Morgan v. Massachusetts Homeland Insurance Co. ( 2017 )

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16-P-216 Appeals Court
ANTHONY G. MORGAN vs. MASSACHUSETTS HOMELAND INSURANCE
COMPANY.
No. 16-P-216.
Hampden. November 9, 2016. - January 20, 2017.
Present: Kafker, C.J., Kinder, & Lemire, JJ.
Consumer Protection Act, Class action, Insurance. Practice,
Civil, Class action, Consumer protection case. Motor
Vehicle, Insurance. Insurance, Motor vehicle insurance,
Settlement of claim, Regulation, Amount of recovery for
loss. Words, "Actual cash value," "Retail book value."
Civil action commenced in the Superior Court Department on
March 8, 2012.
Motions for class certification and for summary judgment
were heard by Edward J. McDonough, Jr., J.; and the case was
heard by Bertha D. Josephson, J.
Brett J. Vottero (Eric D. Applebaum also present) for the
plaintiff.
Michael S. Batson (Michael C. Kinton also present) for the
defendant.
KAFKER, C.J. The plaintiff, Anthony G. Morgan, brought
this civil action against the defendant, Massachusetts Homeland
2
Insurance Company (Homeland or insurer), alleging that Homeland
engaged in unfair or deceptive claim settlement practices in
violation of G. L. c. 176D, § 3(9), and G. L. c. 93A, in the
course of settling his total loss auto insurance claim.1 See
G. L. c. 93A, §§ 2, 9. Even though the claim was settled within
two months of the accident, with the plaintiff's acceptance of
the insurer's offer, the plaintiff claimed that the insurer
violated c. 176D and c. 93A because it did not take into account
the "retail book value" of his vehicle, as required by 211 Code
Mass. Regs. § 133.05(1)(a) (2003). The plaintiff also filed a
motion to certify a class action pursuant to G. L. c. 93A,
§ 9(2). A judge of the Superior Court (motion judge) denied
class certification and entered a summary judgment on that count
of the complaint. After a jury-waived trial on the plaintiff's
individual c. 93A claim, the trial judge (who was not the motion
judge) found that, although Homeland had violated c. 93A, the
plaintiff was not injured by the violation, and entered judgment
for Homeland on that count of the complaint. On appeal, the
plaintiff argues that the judges erred by (1) denying his motion
for class certification; and (2) concluding that he was not
1
The complaint was in three counts. The parties stipulated
to the dismissal of count 1, which alleged breach of contract.
Counts 2 and 3 alleged c. 93A violations -- count 2 on behalf of
Morgan individually, and count 3 on behalf of a purported class
of similarly situated individuals.
3
injured by Homeland's c. 93A violation. Homeland cross-appeals,
challenging the trial judge's ruling that it violated c. 93A.
We conclude that the motion for class certification was properly
denied, and that there was no c. 93A violation.
Background. On January 9, 2011, the plaintiff's 2005
Chevrolet Colorado was significantly damaged in an accident.
Homeland, the plaintiff's auto insurer, determined the vehicle
to be a total loss. Homeland was therefore required to offer
the plaintiff an amount for the actual cash value of the
vehicle. See 211 Code Mass. Regs. § 133.05.2 When calculating
the actual cash value of a total loss vehicle, an insurer must
consider four factors, one of which is the "retail book value"
of a vehicle "of like kind and quality, but for the damage
incurred."3 211 Code Mass. Regs. § 133.05(1)(a).
2
Title 211 Code Mass. Regs. § 133.05 (2003) provides:
"(1) Actual Cash Value. Whenever the appraised cost of
repair plus the probable salvage value may be reasonably
expected to exceed the actual cash value of the vehicle,
the insurer shall determine the vehicle's actual cash
value."
3
The four factors an insurer must consider in calculating
the actual cash value of a total loss vehicle are:
"(a) the retail book value for a motor vehicle of like kind
and quality, but for the damage incurred;
"(b) the price paid for the vehicle plus the value of prior
improvements to the motor vehicle at the time of the
accident, less appropriate depreciation;
4
On January 12, 2011, Homeland determined the actual cash
value of the plaintiff's vehicle to be $11,891. Homeland used a
software program generated by a third party, Certified
Collateral Corporation (CCC), which maintains a database of
vehicles for sale from dealers and private parties in various
markets. The motion judge found that the CCC report
"incorporated a significant amount of information, including,
but not limited to, vehicle description, vehicle options,
vehicle history, the local market, the vehicle's pre-accident
condition, the value of comparable vehicles, and vehicle
mileage." The record provides more particularly that CCC's
database "include[s] vehicles for sale at dealerships that CCC
has physically inspected and dealer and private party advertised
vehicle information from more than 1,700 publications." Using
the vehicle's identification number and the plaintiff's zip
code, CCC compiled a list from its database of twelve comparable
vehicles available for sale in the local market. Three of the
vehicles were listed for sale at local dealerships that CCC had
physically inspected; nine were listed for sale on Autotrader, a
"(c) the decrease in value of the motor vehicle resulting
from prior unrelated damage which is detected by the
appraiser; and
"(d) the actual cost of purchase of an available motor
vehicle of like kind and quality but for the damage
sustained."
