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Ratnayake v. Farmers Insurance Exchange

United States District Court, D. Nevada

February 27, 2015

NAYANANANDA RATNAYAKE, individually, and on behalf others similarly situated, Plaintiff,
v.
FARMERS INSURANCE EXCHANGE d/b/a FARMERS; and DOES I-V and ROES VI-X, inclusive, Defendant.

ORDER

ANDREW P. GORDON, District Judge.

Plaintiff Nayanananda Ratnayake alleges that defendant Farmers Insurance Exchange (1) has not provided some customers with a premium discount required by Nevada law and (2) has not allowed some customers to stack under-insured motorist policies as required by Nevada law. Ratnayake brought this lawsuit asserting causes of action arising out of Farmer's alleged failure to provide discounts and stack policies. Ratnayake now moves to certify three subclasses: the first two assert claims related to Farmer's alleged failure to discount premiums, the third asserts claims related to Farmer's alleged failure to stack policies.[1]

Ratnayake's proposed classes fail on multiple grounds, any of which would be independently sufficient. First, Ratnayake has failed to articulate ascertainable classes. Ratnayake's proposed classes include individuals given a discount "in violation" of Nevada law. It is impossible to determine the members of the classes without first determining the merits of their claims, or in other words whether they were given a discount in violation of Nevada law.

Second, the proposed classes' claims will involve more individualized issues than common ones. These claims will require determinations about what discounts Farmers provided each insured, whether each discount was sufficient under Nevada law, and the extent of damages suffered by each insured. Each of these questions will vary between insureds, and a determination of these issues as to one class member will not necessarily settle class-wide issues.

Finally, a class action in this court is not the superior forum for resolution of Ratnayake's claims. Individualized issues will make management of the class unwieldy. Additionally, the Nevada Supreme Court has expressed a preference that claims involving insurance code violations be brought before the Nevada Department of Insurance ("NDI") in the first instance.

My subject matter jurisdiction over this case arises from the Class Action Fairness Act ("CAFA"). CAFA jurisdiction, in turn, is predicated on the existence of a valid class action. Because I deny Ratnayake's motion to certify, I do not have jurisdiction over this case. Therefore, I remand the case back to the Nevada state court. Even if I retained jurisdiction under CAFA, I would dismiss Ratnayake's case because it presents claims that should have been brought before the NDI.

I. BACKGROUND

A. Anti-stacking provisions and Farmers' discounts

Anti-stacking provisions in insurance policies prevent insureds from combining their coverage limits under separate policies. NRS 687B.145(1) prevents insurers from including these anti-stacking provisions if the insured has paid for coverage of the same risk under multiple policies. The statute recognizes that if an insured has paid for coverage of the same risk more than once, she should be permitted to collect under each of the policies. Nevada law provides an exception: an insurer may include an anti-stacking provision if it discounts overlapping policies so that customers are not double-charged for the same risk.[2] If the insurer does not sufficiently discount the overlapping policies, insureds may stack their coverage.

On a regular basis, insurers submit their proposed premium rates and discounts to the NDI for approval.[3] In 1993, the NDI issued an Order approving Farmer's uninsured-motorist, multicar ("UMMC") premium discount of 28%.[4] This 28% discount was meant, in part, to comply with NRS 687B.145 by ensuring customers received a sufficient discount on overlapping UMMC premiums.[5] Farmers has continued to submit its proposed rates and discounts to the NDI. Farmers reported to the NDI a discount rate of 18%-35% in 2006, and a rate of 23% in 2008.[6] Farmers alleges that until 2008 it provided an average UMMC discount of 28%, and an average of at least 23% after 2008.[7] Farmers also informed the NDI that it would be revising its future rates as it gathered data on non-stacked underinsured motorist risk.[8]

Farmers alleges that it provides anti-stacking discounts, but that it calculates them by actuarializing the anti-stacking risk as part of its multi-car discount.[9] In other words, Farmers appears to argue that an insured's inability to stack policies is considered as a factor in its premium or discount calculation, and thus the discount is given on the front-end rather than at the back-end.[10] Farmers therefore has no means to determine what specific anti-stacking discount it gives to individual customers. Instead, with the NDI's approval, Farmers has bundled its antistacking discount within its overall multi-car discount.[11] "By calculating the proposed rates in part based on the differences between single-and multi-vehicle households, the discount captured the effect of the decreased risk associated with anti-stacking provisions."[12] Accordingly, Farmers has no records specifying the anti-stacking discount any customer receives. Determining the antistacking discount will require analysis, and potentially expert testimony, to parse out what portion of each customer's variable multi-car discount is attributable to anti-stacking considerations.[13]

B. Ratnayake's claims

Ratnayake alleges that Farmers (1) has not provided some of its customers with a specific premium discount required by Nevada law and the NDI's 1993 Order and (2) has not allowed some of its customers to stack their under-insured motorist policies as required by Nevada law. Ratnayake filed this lawsuit alleging (1) underinsured motorist claims; (2) breach of the implied covenant of good faith and fair dealing, (3) unfair claim practices, (4) unjust enrichment, (5) declaratory relief, and (6) fraud.

Plaintiff now moves to certify three subclasses in this class action against Farmers. All three proposed subclasses include insureds with policies that contain anti-stacking provisions who allegedly received an insufficient discount under Nevada law. Subclass A consists of insureds who allegedly received no discount; Subclass B consists of insureds who allegedly received some, but not enough, discount; and Subclass C consists of insureds who actually filed a claim but ...


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