SCOUFOS v. STATE FARM FIRE & CASUALTY CO.

SCOUFOS v. STATE FARM FIRE & CASUALTY CO.
2001 OK 113
41 P.3d 366
72 OBJ 3685
Case Number: 94395
Decided: 12/11/2001
Mandate Issued: 02/22/2002

THE SUPREME COURT OF THE STATE OF OKLAHOMA

HARRY G. SCOUFOS IV, Plaintiff/Appellee
v.
STATE FARM FIRE and CASUALTY CO., Defendant/Appellant

[ 41 P.3d 366 ]APPEAL FROM THE DISTRICT COURT, WAGONER COUNTY

HONORABLE JOHN C. GARRETT, JUDGE

[ 41 P.3d 367 ]

¶0 Scoufos [plaintiff/appellee], on behalf of himself and like-situated insureds, brought an action against State Farm Fire and Casualty Co. [State Farm or appellant] alleging appellant charged premiums for replacement-cost homeowners insurance policies greater than that allowed by statute. The trial judge ordered a class certified and appointed Scoufos class representative. State Farm appeals from the trial court's class-certification order.

THE TRIAL COURT'S CLASS-CERTIFICATION ORDER IS REVERSED.

Clyde A. Muchmore and Harvey D. Ellis, Jr., of Crowe & Dunlevy, Oklahoma City, Oklahoma; John A. Gladd and Gail Harris of Gladd, Smith & Harris, Tulsa, Oklahoma; and Joseph A. Cancila, Jr. and Heidi Dalenberg of Schiff Hardin & Waite, Chicago, Illinois, for appellant.
Sean Burrage, Stratton Taylor and Darrell Downs of Taylor, Burrage, Foster, Mallett & Downs, Claremore, Oklahoma, and Andrew P. Campbell and Janet R. Varnell of Campbell & Walker, Birmingham, Alabama, for appellee.
George P. Phillips and Stephen L. McCaleb for Oklahoma Insurance Department, Oklahoma City, Oklahoma, amicus curiae.

LAVENDER, J.

¶1 Resolution of today's cause requires the Court to measure the trial court's February 11, 2000 class-certification order against the prerequisites for issuing the same enunciated in 12 O.S.1991 § 2023(A) & (B).

I
FACTS AND PROCEDURAL HISTORY

¶2 In 1997 Scoufos purchased a State Farm "HO-W" replacement-cost homeowners insurance policy to cover a residence he was purchasing in Coweta, Oklahoma. The purchased policy was a multi-peril policy covering losses not only to the primary dwelling but also to detached extensions such [ 41 P.3d 368 ] as garages, sheds, fences and other structures. The extension coverage was in an amount equal to ten percent (10%) of the dwelling's coverage. The policy's terms were approved by the Oklahoma Department of Insurance [ODI] and the charged rates were sanctioned by the Board of Property and Casualty Rates. Scoufos purchased $83,000 of coverage to satisfy his mortgage-lender's coverage-requirements. The amount of replacement-insurance purchased exceeded State Farm's estimated replacement cost ($79,400) for the subject dwelling.

¶3 The gravamen of the class' suit is that State Farm overcharged the insureds for replacement-cost homeowners insurance in contravention of the terms of 36 O.S.1991 § 4804 triggering a statutory right-of-reimbursement. Scoufos on behalf of himself and like-situated insureds seeks reimbursement of the costs attributable to the alleged overinsurance (excess premiums) which he defines as equaling the difference between (1) the premiums charged for the issued insurance policy and (2) the costs of a policy with coverage limits equal to State Farm's estimate of replacement costs (measured at the time of the policy's purchase).

¶4 When the present case was filed, Scoufos was employed as a lawyer by one of the firms representing the putative class. Also, his father a senior partner in the same firm was one of the plaintiff's counsel. [While today's case was pending on appeal, the elder Mr. Scoufos resigned as counsel for the certified class.

¶5 State Farm seeks the class action's dismissal asserting (among other reasons) that the trial court is without jurisdiction to hear the matter. The defendant argues that the ODI is vested with authority to hear the cause and that allowing the same to proceed in the district court contravenes those provisions of the Oklahoma Administrative Procedures Act [OAPA], 75 O.S.1991 §§ 250.1 et seq., which require a plaintiff to exhaust administrative remedies before proceeding to the district court. State Farm also contends that the certification requirements of § 2023 were not met in that individual class-member claims are too varied and distinct from a evidentiary-proof perspective to be litigated as a unit.

¶6 After a hearing the trial court certified as a class "all current or former policyholders in the [S]tate of Oklahoma . . . whose residential dwelling was insured by State Farm . . . where State Farm's records assign an insurance to value ratio greater than 100%."

II
THE TRIAL COURT'S ASSESSMENT OF THE PARAMETERS OF THE STATUTORY RIGHT CREATED BY THE TERMS OF 36 O.S.1991 § 4804

¶7 Although the defendant objects to the district court's jurisdiction over the plaintiff's claims [asserting failure to comply with OAPA requirement of exhaustion of administrative remedies], this issue need not be reached because the class-certification issues are dispositive of today's cause. Also, there is no need for the Court to reach the issue whether a private cause of action is in fact authorized by the terms of 36 O.S.1991 § 4804; hence, we do not.

¶8 The trial court based its class-certification order upon a perceived "common right"

If

What is not reflected in the class representative's understanding of the relevant statutory language is that the right to reimbursement being asserted is conditioned upon the insured property's total destruction by fire.

