Bailey v. State Farm Mutual Automobile Insurance Company

Filing 191

MEMORANDUM OPINION & ORDER: IT IS HEREBY ORDERED that Plaintiffs' Amended Motion for Class Certification, Appointment of Class Representatives, and Appointment of Class Counsel DE 114 be SUSTAINED with the class definition modified as detaile d above. IT IS FURTHER ORDERED that Plaintiffs Susan Hicks and Don Williams be appointed as representatives of the class and Mehr, Fairbanks & Peterson Trial Lawyers, PLLC; Richardson & Smith, PSC; and Richardson, Barber & Williamson PSC be appointed as counsel for the class. Signed by Judge Henry R. Wilhoit, Jr on 2/21/19.(KSS)cc: COR

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF KENTUCKY
NORTHERN DIVISION
at ASHLAND
CIVIL ACTION NO. 14-CV-00053-HRW
SUSAN HICKS and DON WILLIAMS,
individually and on behalf of all others
similarly situated
v.

PLAINTIFFS

MEMORANDUM OPINION AND ORDER

STATE FARM FIRE AND CASUALTY COMPANY

DEFENDANT

** ** ** ** ** ** ** ** ** **
This matter is before the Court upon Plaintiffs Susan Hicks' ("Hicks") and Don
Williams' ("Williams") (collectively, "Plaintiffs") Amended Motion for Class Certification,
Appointment of Class Representatives, and Appointment of Class Counsel (the "Class
Certification Motion"). [Docket No. 114]. The matter has been fully briefed by the parties
[Docket Nos. 129 and 140] and the undersigned heard the arguments of counsel on two
occasions, on September 6, 2017 [Docket No. 161] and December 27, 2018 [Docket No. 186].
For the reasons set forth herein, the Court finds class certification to be appropriate.
I.

Plaintiffs filed this civil action to challenge State Farm Fire and Casualty Company's
("State Farm") method of calculation of the actual cash value ("ACV") of structural losses under
its insurance policies issued in Kentucky. Specifically, Plaintiffs allege State Farm improperly
depreciated labor costs when calculating ACV payments, which resulted in breach of their
respective insurance policies (Count I). Plaintiffs further alleged claims for unjust enrichment
(Count II), statutory bad faith in violation ofKRS 304.12-235(Count111), and violation ofKRS

367.170, the Kentucky Consumer Protection Act (Count IV). State Farm sought dismissal of
Plaintiffs' Complaint.

By Order dated March 25, 2015, the undersigned sustained State Farm's motion as to all
claims except the claim for breach of contract. [Docket No. 42]. On the question of a breach,
this Court stated that "under fundamental tenets of Kentucky law, it would appear that the
depreciation oflabor in calculating ACV is improper." [Docket No. 42 at 10].
The case then proceeded on the question of class certification. Plaintiffs seek certification
of a statewide class of persons with breach of contract claims against State Farm for withholding
labor depreciation from ACV payments on structural damage claims. Plaintiffs seek recovery of
unrecovered labor depreciation withheld by State Farm and prejudgment interest for amounts
withheld.
On September 6, 2017, the undersigned convened a hearing on Plaintiffs' Class
Certification Motion. During the hearing, it became apparent that an interlocutory appeal of the
Court's March 25, 2015 Order was necessary as to the issue of depreciation oflabor costs.
Subsequently, on October 17, 2017, this Court sustained State Farm's request for Section
1292(b) certification of the March 25, 2015 Order and stayed the action pending a resolution
from the Sixth Circuit.
The Sixth Circuit accepted State Farm's petition for interlocutory appeal. On October 15,
2018, the Sixth Circuit affirmed this Court's March 25, 2015 Order, "hold[ing] that State Farm
miscalculated [ACV] when it depreciated the cost of labor and materials rather than simply
materials." Hicks v. State Farm Fire & Cas. Co., 2018 U.S. App. LEXIS 28894, at *1 (6th Cir.
Oct. 15, 2018).