211 Code Mass. Regs. § 133.05(1) (2003).
5
publicly accessible online database of vehicles for sale from
dealers and private parties listed by age, make, model, mileage,
and city and State.4 See, e.g., Kesling v. Hubler Nissan, Inc.,
997 N.E.2d 327, 330 (Ind. 2013). CCC then adjusted those values
for the condition of the plaintiff's vehicle, and, using a
weighted average formula, arrived at an actual cash value of
$11,891.5
When informed of this valuation on January 20, 2011, the
plaintiff insisted that his vehicle was worth more than $14,000,
citing a report by the National Automobile Dealers Association
(NADA) that showed a "clean retail" value of $14,500.6 NADA
4
For each comparison vehicle, the CCC list also showed the
distance from the plaintiff's address.
5
The "valuation methodology" section of the CCC report
reads:
"Vehicles located [by searching CCC's database] are
compared to the loss vehicle, and adjustments are made for
differences such as model, equipment, and odometer that
results in the adjusted value for each comparable. The
comparable vehicles are used to determine the market value.
"This calculation is a weighted average that is based on
the following factors:
" - Precision of the data (inspected versus advertised)
- Similarity of model, equipment, and odometer
- Nearness to the loss vehicle's primary garage location
- Recency of information."
6
The NADA report in the record provided values for "clean
retail" ($14,500), "clean trade-in" ($11,325), "average trade-
in" ($10,450), and "rough trade-in" ($9,375). According to the
report, "Clean Retail values reflect a vehicle in clean
6
maintains a publicly accessible online database of used car
values in each region of the country, from which reports on
particular vehicles may be generated. NADA, an industry trade
association, also periodically publishes "books" containing
these values in regional editions. See Braucher, Rash and Ride-
Through Redux: The Terms for Holding on to Cars, Homes and
Other Collateral Under the 2005 Act, 13 Am. Bankr. Inst. L. Rev.
457, 466 n.37 (2005) (Braucher). See also FTC v. CCC Holdings
Inc., 605 F. Supp. 2d 26, 33 (D.D.C. 2009).
After receiving the plaintiff's c. 93A demand letter on
February 11, 2011, and the NADA report, Homeland increased its
valuation of the vehicle to $13,024.66, which was found by the
motion judge to reflect "an average of the NADA, Auto[t]rader,
and CCC valuations." Homeland subsequently increased its
valuation to $13,650, which resulted in a settlement offer of
$14,003.12.7 The plaintiff accepted a check in that amount.
condition. This means a vehicle with no mechanical defects and
passes all necessary inspections with ease. Paint, body and
wheels have minor surface scratching with a high gloss finish
and shine. Interior reflects minimal soiling and wear with all
equipment in complete working order. Vehicle has a clean title
history." "Clean trade-in" values, by contrast, reflect a
vehicle that needs "minimal reconditioning to be made ready for
resale."
7
This figure included the applicable sales tax, minus the
deductible. We are not called upon here to assess the
correctness of this methodology.
7
Discussion. 1. Class certification. The plaintiff claims
that the judge erred in denying his motion to certify a class of
all Homeland auto insureds who received payment for a total loss
claim. He apparently claims a class should be certified based
on Homeland's alleged use of the CCC software to determine its
original offers, which, according to the plaintiff, did not
account for the higher "retail book value," in violation of 211
Code Mass. Regs. § 133.05(1)(a). We disagree.
To bring a class action under c. 93A, the plaintiff must
show that he seeks relief for an unfair or deceptive act or
practice, that the act or practice "caused similar injury to
numerous other persons similarly situated," and that he would
"adequately and fairly represent[]" such persons. G. L. c. 93A,
§ 9(2), inserted by St. 1969, § 690. The plaintiff must
"provide 'information sufficient to enable the motion judge to
form a reasonable judgment' that the class meets the relevant
requirements." Bellermann v. Fitchburg Gas & Elec. Light Co.,
470 Mass. 43, 52 (2014), quoting from Weld v. Glaxo Wellcome
Inc., 434 Mass. 81, 87 (2001). In deciding on a motion for
class certification under c. 93A, a judge must bear in mind the
"pressing need for an effective private remedy."8 Aspinall v.
