met the burden of proving the requirements as set out in Fed. R. Civ. P. 23 to constitute a class. Eisen, 417 U.S. at 163.

First, "[a] prerequisite to a Rule 23 action is the actual existence of a 'class.'" Sanneman v. Chrysler Corp., 191 F.R.D. 441, 445 (E.D. Pa. 2000) (citing In re A.H. Robins Co., 880 F.2d 709, 728 (4th Cir. 1989); Clay v. American Tobacco Co., 188 F.R.D. 483 (S.D. Ill. 1999)). Fed. R. Civ. P. 23(a) requires four initial elements to be sufficiently proven by the plaintiff in class action certification: numerosity, commonality, typicality and adequacy. Baby Neal v. Casey, 43 F.3d 48, 55 (3d Cir. 1994); Barabin v. Aramark Corp., 210 F.R.D. 152, 157 (E.D. Pa. 2002); Sanneman, 191 F.R.D. at 445. Additionally, the action must fall within one of the categories of Fed. R. Civ. P. 23(b), in this instance, Rule 23(b)(3), to be certified. Id. Fed. R. Civ. P. 23(b)(3) requires the predominance of common claims and the superiority of a class action as a method of adjudication. This Court undertakes a thorough examination of each of the factors in Rules 23(a) and (b) to determine whether the class may be certified.

Finally, we note that substantive state law of the law of Pennsylvania will followed, as the claims arise under Pennsylvania state law and "state law as announced by the highest court of the State is to be followed by federal courts where the underlying question is one of state law." Erie R. Co. v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817, 82 L.Ed. 1188 (1938).


1. Class Definition

As a preliminary matter, to be certified, the class must be "sufficiently identified without being overly broad." Sanneman v. Chrysler Corp., 191 F.R.D. 441, 445 (E.D. Pa. 2000). While this is a basic and liberal requirement, defendant alleges that the verb "limits" within the class definition creates a problem, in that to say that the contractor's overhead and profit was "limited" would necessitate an individualized determination as to whether a potential class member was entitled to more than 5%, but was given only 5%. Id. In recent cases concerning overhead and profit, Pennsylvania state courts have determined that whether a claim should receive payment for general contractor's overhead and profit (GCOP) is an individual determination involving numerous case-specific factors to ultimately determine whether the use of a general contractor was "reasonably likely." Mee v. Safeco Insurance Co., 2006 Pa. Super. 257, 908 A.2d 344 (2006); Gilderman v. State Farm Insurance Co., 437 Pa. Super. 217, 649 A.2d 941 (1994). If the use of a general contractor is reasonably likely based on an individual assessment, then the claim requires GCOP. Id. Hence, the definition, in so far as it would require individual determinations of whose contractor overhead and profit was actually "limited," is problematic. It appears that allowing certification of all members whose overhead and profit was "limited" would necessitate the Court to determine each member that was entitled, under replacement cost coverage, to a general contractor's overhead and profit of 20-25%, but was instead limited to 5% overhead and profit -- a case-specific investigation. The problem inherent in the definition foreshadows deficiencies with the requirements of Fed. R. Civ. P. 23(a)(3) and (4) and will be addressed accordingly.

2. Numerosity

Plaintiff alleges that the claimants "limited" to 5% contractor overhead and profit would be in the thousands. Pl. Mot. Brf. 11. Defendants do not dispute that there are thousands of persons covered by replacement cost coverage in Pennsylvania who received 5% overhead ...

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