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Following the Sixth Circuit's opinion and mandate, the undersigned, again, heard
arguments of counsel on the issue of class certification.
Plaintiffs request certification of the following class of individuals seeking monetary
damages from State Farm:
All persons and entities that received "actual cash value" payments, directly or
indirectly, from State Farm Fire and Casualty Company ("State Farm") for loss or
damage to a dwelling or other structure located in the Commonwealth of
Kentucky, such payments arising from events that occurred from February 28,
2004 through July 25, 2015, where the cost of labor was depreciated. Excluded
from the class are: (1) all persons and entities that received payment from State
Farm in the full amount of insurance shown on the declarations page; (2) State
Farm and its affiliates, officers, and directors; (3) members of the judiciary and
their staff to whom this action is assigned; and (4) Plaintiffs' counsel.
While Plaintiffs propose the above class definition with a class period extending more
than ten years, for the reasons discussed below, the Court will modify the class definition so that
the class period includes only those claims arising from events that occurred from February 28,
2013 through July 25, 2015.
II.

"A district court has broad discretion to decide whether to certify a class. " In re
Whirlpool Corp. Front-Loading Washer Prod. Liab. Litig., 722 F.3d 838, 850 (6th Cir. 2013),
cert. denied, 134 S. Ct. 1277 (2014). "Class certification is appropriate if the court finds, after
conducting a 'rigorous analysis,' that the requirements of Rule 23 have been met." Id. at 851
(citing Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 351 (2011); Young v. Nationwide Mut. Ins.
Co., 693 F.3d 532, 537 (6th Cir. 2012). To be certified under Rule 23, a putative class must
satisfy, by a preponderance of the evidence, each of the four requirements of Rule 23(a):
numerosity, commonality, typicality, and adequacy. Fed. R. Civ. P. 23. In addition, a putative
class must satisfy the requirements of one of the three provisions of Rule 23(b). Id. Here,

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Plaintiffs seek certification of the Class under Rule 23(b)(3), which requires that "questions of
law or fact common to class members predominate over any questions affecting only individual
members," and that "a class action is superior to other available methods for fairly and efficiently
adjudicating the controversy." Id. "These are known as the 'predominance' and 'superiority'
requirements." Wilson v. Anthem Health Plans of Ky., Inc., 2017 U.S. Dist. LEXIS 572, at *39
(W.D. Ky. Jan. 3, 2017).
In addition to the express requirements of Rule 23, this Circuit requires that a putative
class be "sufficiently ascertainable." Rikos v. P&G, 799 F.3d 497, 525 (6th Cir. 2015), cert.

denied, P&G v. Rikos, 136 S. Ct. 1493 (2016). "In our circuit, the ascertainability inquiry is
guided by Young v. Nationwide Mutual Insurance Co., 693 F.3d 532 (6th Cir. 2012)." Id. Under

Young, for a putative class to be ascertainable, '"the court must be able to resolve the question of
whether class members are included or excluded from the class by reference to objective
criteria."' Id. (quoting Young, 693 F.3d at 539).
Courts should refrain from "engag[ing] in free-ranging merits inquiries at the certification
stage." Amgen Inc. v. Connecticut Ret. Plans & Trust Funds, 133 S. Ct. 1184, 1194-95 (2013).
However, the Rule 23 analysis often "will entail some overlap with the merits of the plaintiffs
underlying claim. That cannot be helped." Dukes, 564 U.S. at 351. "'Merits questions may be
considered to the extent-but only to the extent-that they are relevant to determining whether
the Rule 23 prerequisites for class certification are satisfied."' Rikos, 799 F.3d at 505 (quoting

Amgen, 133 S. Ct. at 1194-95).
III.
A. Rule 23( a)
1. Numerosity

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In order to satisfy Rule 23(a)(l), a class must be "so numerous thatjoinder of all
members is impracticable." Rule 23(a)(l). Although "no strict numerical test exists to define
numerosity under Rule 23(a)(l ), substantial numbers of affected consumers are sufficient to
satisfy this requirement." In re Whirlpool Corp., 722 F.3d at 852. In addition, "impracticability
of joinder must be positively shown,' and 'mere speculation as to the number of parties involved
is not sufficient to satisfy Rule 23(a)(l)." Golden v. City of Columbus, 404 F.3d 950, 966 (6th
Cir. 2005).
Numerosity is satisfied here. For example, State Farm's own documentation of its
Kentucky refund program identifies 1,854 Kentucky policyholders with claims during just four
months of the more than two-year class period who received labor depreciation refund payments.
[Docket No. 114-10]. All of these policyholders are members of Plaintiffs' proposed class.
Moreover, State Farm's counsel conceded during the December 27, 2018 hearing that from
February 2013 through July 25, 2015 approximately 11,800 Kentucky structural claims had
depreciated labor costs withheld from the respective ACV payments. These numbers easily
satisfy the numerosity requirement here.
2. Commonality