8
A judge therefore has less discretion to deny class
certification under G. L. c. 93A than under Mass.R.Civ.P. 23(b),
as amended, 365 Mass. 767 (1974). See Bellermann, 470 Mass. at
8
Philip Morris Cos., 442 Mass. 381, 391-392 (2004), quoting from
Fletcher v. Cape Cod Gas Co., 394 Mass. 595, 605-606 (1985). We
review a denial of class certification under c. 93A for an abuse
of discretion. Bellermann, 470 Mass. at 51. We conclude that
the motion judge did not abuse his discretion in declining to
certify the plaintiff's class action, as the plaintiff failed to
provide sufficient information to support a reasonable judgment
that others were similarly situated and similarly injured. See
id. at 54.
We begin with the specifics of the plaintiff's case.
Homeland based its original offer on the CCC report, which
included information from Autotrader; the insurer later made
upward adjustments after considering the NADA report presented
by the plaintiff. The record, however, provides little to no
information regarding how other putative class members' total
loss claims were calculated, negotiated, and settled. As the
motion judge explained, "Morgan has failed to adduce any
evidence of injury to any other party." There is also
insufficient information in the record to support a reasonable
judgment that Homeland employed a uniform approach in handling
total loss claims. Homeland's nationwide policy provides only
that CCC reports "may" be used to calculate the actual cash
52; Kwaak v. Pfizer, Inc., 71 Mass. App. Ct. 293, 297-298
(2008).
9
value of a total loss vehicle and that "sources [such] as
Auto[t]rader, NADA, Edmunds, Redbook and KBB [Kelly Blue Book]"
may be consulted. Additionally, the record does not support a
reasonable judgment that reliance on the CCC software, rather
than NADA or other retail book values, similarly affected other
members of the putative class. The plaintiff did not dispute
that "CCC valuations are sometimes higher than other
commercially available book valuations."9 Thus, the beneficial
or detrimental effect of the use of the CCC reports in
determining even the original offer would depend on each
putative class member's particular circumstances. This
determination would further depend on each class member's zip
code and vehicle condition, based on CCC's methodology. Thus,
there is insufficient evidence to support a reasonable judgment
that the plaintiff and the putative class members were similarly
situated.
Moreover, we cannot discern how the plaintiff here was
actually harmed by the use of the CCC report, or how his alleged
harm compared to that of the other putative class members.
9
This statement appears in the parties' joint statement of
material facts in support of Homeland's motion for summary
judgment. The motion judge's decisions on the motion for class
certification and summary judgment were issued on the same day.
Although not in the record when the judge ruled on the
plaintiff's motion for class certification, we also note that
one of Homeland's supervisors testified at trial that the CCC
reports sometimes produce valuations higher than those from
NADA.
10
After basing its original offer on the lower CCC number, which
included Autotrader listings, Homeland did consider the NADA
report in upwardly adjusting the value of the plaintiff's
vehicle. The plaintiff then ultimately received a check close
to the amount of his original demand, approximately $14,000.
The end result was very nearly what he requested and included
consideration of retail book values presented by Autotrader and
NADA. Whether others were so fortunate -- or not -- is
completely absent from the record.
In sum, "the facts underlying the claims of the purported
class are too diverse" and the causal connection between
Homeland's allegedly unfair practice and any loss "is not just
difficult to identify but appears to vary widely depending on
the [insured]." Kwaak v. Pfizer, Inc., 71 Mass. App. Ct. 293,
294, 301 (2008). See Bellermann, 470 Mass. at 55 (certification
properly denied for class of consumers who lost power during
major ice storm; outages varied for each consumer). Contrast
Aspinall, 442 Mass. at 382, 392 (certification properly granted
for class of consumers who purchased cigarettes allegedly
falsely advertised to contain "lowered tar and nicotine"). We
therefore discern no error in the motion judge's denial of the
plaintiff's motion for class certification.