¶11 When the parameters of the right being asserted are fully understood, it becomes clear that prospective class members could include only those persons purchasing fire insurance policies covering property (in Oklahoma) which was totally destroyed by fire. The record clearly evidences that the claim being pressed by the class representative is not typical of claims which might be asserted by the putative class inasmuch as there is no representation that Scoufos has suffered any, much less total, loss of his property by fire. Hence, while others might be able to meet the two statutory predicates for reimbursement, the class representative's claim as delineated by the record falls short. As Scoufos's claim necessarily must proceed upon different facts and legal theory from the suggested § 4804 statutory right of recovery which the prospective class members assert, his claim is not typical of the class' and his appointment as class representative cannot be sustained.

¶12 In resolving today's cause we need not and do not reach nor make any pronouncement on the numerous other challenges raised by the parties' appeal.

THE TRIAL COURT'S CLASS-CERTIFICATION ORDER IS REVERSED. [ 41 P.3d 371 ]

¶13 HARGRAVE, C.J., WATT, V.C.J., HODGES, LAVENDER, OPALA, KAUGER, BOUDREAU and WINCHESTER, JJ., concur.

¶14 SUMMERS, J., concurs in result.

FOOTNOTES

1 The pertinent provisions of 12 O.S.1991 § 2023 are:

A. PREREQUISITES TO A CLASS ACTION. One or more members of a class may sue or be sued as representative parties on behalf of all only if:

1. The class is so numerous that joinder of all members is impracticable;

2. There are questions of law or fact common to the class;

3. The claims or defenses of the representative parties are typical of the claims or defenses of the class; and

4. The representative parties will fairly and adequately protect the interests of the class.

B. CLASS ACTIONS MAINTAINABLE. An action may be maintained as a class action if the prerequisites of subsection A of this section are satisfied and in addition:

1. The prosecution of separate actions by or against individual members of the class would create a risk of:

a. inconsistent or varying adjudications with respect to individual members of the class which would establish incompatible standards of conduct for the party opposing the class , or

b. adjudications with respect to individual members of the class which would as a practical matter be dispositive of the interests of the other members not parties to the adjudications or substantially impair or impede their ability to protect their interests; or

* * *

3. The court finds that the questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy. . . .

2 Fent v. Okla. Nat. Gas Co., 2001 OK 35, ¶12, 27 P.3d 477, 480. See also KMC Leasing, Inc. v. Rockwell-Standard Corp., 2000 OK 51, ¶10, 9 P.3d 683, 688, where the Court held that "an abuse of discretion occurs when a court has, 'based its decision on an erroneous conclusion of law . . . ." Id.

3 State Farm uses "Insurance to Value Quarterly Usage Reports" to calculate the "insurance to value ratio" [IV ratio] for each residential policy it issues. If the IV ratio equals 100%, replacement costs as defined by the policy's terms for the insured dwelling are completely covered.

4 The pertinent terms of 36 O.S.1991 § 4804 provide:

No insurance company shall , knowingly, issue any fire insurance policy upon property within this state for an amount which, with any existing insurance thereon, exceeds the fair value of the property, nor for a longer term than five (5) years. If buildings insured against loss by fire, and situated within this state, are totally destroyed by fire, the company shall not be liable beyond the actual value of the insured property at the time of the loss or damage, and if it shall appear that the insured has paid insurance premiums on an amount in excess of said actual value, the insured shall be reimbursed the proportionate excess of premiums paid on the difference between the amount named in the policy and said actual value, with interest at six percent (6%) per annum from the date of issue. [Emphasis added.]

5 The resignation of the elder Mr. Scoufos as class counsel was suggested, but not required, by the trial court in its class certification order. See February 11, 2000 class-certification order p. 17 n. 1.

6 See trial court's February 11, 2000 certification order.

7 In defining the class size the trial court held: "State Farm's argument is premised on a different class definition than that proposed by Plaintiff. Plaintiff urges that 12 O.S. § 4804 prohibits an insurer from writing more insurance than it considers necessary to cover the replacement cost on the dwelling as determined at the time the policy is written. The Court agrees with Plaintiff's reading of Section 4804." [Emphasis added.]

8 For the pertinent terms of 36 O.S.1991 § 4804 see supra note 3.

9 This result is correct for we decide today that even if a private cause of action were authorized, the class representative's claim is not typical of those which § 4804 would authorize against an insurer. Hence, class certification was improper.

10 We find persuasive the U.S. Supreme Court's legal reasoning in Anchem Products, Inc. v. Windsor, 521 U.S. 591, 622-24, 117 S. Ct. 2231,2249-50, 138 L. Ed. 2d 689 (1997), where in assessing entitlement to class certification the Court focused its analysis upon legal and/or factual questions common to the plaintiffs rather than simply relying upon a "community of interests" held by putative class members. For an analysis of the "common right theory" as an underpinning of class action litigation, see Michael C. Protos, An Epistemological Approach To Class Certification: A Classy Understanding of the Problems of Class Certification, 42 Case W. Res. L. Rev. 1297, 1313-1315 (Fall 1992).

11 Mattoon v. City of Norman, 1981 OK 92, 633 P.2d 735, 736.

12 Sullins v. American Medical Response of Okla., Inc., 2001 OK 20, ¶17, 23 P.3d 259, 263.

13 Sullins, supra note 12, 2001 OK at ¶17, 23 P.3d at 263; Community Bankers Ass'n. of Okla. v. Okla. State Banking Bd., 1999 OK 24, ¶26, 979 P.2d 751, 757.

14 Haney v. State of Okla., 1993 OK 41, 850 P.2d 1087, 1089.

15 See County Bd. of Supervisors of Platte County v. Breese, 105 N.W.2d 478, 484 (Neb. 1960).