Third Circuit Reverses Class Certification in Auto Insurance Dispute, Citing Valuation Methods

The Third Circuit recently overturned class certification in Drummond v. Progressive Specialty Insurance Co., an auto insurance dispute, ruling that individual issues outweighed common ones, thereby failing the predominance requirement under Rule 23(b)(3).

Devon Schulz of Covington reports that the plaintiffs, representing a class of insured drivers, alleged that Progressive systematically undervalued total-loss vehicles, in breach of their insurance contracts.

The appellate court held that evaluating underpayment required individualized inquiries into each policyholder’s circumstances, making the case unsuitable for class-wide resolution.

The case centered on Progressive’s methodology for calculating settlement values on totaled cars.

Plaintiffs argued that the use of a particular component in the valuation process consistently led to underpayment. However, the Third Circuit disagreed with the district court’s acceptance of that framing.

Instead, the appellate court emphasized that the core legal issue was whether Progressive breached each insurance contract, a question that requires individualized proof, especially since some policyholders may have been fully or even overcompensated under the same methodology.

As a result, uniform class-wide proof was deemed unattainable. The ruling leaned heavily on Jama v. State Farm, a 2024 Ninth Circuit case that also denied class certification over similar underpayment claims.

In Jama, the court found that a challenged valuation adjustment did not consistently produce lower payouts, undermining the ability to prove breach or damages on a class-wide basis.

However, Jama allowed a different class action to proceed, where the claim was based on a statutory violation that permitted uniform proof. The Third Circuit used Jama to contrast the types of claims that may or may not satisfy the predominance standard.

Defense attorneys should note that courts are increasingly scrutinizing class definitions under Rule 23(b)(3), particularly in breach-of-contract and insurance cases.

Plaintiffs’ attorneys must distinguish between claims that allow for common proof and those that inherently require individualized inquiries, and structure their claims accordingly.