Baldwin Mutual Ins. Co. v. McCainAnnotate this Case
Baldwin Mutual Insurance Company appealed a circuit court order certifying the action filed against it by Gloria McCain as a class action. McCain owned a house in Montgomery on which she held a homeowner's insurance policy issued by Baldwin Mutual. That policy provided that any covered property losses would be settled "at actual cash value at the time of loss but not exceeding the amount necessary to repair or replace the damaged property." In July 2005, McCain's house was damaged as the result of a windstorm. She filed a claim with Baldwin Mutual, and Baldwin Mutual thereafter retained an independent adjuster to examine McCain's damaged property and to prepare an estimate to repair the damage. Baldwin Mutual paid McCain's claim in accordance with the estimate prepared by the adjuster. Pursuant to a work-authorization form signed by McCain, Baldwin Mutual paid the funds directly to McCain's contractor. In June 2006, McCain filed another claim after her house suffered damage as a result of a lightning strike. After the same adjuster prepared an estimate, Baldwin Mutual paid the new claim in accordance with the adjuster's estimate. The genesis of the claims underlying this suit was that Baldwin Mutual had wrongfully been reducing the amount paid on claims made on actual-cash-value polices inasmuch as its practice was to deduct some amount for depreciation not only of the damaged materials and the labor costs of initially installing those damaged materials (based on their condition prior to the covered damage and their expected life span), but also of the labor costs associated with the removal of the damaged materials. It was improper and impossible to depreciate those labor costs, McCain argued, because they had not previously been incurred at some defined time in the past; rather, they were being incurred at the time of the current repair. Noting that hundreds or thousands of Baldwin Mutual policyholders were likely negatively affected by Baldwin Mutual's practices in this regard, McCain sought class action certification of her claims. The Alabama Supreme Court reversed the class certification, finding that the trial court here exceeded its discretion with a definition proposed by McCain without giving Baldwin Mutual the opportunity to oppose the certification of the proposed class at a hearing conducted for that purpose pursuant to statute. The case was remanded for further proceedings.