To establish "commonality, the plaintiffs' 'claims must depend on a common contention .
. . of such a nature that it is capable of classwide resolution-which means that determination of
its truth or falsity will resolve an issue that is central to the validity of each one of the claims in
one stroke."' Young, 693 F.3d at 542 (quoting Dukes, 564 U.S. at 350). As the Sixth Circuit has
explained, "[i]n other words, named plaintiffs must show that there is a common question that
will yield a common answer for the class (to be resolved later at the merits stage), and that that
common answer relates to the actual theory of liability in the case." Rikos, 799 F.3d at 505.

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Moreover, "there need be only one common question to certify a class." In re Whirlpool Corp.,
722 F.3d at 853; see also Dukes, 564 U.S. at 359 ("We quite agree that for purposes of Rule
23(a)(2) '"[e]ven a single [common] question"' will do.").
Here, "Plaintiffs have identified a common question" - whether it is improper for State
Farm to depreciate labor costs in calculating the ACY of structural damage claims in Kentucky"that will yield a common answer for the entire class and that, if true, will make [State Farm]
liable to the entire class." Rikos, 799 F.3d at 506.
In addition, all class members' claims arise from State Farm's common practice of
depreciating labor costs in the calculation of ACY payments to Kentucky insureds. State Farm
has admitted that its common practice until July 25, 2015 was to withhold labor depreciation
from ACY payments to its insureds. [Docket No. 1 at 8] ("State Farm Fire generally has applied
depreciation in its repair estimate, when appropriate, to all elements of the published unit cost,
including embedded labor components thereof."); [Docket No. 79 at 2] ("In or about July 25,
2015, State Farm took steps to change the settings for its estimating software, called Xactimate,
so that depreciation would no longer be applied to non-material components of repair prices
when calculating the 'actual cash value' of a loss in an Xactimate estimate."); [Docket No. 114-2
at 53:8-9] ("the change was made to Xactimate application in July of 2015"). Moreover, through
the Xactimate estimating software program, State Farm was able to calculate labor depreciation
in a common, automated manner. [Docket No. 114-2 at 17:20-23] ("it's our only estimating
software that we use").
This common question, posed in the context of State Farm's uniform claim handling
practices, "will yield a common answer for the entire class that goes to the heart of whether

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[State Farm] will be found liable under the relevant[] laws. That is all Dukes requires." Rikos,
799 F.3d at 508-09.
Finally, without deciding the merits of Plaintiffs' arguments seeking to avoid State
Farm's one-year contractual suit limitations clause for certain proposed class members, the Court
finds that those arguments, even if successful, might result in a class that includes members who
do not satisfy the commonality requirement. This is because the potential class members who
must rely on exceptions to the suit limitations clause may have to rely on proof that is not
common to other class members, thus defeating commonality. The class period must thus be
limited in time to exclude claims for losses that occurred more than one year prior to the
February 28, 2014 filing of Plaintiffs' Complaint. [Docket No. 1 at 2].
For this reason, the Court modifies the class definition as follows:
All persons and entities that were insured under the same type of homeowners
policy form issued to Plaintiffs and who received "actual cash value" payments,
directly or indirectly, from State Farm Fire and Casualty Company ("State Farm")
for loss or damage to a dwelling or other structure located in the Commonwealth
of Kentucky, such payments arising from events that occurred from February 28,
2013 through July 25, 2015, where the cost of labor was depreciated. Excluded
from the Class are: (1) all persons and entities that received payment from State
Farm in the full amount of insurance shown on the declarations page; (2) State
Farm and its affiliates, officers, and directors; (3) members of the judiciary and
their staff to whom this action is assigned; and (4) Plaintiffs' counsel.
See Powers v. Hamilton Cty. Pub. Def Comm 'n, 501 F .3d 592, 619 (6th Cir. 2007) (district
courts have broad discretion to modify class definitions).
With this modification, commonality is satisfied.

