Horton v. Usaa Casualty Insurance

266 F.R.D. 360, 2009 U.S. Dist. LEXIS 125768, 2009 WL 5066681
CourtDistrict Court, D. Arizona
DecidedDecember 16, 2009
DocketNo. CV-06-2810-PHX-DGC
StatusPublished
Cited by23 cases

This text of 266 F.R.D. 360 (Horton v. Usaa Casualty Insurance) is published on Counsel Stack Legal Research, covering District Court, D. Arizona primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Horton v. Usaa Casualty Insurance, 266 F.R.D. 360, 2009 U.S. Dist. LEXIS 125768, 2009 WL 5066681 (D. Ariz. 2009).

Opinion

ORDER CONDITIONALLY CERTIFYING SETTLEMENT CLASS, PRELIMINARILY APPROVING SETTLEMENT AND FORM OF NOTICE, DIRECTING THAT NOTICE BE SENT, AND SETTING FINAL APPROVAL HEARING

DAVID G. CAMPBELL, District Judge.

Plaintiffs Amanda K. Horton and Keith Alstrin, and Defendants United Services Automobile Association, USAA Casualty Insurance Company, USAA General Indemnity Company, USAA County Mutual Insurance Company, and Garrison Insurance Company (collectively “USAA”), have entered into an amended class action settlement agreement, dated November 13, 2009 (the “Amended Agreement”), to settle the above-captioned action (“Lawsuit”). They seek an order conditionally certifying the settlement class, preliminarily approving the settlement and form of notice, directing that notice be sent, and setting a final approval hearing (Dkt.# 103) (the “motion for preliminary approval”). The Amended Agreement replaces the class action settlement agreement approved by this Court on July 3, 2006 (the “Original Agreement”). The Amended Agreement sets forth the terms and conditions of the proposed settlement and dismissal with prejudice of this lawsuit.

I. Objectors’ arguments.

Third Party Rebecca Olson, on behalf of herself and Roman Olson (collectively “the Objectors”), has filed a response objecting to the motion for preliminary approval. Dkt. # 104. Plaintiffs have replied to the objection. Dkt. # 106. Oral argument was held on November 20, 2009. The Court finds the Objectors’ arguments unpersuasive and will grant the motion for preliminary approval. Dkt. # 103.

A. Background.

USAA is an insurance company that offers automobile insurance coverage. Dkt. # 103 at 3. Plaintiffs, insureds of USAA, brought a class action against USAA asserting claims for breach of contract and breach of the covenant of good faith and fair dealing, arguing that USAA failed to pay them the medical benefits required under their policies. Id. at 2-4. In short, Plaintiffs assert that USAA unfairly refused to pay claims in full when the charge for the medical procedure was higher than USAA’s audit software indicated it should be. Id. To determine whether a charge was too high, USAA used a product called MDR, which indicated whether a given charge was higher than 80% of the charges for the same procedure in a given geographical area. Id. When MDR indicated that a charge was above the 80th percentile, USAA would not pay the charge in full. Id.

In May of 2008, the parties entered into the Original Agreement, which provided for monetary payments to qualified insureds and which allowed USAA to continue using MDR [363]*363if it disclosed the use of MDR to its insureds. Id. at 6. The Court preliminarily approved the Original Agreement. Dkt. # 47. In January of 2009, however, UnitedHealth Group, Inc.—the parent of the company that owns and maintains MDR—entered into a settlement agreement with the New York Attorney General’s Office, agreed to stop maintaining the MDR product, and agreed to contribute money and resources to help establish a new database product that would be run by a not-for-profit organization. Dkt. # 103 at 6-7. Because MDR would soon be eliminated, the Original Agreement was no longer viable. As a result, the parties requested that the Court continue the hearing for final approval of the Original Agreement so they could investigate MDR and the issues surrounding UnitedHealth Group, Inc. Id. at 7. The Court granted a continuance and set a deadline of November 6, 2009 for the parties to file an amended settlement agreement.

During the continuance, the parties hired consultants to study MDR, but the results were inconclusive. Id. at 9. The parties filed the Amended Agreement on November 13, 2009. The Amended Agreement allows USAA to continue using MDR until March 31, 2010, and still provides for monetary compensation to qualified insureds. Id. at 9-10.

B. Analysis.

When considering whether to grant preliminary approval of a settlement agreement, the Court must evaluate the fairness, reasonableness, and adequacy of the proposed settlement. In re Syncor ERISA Litigation, 516 F.3d 1095, 1100 (9th Cir.2008). The Court should consider whether the proposed settlement “appears to be the product of serious, informed, non-collusive negotiations, has no obvious-deficiency, does not improperly grant preferential treatment to class representatives or segments of the class and falls within the range of possible approval.” In re Nasdaq Market-Makers Antitrust Litig., 176 F.R.D. 99,102 (S.D.N.Y.1997); see Mehling v. New York Life Ins. Co., 246 F.R.D. 467, 472 (E.D.Pa.2007).

The Objectors argue that the Amended Agreement is unfair and should not be preliminarily approved. Specifically, the Objectors ask the Court to “exclude Washington state citizens who are USAA insureds and claimants” from the Amended Agreement or, in the alternative, to refuse to certify a national settlement class and to award the Objectors their attorneys’ fees and costs because “their actions have benefitted the class under a common fund or common benefit principle.” Dkt. # 104 at 1-2, 4. For the reasons that follow, the Court finds the Objectors’ arguments unpersuasive. Dkt. #103.

1. Objector’s Arguments.

The Objectors argue that the Court should not grant preliminary approval of the Amended Agreement because it allows the continued use of MDR, a system that pays only up to the 80th percentile, when other systems are available. Dkt. # 104 at 9-10. They further argue that the Court should not include Washington in the national class because “Washington law requires ‘all reasonable’ medical expenses to be paid,” meaning “100 percent, not 80 percent.” Id. at 10-11. The Original Agreement, they argue, stated that it was only enforceable in accordance with state law, meaning that Washington law would still be available to class members in Washington. Id. at 11. But since the Amended Agreement does not include this language, “there is no mechanism to protect Washington Consumers against Arizona laws which are unenforceable in Washington.” Id. at 12.

At the preliminary approval stage, the Court must consider only whether the settlement agreement “appears to be the product of serious, informed, non-collusive negotiations,” is fair, and has no obvious deficiency. In re Nasdaq, 176 F.R.D. at 102. The Amended Agreement appears to be fair and the result of non-collusive negotiations between the parties, and the Court cannot conclude that it suffers from an obvious deficiency.

The Objectors argue that the Amended Agreement will impose Arizona’s insurance law on a nationwide class, including class members in Washington'—the state where Objectors wish to pursue their own class [364]*364action. But Objectors identify no provision of the Amended Agreement that would apply Arizona insurance law, and the Court has found none. The Amended Agreement establishes a negotiated amount qualified class members will receive, regardless of their State’s insurance law. This may provide a basis for arguing that the settlement is not reasonable, but it does not constitute the imposition of Arizona law on the national class.

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266 F.R.D. 360, 2009 U.S. Dist. LEXIS 125768, 2009 WL 5066681, Counsel Stack Legal Research, https://law.counselstack.com/opinion/horton-v-usaa-casualty-insurance-azd-2009.