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Sitton v. State Farm Mutual Automobile Insurance Co.2/18/2003
This is a class action by State Farm insureds, who allege State Farm acted in bad faith to deny coverage for medical expenses. We granted discretionary review to determine whether the trial court erred in refusing to decertify the class, particularly in light of its adopted trial plan. We conclude the court did not abuse its discretion in granting class certification under CR 23(b)(3), but that certification under CR 23(b)(1) and (b)(2) was improper. We also vacate the trial plan, because it contemplates an award of damages without proof of causation and without an opportunity for State Farm to show it had a reasonable justification for denying individual claims.
FACTS
The individual plaintiffs made claims for medical treatment under the personal injury protection (PIP) provisions of their State Farm automobile insurance policies. As permitted by the policies, State Farm referred their claims for medical utilization reviews as to whether treatment was reasonable, necessary, and undertaken for injury caused by a covered accident. Following the reviews, all the claims were denied, at least in part.
Plaintiffs filed this class action lawsuit contending State Farm uses the review process in bad faith for the sole purpose of denying or limiting benefits, as part of a secret cost containment policy. Plaintiffs allege breach of contract, breach of fiduciary duty, breach of the duty of good faith and fair dealing, violation of the Consumer Protection Act, and unjust enrichment. They seek damages, and injunctive and declaratory relief.
The class consists of:
All persons in the State of Washington who, within the last six years, were insured by State Farm for personal injury protection (PIP) and who sustained injuries in a covered occurrence (motor vehicle accident) and who submitted a PIP claim to State Farm for medical expenses which was referred to an external medical utilization review, and who were denied or limited in the PIP benefits by State Farm based on such review.
Initially, the court certified the class under CR 23(b)(1)(A) and (b)(2), but not CR 23(b)(3). The trial court then entered an additional order certifying the class under CR 23(b)(3).
Thereafter, the court granted plaintiffs' motion to bifurcate the trial, and adopted a plan for two trial phases. In trial Phase I, the jury is to determine whether State Farm implemented a program designed to deny, limit, or terminate PIP claims, and whether the plan was implemented in bad faith. If so, the jury will determine the amount of 'aggregate damages.' Trial Phase II, which is still largely inchoate, will address issues of individual damages.
Following adoption of the trial plan, State Farm sought decertification of the class. The trial court denied the motion. We granted discretionary review.
DISCUSSION
I. Class Certification
A. Generally. 'Washington courts favor a liberal interpretation of CR 23 as the rule avoids multiplicity of litigation, 'saves members of the class the cost and trouble of filing individual suits{,} and . . . also frees the defendant from the harassment of identical future litigation.'' A trial court's decision regarding class certification is reviewed for a manifest abuse of discretion. Ordinarily, we will not disturb a certification decision if the record indicates consideration of the CR 23 criteria and the decision is based on tenable grounds. We resolve close cases in favor of allowing or maintaining the class.
The four prerequisites to a class action under CR 23(a) (numerosity, commonality, typicality, and adequacy of representation) are not challenged here. Rat
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