3. Typicality
Rule 23(a)(3) requires plaintiffs to show that "the claims or defenses of the representative
parties are typical of the claims or defenses of the class." "As the Supreme Court made clear in
Dukes, '[t]he commonality and typicality requirements of Rule 23(a) tend to merge.' Rikos, 799

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F.3d at 509 (quoting Dukes, 564 U.S. at 349 n.5). Thus, "many courts have found typicality if
the claims or defenses of the representatives and the members of the class stem from a single
event or a unitary course of conduct, or if they are based on the same legal or remedial theory."
Id. (quoting 7A Charles Alan Wright, Arthur R. Miller, & Mary Kay Kane, Fed. Prac. & Proc.§

1764 (3d ed. 2005)).
To satisfy typicality, the "class representatives' interests must be aligned with those of
the putative class and the pursuit of their claims must also advance the interest of the class."
Kendrickv. Std. Fire Ins. Co., 2010 U.S. Dist. LEXIS 135694, at *5 (E.D. Ky. Sep. 30, 2010).

Importantly, "the class representatives' claims need not always involve the same facts or law."
Id. at *56-57. However, "there must be a common element or fact or law." Id. at *57.

Plaintiffs' claims and the class's claims all arise from State Farm's course of conduct of
using Xactimate to depreciate labor costs when calculating ACV. Like all other members of the
class, Plaintiffs had labor costs depreciated and deducted from ACV payments they received for
structural damage claims. Additionally, Plaintiffs' claims are based on the same legal theories as
the class's claims. Plaintiffs contend that they and every other class member are entitled to
damages which are comprised of umecovered labor depreciation and prejudgment interest.
"Because Plaintiffs allege both a single practice or course of conduct on the part of[] Defendant
[] that gives rise to the claims of each class member and a single theory of liability," typicality is
satisfied. Young, 693 F.3d at 543.

4. Adequacy
Rule 23(a)(4) requires a showing that the "representative parties will fairly and
adequately represent the interests of the class." A '"class representative must be part of the class
and possess the same interest and suffer the same injury as the class members.'" Young, 693 F.3d

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at 543 (quotingAmchem Prods. v. Windsor, 521 U.S. 591, 625-26 (1997)). The Sixth Circuit
"looks to two criteria for determining adequacy ofrepresentation: '1) the representative must
have common interests with unnamed members of the class, and 2) it must appear that the
representatives will vigorously prosecute the interests of the class through qualified counsel."'

Id. at 543 (quoting In re Am. Med. Sys., 75 F.3d 1069, 1083 (6th Cir. 1996)). In addition, courts
in the Sixth Circuit "'review[] the adequacy of class representation to determine whether class
counsel are qualified, experienced and generally able to conduct the litigation."' Id. (quoting

Stout v. JD. Byrider, 228 F.3d 709, 717 (6th Cir. 2000)).
Here, regarding the first criterion, Ms. Hicks' and Mr. Williams' interests are fully
aligned with those of the class, as they are both part of the class and their claims arise out of the
same common course of conduct and are based upon the same legal theories as class members'
claims. As to the "second criterion, [Plaintiffs have] demonstrated, through [their] diligent
'prosecution of the litigation to date,' that [they] 'will continue to vigorously prosecute the
claims of the class as a whole."' Wilson, 2017 U.S. Dist. LEXIS 572, at *33-34 (quoting Young,
693 F.3d at 543). Finally, Plaintiffs have retained highly-qualified counsel, who have vigorously
prosecuted the interests of the Class and will continue to do so. See Wilson, 2017 U.S. Dist.
LEXIS 572, at *33-34.

B. Rule 23(b )(3)

1. Predominance
'"To meet the predominance requirement, a plaintiff must establish that issues subject to
generalized proof and applicable to the class as a whole predominate over those issues that are
subject to only individualized proof."' Young, 693 F.3d at 544 (quoting Randleman v. Fidelity

Nat'! Title Ins. Co., 646 F.3d 347, 352-53 (6th Cir. 2011)). Courts in jurisdictions where labor

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depreciation has been found to be unlawful have uniformly found that common issues
predominate in cases challenging insurers' deprecation oflabor costs. See Stuart v. State Farm