2. General Laws c. 93A violation. After trial, the judge
concluded that Homeland had violated c. 93A because its "initial
11
valuation of $11,891 did not consider . . . retail book value"
in determining the actual cash value of the plaintiff's vehicle,
as required by 211 Code Mass. Regs. § 133.05(1)(a).10 See 211
Code Mass. Regs. § 133.08 (2003) ("A violation of any provision
of 211 CMR 133.00 shall be considered to be an unfair or
deceptive act or practice, in violation of M.G.L. c. 176D");
G. L. c. 93A, §§ 2, 9.
Homeland claims in its cross appeal that this conclusion,
to the extent that it was based on a factual finding, was
clearly erroneous, and incorrect as a matter of law. We agree.
It is plain from the trial record that Homeland considered
retail book value information from Autotrader in formulating its
initial settlement offer, and therefore the judge's finding that
the initial offer violated c. 93A was incorrect. Additionally,
apart from the Autotrader information reflected in the initial
offer, Homeland's final offer also incorporated retail book
value from NADA, again reflecting Homeland's "consideration" of
retail book value, albeit later in the settlement process.
"Whether conduct is unfair or deceptive under G. L. c. 93A
is a mixed question of law and fact." Zabin v. Picciotto, 73
Mass. App. Ct. 141, 170 (2008). "Although whether a particular
10
The judge further determined that the plaintiff was not
harmed by this c. 93A violation because Homeland's March 7
offer, accepted by the plaintiff, "took into account all the
relevant factors" in the regulation.
12
set of acts, in their factual setting, is unfair or deceptive is
a question of fact . . . the boundaries of what may qualify
. . . as a c. 93A violation is a question of law." Milliken &
Co. v. Duro Textiles, LLC, 451 Mass. 547, 563 (2008) (quotation
omitted). We review the judge's findings of fact for clear
error and her conclusions of law de novo. Zabin, 73 Mass. App.
Ct. at 170. Moreover, to the extent the trial judge's
conclusion that Homeland violated c. 93A rested on her legal
interpretation of the meaning of the requirement in 211 Code
Mass. Regs. § 133.05(1) that the determination of the "actual
cash value of [a] vehicle . . . shall be based on a
consideration of . . . (a) the retail book value," we review
that interpretation de novo. Ivey v. Commissioner of
Correction, 88 Mass. App. Ct. 18, 23 (2015).
The purpose of 211 Code Mass. Regs. § 133.00 is to "promote
the public welfare and safety by establishing fair and uniform
standards for the repair of damaged motor vehicles." 211 Code
Mass. Regs. § 133.01 (2003). As we have noted, the express
language of 211 Code Mass. Regs. § 133.08 makes a "violation of
any provision of 211 CMR 133.00 . . . an unfair or deceptive act
or practice." More generally, 940 Code Mass. Regs. § 3.16(3)
(1993) provides that an act or practice that fails to comply
with a regulation "meant for the protection of the public's
health, safety or welfare" constitutes a violation of c. 93A if
13
it occurs during trade or commerce and is unfair or deceptive
under the circumstances. See Klairmont v. Gainsboro Restaurant,
Inc., 465 Mass. 165, 174 (2013).
As previously explained, 211 Code Mass. Regs. § 133.05(1)
expressly requires an insurer calculating the actual cash value
of a total loss vehicle to consider four factors, one of which
is the "retail book value" of a vehicle "of like kind and
quality, but for the damage incurred." 211 Code Mass. Regs.
§ 133.05(1)(a). The regulations do not, however, define "retail
book value," nor did the trial judge attempt to do so. The
parties agreed, and the judge determined without explanation,
that NADA provides retail book values.11 The trial judge also
noted that Autotrader is "another commercial retail book value
service" (emphasis added), which the parties did not dispute.
We begin by confirming that both the record and the case
law support the judge's findings that NADA and Autotrader
provide retail book values. Several courts have specifically
referenced "NADA retail book value[s]." See In re Minke, 21
B.R. 214, 214 (Bankr. D. Minn. 1982); In re Stauffer, 141 B.R.
612, 612 (Bankr. N.D. Ohio 1992); McCorvey v. McCorvey, 922 So.
2d 694, 708 (La. App. 2006). Other courts have noted,
generally, that NADA and/or Autotrader provide such values.
11
The judge described NADA as a "retail book value
service."
14
See, e.g., In re Morales, 387 B.R. 36, 49 (Bankr. C.D. Cal.
2008) (Autotrader); In re Ayres, Bankr. N.D. Cal., No. 09-56695
ASW, slip op. (Feb. 22, 2010) (Autotrader and NADA consulted to
determine "the price a retail merchant would charge"); In re
Zambuto, 437 B.R. 175, 178 (Bankr. D.N.J. 2010) (Autotrader
provides "retail prices" for vehicles in excellent or "clean"
condition). See also Hylton, The Law and Economics of Products
Liability, 88 Notre Dame L. Rev. 2457, 2502 n.147 (2013)
(Autotrader is an "automotive retail website[]").
