I’m thrilled to sit down with Simon Glairy, a distinguished expert in insurance law and Insurtech, whose deep knowledge of risk management and AI-driven risk assessment has made him a trusted voice in the industry. Today, we’re diving into a recent high-profile case involving Progressive Preferred Insurance Co., where the Ninth Circuit Court of Appeals declined to certify a class-action lawsuit over allegations of undervalued totaled vehicles. Our conversation will explore the intricacies of actual cash value (ACV) disputes, the implications of the court’s decision, the controversial “projected sold adjustment” method, and broader trends in insurance litigation. Let’s get started.
Can you walk us through the core issue in the lawsuit against Progressive Preferred Insurance Co.?
Absolutely. The heart of this lawsuit was the claim that Progressive undervalued totaled vehicles when determining their actual cash value, or ACV, for settlement payouts. The plaintiffs argued that Progressive’s valuation method didn’t reflect the true market value of their vehicles, resulting in lower compensation than they deserved. This wasn’t just a minor discrepancy; it was a systematic issue, according to the plaintiffs, that affected many policyholders.
What role did Progressive’s “projected sold adjustment” process play in these allegations?
The “projected sold adjustment” was central to the dispute. This method essentially assumes that a consumer would negotiate a lower price than what’s listed by a car seller. Progressive applied this adjustment as a negative line item, reducing the listed value of comparable vehicles used to calculate the ACV. The plaintiffs claimed this practice artificially deflated the payouts, as it didn’t accurately capture what a vehicle would actually sell for in the market.
How did the Ninth Circuit Court of Appeals rule on this case, and what was their reasoning?
The Ninth Circuit declined to certify this as a class-action lawsuit, affirming the lower court’s decision. Their reasoning hinged on the idea that individual questions about each plaintiff’s ACV calculation outweighed any common issues shared by the group. Essentially, they said that determining harm required a case-by-case review—each person would need to prove that Progressive’s valuation was flawed compared to the correct market value. This made a collective lawsuit impractical in their view.
There was a notable dissent in this ruling. Can you tell us about Judge Evan Wallach’s perspective?
Yes, Judge Wallach had a strong dissenting opinion. He argued that class-action certification was appropriate because the common questions of law and fact—such as whether Progressive’s method was inherently problematic—should take precedence over individual differences in contracts or damages. He felt the majority’s focus on case-by-case analysis was too narrow and didn’t align with prior rulings from the Ninth Circuit and other federal courts, which have often prioritized shared issues in similar cases.
Let’s dive deeper into the “projected sold adjustment” method itself. How does it work, and why wasn’t it deemed inherently problematic by the court?
The method works by adjusting the listed prices of comparable vehicles downward to reflect typical consumer negotiations. It’s based on the idea that buyers rarely pay the sticker price. The court didn’t see this as inherently wrong because Progressive’s policy language didn’t explicitly prohibit such adjustments. They ruled that without a clear policy violation, plaintiffs would need to show individually that this adjustment led to an underpayment in their specific case, rather than assuming it was universally harmful.
Progressive is also facing scrutiny in a separate case in Pennsylvania. Can you shed light on what’s happening there?
In Pennsylvania, Progressive is dealing with allegations of bad faith and breach of contract. The claim is that an adjuster interfered in a client’s settlement negotiations to minimize the company’s underinsured motorist exposure. This kind of interference raises serious ethical questions about how adjusters handle claims and whether they’re prioritizing the insurer’s interests over fair treatment of policyholders. It’s a stark reminder of how critical clear policy terms and professional conduct are in these situations.
How do you see the Ninth Circuit’s ruling impacting future insurance lawsuits, especially class-action cases?
This ruling could set a significant precedent by making it harder to certify class actions in insurance disputes involving valuation methods. It emphasizes the need for individualized proof of harm, which can be a major hurdle for plaintiffs hoping to band together over shared grievances. Insurers might feel emboldened to use complex valuation adjustments, knowing that challenges may not easily scale to class actions. On the flip side, it could push plaintiffs’ attorneys to focus on stronger individual claims or seek legislative changes to clarify ACV standards.
What is your forecast for the future of ACV disputes in the insurance industry?
I think we’re going to see ACV disputes remain a hot-button issue, especially as data-driven valuation tools and AI become more prevalent. These technologies can streamline processes but also introduce new layers of complexity and potential bias in how values are calculated. I expect more litigation as consumers and regulators demand transparency in these methods. Additionally, there might be a push for standardized valuation guidelines across states to reduce discrepancies and protect policyholders from undervaluation. It’s an evolving space, and I anticipate both legal and technological developments will shape the landscape in the coming years.