Fire & Cas. Co.,_ F.3d_, 2018 U.S. App. LEXIS 34356, at *10 (8th Cir. Dec. 6, 2018)
(petition for en bane review pending); [Docket No. 114-7 at 8-14] (same); [Docket No. 114-9]
(same); Farmers Union Mut. Ins. Co. v. Robertson, 370 S.W.3d 179, 187 (Ark. 2010) ("[t]he
requirement that the common issue[s] predominate is[] satisfied" because "whether Appellant
was able to depreciate labor pursuant to the contractual terms of its policies would be the same
and require the same proof').
Where, as here, Plaintiffs challenge an insurer's standard process, "this is a predominate
issue central to each of Plaintiffs' claims and subject to generalized proof." Young, 693 F.3d at
544; see also In re Checking Account Overdraft Litig., 286 F.R.D. 645, 656 (S.D. Fla. 2012)
("where corporate policies 'constitute the very heart of the plaintiffs' ... claims,' as they do
here, common issues will predominate because those policies 'would necessarily have to be reproven by every plaintiff") (alterations in original); 1 McLaughlin on Class Actions § 5:56
(12th ed., updated Dec. 2015) ("Breach of contract claims arising out of a standardized, form
contract ordinarily are suitable for class certification unless numerous inquiries are required to
determine whether a breach of the contract occurred as to each class member.").
As the Sixth Circuit has recognized, '"when adjudication of questions of liability
common to the class will achieve economies of time and expense, the predominance standard is
generally satisfied even if damages are not provable in the aggregate."' In re Whirlpool, 722
F.3d at 850 (quoting Comcast Corp. v. Behrend, 133 S. Ct. 1426, 1437 (2013) (Ginsberg and
Breyer, JJ, joined by Sotomayor and Kagan, JJ, dissenting)). In addition, "[b ]ecause
'[r]ecognition that individual damages calculations do not preclude class certification under Rule

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23(b )(3) is well-nigh universal,' in 'the mine run of cases, it remains the 'black letter rule' that a
class may obtain certification under Rule 23(b)(3) when liability questions common to the class
predominate over damages questions unique to class members."' Id. Indeed, "courts in every
circuit have uniformly held that the 23(b)(3) predominance requirement is satisfied despite the
need to make individualized damage determinations."' Wm. Rubenstein, Newberg on Class
Actions,§ 4:54 (Winter 2013 Supp.) (citing Comcast, 133 S. Ct. 1426 (2013) (Ginsberg and
Breyer, JJ., joined by Sotomayor and Kagan, JJ, dissenting)); see also Stuart, 2018 U.S. App.
LEXIS 34356, at * 10 ("The potential need for individualized damages inquiries is not sufficient

to overcome the district court's findings of predominance and superiority."); In re Deepwater
Horizon, 739 F. 3d 790, 815 (5th Cir. 2014) ("wide disparity among class members as to the
amount of damages does not preclude class certification and courts, therefore, have certified
classes even in light of the need for individualized calculations of damages"); Butler v. Sears,
Roebuck & Co., 727 F.3d 796, 801 (7th Cir. 2013) (predominance satisfied in breach of warranty
case despite individualized damages where there was a "single, central, common issue of
liability").
The Court must "ensure at the class-certification stage that 'any model supporting a
plaintiff's damages case [is] consistent with its liability case,' i.e., that the model 'measure[s]
only those damages attributable to that theory' of liability." Rikos, 799 F.3d at 523 (quoting
Comcast, 133 S. Ct. at 1433). That is the case here.
Plaintiffs' expert proposes to measure damages in a manner that both is "'consistent with
[the] liability case"' and '"measure[s] only those damages attributable to that theory' of
liability." Rikos, 799 F.3d at 523 (quoting Comcast, 133 S. Ct. at 1433). Plaintiffs allege that
State Farm's improper depreciation oflabor costs resulted in a breach of its insurance policies,

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and that State Farm should not have withheld labor depreciation when it made ACV payments to
class members. Plaintiffs also allege that the class members are owed prejudgment interest
representing the time-value of money for the labor amounts improperly withheld. That is
precisely the harm quantified by Plaintiffs' damages model, which calculates damages pursuant
to the following formula:
DAMAGES= (WITHHELD LABOR DEPRECIATION AMOUNT NOT
RESULTING IN TOTAL CLAIM EXCEEDING POLICY LIMITS RECOVERED LABOR DEPRECIATION)+ PREJUDGMENT INTEREST

[Docket No. 114-3 at ifil 5, 16-22]. Thus, Plaintiffs have satisfied the Comcast and Rikos
requirement that Plaintiffs' damages approach track the theory of liability.
Predominance is established here.