We therefore conclude that in the instant case retail book
value was considered both in formulating Homeland's initial
offer, through the inclusion of Autotrader information in the
CCC comparative lists, and in the final offer, through the
inclusion of NADA information.12 The CCC report, used by
12
Because we need not resolve the issue to decide the case,
we decline to determine whether the CCC methodology itself
constitutes a retail book value, or, as Homeland argues, a more
sophisticated retail book value than those contained in NADA,
Autotrader, or other such services. As the parties have not
adequately briefed the proper interpretation of "retail book
value," we are not prepared to determine whether insurers must
consult so-called "'book' providers," which publish valuations
online and in "books," CCC Holdings, Inc., 605 F. Supp. 2d at
33, in considering "retail book value," or whether they may
arrive at retail book value through other means. See Warcewicz
v. Dept. of Envtl. Protection, 410 Mass. 548, 551 (1991) ("[N]o
portion of the language of a regulation should be treated as
surplusage").
One Federal District Court has differentiated "the Books"
from total loss software systems such as CCC's, stating: "Today
there are several different methodologies and tools for
15
insurance companies to calculate total loss. One option is the
'book' providers -- [NADA], the Kelley Blue Book, the Red Book,
and the Black Book (collectively 'the Books') -- whose reports
are based on local or regional values. . . . These products are
available in hard copy and many are available electronically;
the electronic versions are updated more frequently than the
printed Books. A number of insurance companies perform some or
even most of their total loss valuations in-house using a
combination of the Books and market research conducted by
internal staff in order to obtain a more accurate and localized
valuation." CCC Holdings Inc., 605 F. Supp. 2d at 33. Although
the court was addressing an unrelated issue, it further noted
that "the Books" and total loss software systems are
"undoubtedly differentiated products," id. at 43, and "not part
of the same product market." Id. at 41. Specifically, the
software systems have "substantially different valuation
methodologies than the Books"; the Books "simply are not as
accurate, detailed, or up-to-date" as the software systems. Id.
at 42. See Braucher, 13 Am. Bankr. Inst. L. Rev. at 466
(discussing why "retail book values," including NADA, "will
routinely be too high").
In Massachusetts, the Commissioner of Insurance expressed
his views on the use of the CCC service in a May, 1988, letter
responding to an inquiry from CCC. In that response, the
Commissioner, while cautioning that "insurer[s] may not blindly
adhere to or rely solely on the dollar amount the [CCC] service
generates" for the value of total loss vehicles, also indicated
that he had "no objection" to the use of CCC reports as "a
factor or factors in the determination of the actual cash value
or 'book' value for a total loss vehicle in compliance with [211
Code Mass. Regs. § 133.05]." Compare Pennsylvania, a State with
a regulation similar to ours. There, the regulatory agency has
formally approved the use of NADA and CCC in determining the
"retail book value" of a total loss vehicle. See 31 Pa. Code
§ 62.3(e)(1)(i) (2016) (one method insurers may use in
calculating the replacement value of a total loss vehicle is to
average two values from approved "guide sources," which
represents the "retail book value" of the vehicle); 46 Pa. Bull.
6734 (2016) (approving NADA, Red Book, and CCC as guide source
vendors).
16
Homeland in arriving at its initial valuation of $11,891,
explicitly took into account nine listings from Autotrader,13
which, as we have noted, is a source that provides retail book
values. Homeland's final offer undisputedly incorporated the
NADA report, which included the "retail book value" of the
plaintiff's vehicle.14 In sum, the regulatory requirements
involving the consideration of retail book value were satisfied
in the instant case, and there was no violation of c. 93A.
Conclusion. There was no error in the denial of the motion
for class certification or in the entry of judgment on that
count of the complaint. Although the trial judge erred in
determining that Homeland violated c. 93A, there was no error in
the entry of judgment for Homeland on the plaintiff's individual
claim.15
Order denying motion for
class certification
affirmed.
Judgments affirmed.
13
The trial judge did not specifically address the
Autotrader information in the CCC report; on the record before
us, the report's content appears to be uncontested.
14
We note, however, that insurers would be well-advised to
consider the retail book value of a vehicle early in the
settlement process, and not to depend on insureds to bring such
information to their attention.
15
Accordingly, the plaintiff's request for attorney's fees
and costs is denied.