2. Superiority is established.
As the Sixth Circuit has explained, "'[t]he policy at the very core of the class action
mechanism is to overcome the problem that small recoveries do not provide the incentive for any
individual to bring a solo action prosecuting his or her rights."' Young, 693 F.3d at 545 (quoting
Amchem, 521 U.S. at 617). Where, as here, '"it is not economically feasible to obtain relief

within the traditional framework of a multiplicity of small individual suits for damages,
aggrieved persons may be without any effective redress unless they may employ the class-action
device."' Id. (quoting Deposit Guar. Nat'! Bank v. Roper, 445 U.S. 326, 339 (1980)).
As in Young, here damages "are relatively small for [each of the] potential class
member[s]." Id. Indeed, the spreadsheet produced by State Farm showing the supplemental
labor depreciation payments made as part of its Kentucky labor depreciation refund program
demonstrates that the bulk of its policyholders were paid less than $1,000.00, with a significant
portion paid less than the filing fee for initiating an action in state court. [Docket No. 114-1 O];

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Carnegie v. Household Int'!, Inc., 376 F.3d 656, 661 (7th Cir. 2004) ("[t]he realistic alternative
to a class action is not 17 million individual suits, but zero individual suits" because of litigation
costs).
Moreover, "few policyholders are likely to be aware of' State Farm's challenged practice
here. Young, 693 F.3d at 545. "Given the unlikelihood that many injured policyholders will
discover, let alone attempt to vindicate, their injury individually" in Kentucky courts, a class
action is the superior method to adjudicate this case fairly and efficiently. Id.; see also In re
Whirlpool, 722 F.3d at 861 ("Use of the class method is warranted particularly because class
members are not likely to file individual actions-the cost of litigation would dwarf any potential
recovery.").
In addition, "'cases alleging a single course of wrongful conduct are particularly wellsuited to class certification."' Id. (quoting Powers v. Hamilton Cty. Pub. Def Comm 'n, 501
F.3d 592, 619 (6th Cir. 2007)). Where, as here, "a threshold issue is common to all class
members, class litigation is greatly preferred." Id.; see also Daffin v. Ford Motor Co., 458 F.3d
549, 550 (6th Cir. 2006) ("Permitting individual owners and lessees of 1999 or 2000 Villagers to
litigate their cases is a vastly inferior method of adjudication when compared to determining
threshold issues of contract interpretation that apply equally to the whole class."). Accordingly,
a class action is the superior method for adjudicating the class's claims.

C. Standing
Like in Stuart, here "State Farm argues that class certification is inappropriate because
certain plaintiffs cannot demonstrate the injury-in-fact element of standing." Stuart, 2018 U.S.
App. LEXIS 34356 at *11-12. As discussed above, "[t]his argument again misconstrues the
basic theory of liability at issue in this case." Rikos, 799 F.3d at 524. "State Farm argues that

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plaintiffs who completed their repairs at or below the cost of the ACV payment, or who
ultimately received RCV payments, have suffered no injury and accordingly lack standing."

Stuart, 2018 U.S. App. LEXIS 34356at*12. While "couched as disputes about standing, State
Farm's arguments really go to the merits of plaintiffs' claims." Id. Plaintiffs' theory is that "all
individuals who received an improperly-depreciated ACV payment suffered a legal injurybreach of contract-regardless of whether the ACV payment was more than, less than, or exactly
the same as the ultimate cost of repairing or replacing their property." Id. Moreover, Plaintiffs'
damages theory and model seek damages for all class members, whether or not they ultimately
recovered all of labor costs depreciated by State Farm. Plaintiffs seek both to recover
unrecovered withheld labor depreciation and prejudgment interest for the time-value of labor
depreciation withheld by State Farm.

D. Membership in the Class is ascertainable.
Under Young, for a putative class to be ascertainable, '"the court must be able to resolve
the question of whether class members are included or excluded from the class by reference to
objective criteria."' Rikos, 799 F.3d at 525 (quoting Young, 693 F.3d at 539). Young is
instructive. In Young, "the named plaintiffs sued their respective insurance companies, alleging
'that their insurer charged them a local government tax on their premiums when either the tax
was not owed, or the tax amount owed was less than the insurer billed."' Rikos, 799 F .3d at 525
(quoting Young, 693 F.3d at 535). This Court certified a class of "'[a]ll persons in the
Commonwealth of Kentucky who purchased insurance from or underwritten by [Defendant
insurer] ... and who were charged local government taxes on their payment of premiums which
were either not owed or were at rates higher than permitted."' Young, 693 F.3d at 536 (second
alteration in original). The insurer defendants argued that this definition was "not

14

administratively feasible" because it was not "sufficiently definite so that it [would be]
administratively feasible for the court to determine whether a particular individual is a member."
Id. at 538.

The Sixth Circuit rejected this argument, noting that "[f]or a class to be sufficiently
defined, the court must be able to resolve the question of whether class members are included or
excluded from the class by reference to objective criteria." Id. The court determined that
"plaintiffs had presented such a class, because class membership could be determined by
reviewing factors such as 'the location of the insured risk/property' and 'the local tax charged
and collected from the policyholder."' Rikos, 799 F.3d at 525 (quoting Young, 693 F.3d at 539).
The court also "considered-and rejected-the defendants' claim 'that the class properly could
[not] be certified without ... 100% accuracy."' Id. "Instead, [the court] agreed with the district
court's conclusion that 'the subclasses can be discerned with reasonable accuracy using
Defendants' electronic records and available geocoding software, though the process may require
additional, even substantial, review of files."' Id. (emphasis added in Rikos.).
The Sixth Circuit found "[e]qually-if not more-persuasive[] th[is] []court's practical
rationale: '[T]he need to manually review files is not dispositive. If it were, defendants against
whom claims of wrongful conduct have been made could escape class-wide review due solely to
the size of their businesses or the manner in which their business records were maintained."'
Young, 693 F.3d at 540 (quoting Kendrick v. Std. Fire Ins. Co., 2010 U.S. Dist. LEXIS 135694,

at *38-39 (E.D. Ky. Sep. 30, 2010), aff'd sub nom. Young v. Nationwide Mut. Ins. Co., 693 F.3d
532 (6th Cir. 2012)). Importantly, the Sixth Circuit explained that "[i]t is often the case that
class action litigation grows out of systemic failures of administration, policy application, or
records management that result in small monetary losses to large numbers of people. To allow

15

that same systemic failure to defeat class certification would undermine the very purpose of class
action remedies." Young, 693 F.3d at 540; see also McKeage v. TMBC, 847 F.3d 992, 997, 1000
(8th Cir. Feb. 13, 2017) (ascertainability requirement satisfied where manual review of
individual files identified approximately 100,000 class members). The Sixth Circuit also
observed that administrative feasibility was supported by the fact that the defendant insurers'
records "are in a form compatible with [analysis] software," which "would be used to assist in
identifying potential class members and would be used in conjunction with manual review."
Young, 693 F.3d at 540 (emphasis in original).

Just as in Rikos, "[t]he same reasoning applies to the instant case." Rikos, 799 F.3d at
525. Here, "[t]he proposed class is defined by objective criteria:" To be a class member, one
must be insured under the same State Farm homeowners policy form as Plaintiffs and have i)
received an ACV payment from State Farm, ii) for loss or damage to a dwelling or other
structure located in the Commonwealth of Kentucky, iii) occurring from February 28, 2013
through July 25, 2015, iv) where labor costs were depreciated. Plaintiffs have also provided
additional objective criteria to limit class membership, excluding: i) persons who received
payment for the full amount of coverage listed on the declarations page; ii) State Farm and its
affiliates, officers, and directors; iii) members of the judiciary and their staff to whom this action
is assigned; and iv) Plaintiffs' counsel.
Through the application of these objective criteria, it is administratively feasible to
identify class members. Ascertainability is established here.

IV.
Accordingly, IT IS HEREBY ORDERED that Plaintiffs' Amended Motion for Class
Certification, Appointment of Class Representatives, and Appointment of Class Counsel [Docket

16

No. 114] be SUSTAINED with the class definition modified as detailed above. IT IS

FURTHER ORDERED that Plaintiffs Susan Hicks and Don Williams be appointed as
representatives of the class and Mehr, Fairbanks & Peterson Trial Lawyers, PLLC; Richardson &
Smith, PSC; and Richardson, Barber & Williamson, PSC be appointed as counsel for the class.

Signed By:

l:lency R. Wilhoit Jr.
United States Dl1trlct Judge

17