Ex parte Government Employees Ins. Co.

729 So.2d 299

Ex Parte GOVERNMENT EMPLOYEES INSURANCE COMPANY.

(Re: Walter S. Kenney et al. v. Timothy Allen Roach et al.).

No. 1970673.

Supreme Court of Alabama.

January 15, 1999.

Richard A. Ball, Jr., and Clyde C. Owen, Jr., of Ball, Ball, Matthews & Novak, P.A., Montgomery; and L. Merrill Shirley, Elba, for petitioner.

Jeff W. Kelly, Elba: G.A. Lindsey, Elba; George L. Beck, Jr., of Beck & Bryne, P.C., Montgomery; and Warren Rowe of Rowe & Associates, Enterprise, for respondents.

HOOPER, Chief Justice.

Government Employees Insurance Company ("GEICO"), petitions for a writ of mandamus directing the Circuit Court of Coffee County to vacate an order certifying a certain pending action as a class action. We grant the petition to the extent it relates to the plaintiffs' fraud claim, their bad-faith-failure-to-pay claim, and their breach-of-contract claim; but we deny it to the extent it relates to the plaintiffs' request for a judgment declaring that GEICO has not complied with Alabama's Uninsured Motorist Statute.

This Court has stated many times that the writ of mandamus is an extraordinary remedy and that it will be issued only upon a showing of "(1) a clear legal right in the petitioner to the order sought; (2) an imperative duty upon the respondent to perform, accompanied by a refusal to do so; (3) the lack of another adequate remedy; and (4) properly invoked jurisdiction of the court." Ex parte Alfab, Inc., 586 So.2d 889, 891 (Ala.1991). See also, Martin v. Loeb & Co., 349 So.2d 9 (Ala.1977); Ex parte Slade, 382 So.2d 1127 (Ala.1980) (overruled on other grounds by Ex parte Creel, 719 So.2d 783 (Ala.1998)); Ex parte Houston County, 435 So.2d 1268 (Ala.1983); Ex parte Johnson, 638 So.2d 772 (Ala.1994). "Mandamus is an extraordinary remedy and will lie to compel the exercise of discretion, but not to compel its exercise in a particular manner except where there is an abuse of discretion." State v. Cannon, 369 So.2d 32, 33 (Ala.1979). The facts in this case require that the circuit court modify its class certification by decertifying the plaintiffs fraud claim, breach-of-contract claim, and bad-faith claim. Otherwise, we find no abuse of discretion on the part of the trial court in its certification of this class action.

I. The Facts and the Proceedings Before the Trial Court

This mandamus petition relates to an action that was filed by Walter Kenney and his wife, Thelma Kenney, to recover uninsured-motorist benefits and medical-payments benefits under an automobile insurance policy GEICO had issued to Mr. Kenney. Mr. Kenney was injured in an automobile accident that he says was caused by an uninsured motorist. Thelma Kenney claimed a loss of consortium, based on her husband's injuries.

On November 9, 1992, Walter Kenney sued Timothy Allen Roach in the Circuit Court of Coffee County, alleging that Roach had negligently caused the automobile accident. Mr. Kenney joined GEICO as a defendant, seeking from GEICO uninsured-motorist and medical-payments benefits under his GEICO policy.

Before the lawsuit was filed, GEICO had paid Mr. Kenney $2,000; this was the maximum amount of coverage provided under the medical-payments provision. After Mr. Kenney had filed his lawsuit, GEICO offered him $38,000 under the uninsured-motorist provision of his policy to settle his claims under the policy. According to GEICO and the wording of the policy, $38,000 was the most Mr. Kenney could be paid, because of the "offset provision" of the uninsured-motorist portion of his policy. GEICO's manual for its adjusters requires adjusters to reduce benefits payable to an insured under the uninsured-motorist coverage by any amount that has been paid under the medical-payments coverage. GEICO applies this offset uniformly, even though the Alabama statute governing uninsured-motorist coverage, § 32-7-23, Ala. Code 1975, requires that each automobile liability policy providing such coverage provide a minimum of $20,000 in coverage. Because the Kenneys owned two cars as to which GEICO had provided the minimum $20,000 uninsured-motorist coverage, their coverages were "stacked" to provide them with a total of $40,000 in coverage. See Great Central Ins. Co. v. Edge, 292 Ala. 613, 298 So.2d 607 (1974) (this Court recognized "stacking" of insurance policy benefits), and Ala.Code 1975, § 32-7-23(c).¹

Mr. Kenney rejected the $38,000 offer and amended the lawsuit, adding counts alleging breach of contract and bad-faith failure to pay. On May 9, 1994, Mr. Kenney again amended the complaint to add a fraud count and to aver that he brought the action on behalf of all GEICO policyholders that had purchased GEICO policies containing an endorsement permitting the offset of medical-payments benefits against uninsured-motorist or underinsured-motorist benefits. The essence of Mr. Kenney's claims is that GECO's procedure for paying claims under its uninsured-motorist policies violates Alabama's Uninsured Motorist Statute. On or about June 18, 1996, Mr. Kenney filed a motion for class certification. Mr. Kenney sought class certification under Rule 23(b)(1), 23(b)(2), and 23(b)(3), seeking injunctive relief that would prohibit GEICO from using the medical-payments coverage to reduce benefits paid to a policyholder under the uninsured/underinsured-motorist provision of the GEICO policy. The injunctive relief sought by Mr. Kenney would also order a rewrite of the language in future GEICO automobile policies to prevent what he alleges is a wrongful offset of benefits.

The trial court heard the motion for class-action certification on October 25, 1996, and on December 16, 1997 it issued an order conditionally certifying the class action, as follows:

"1. Class I—Class I shall be maintained as a Rule 23(b)(1) class action with Walter S. Kenney and Thelma June Kenney as the named class representatives on behalf of the following defined class Plaintiffs:

"Each and every individual or entity within the State of Alabama, who has purchased at any time from a period of six years preceding the filing of this action, or who will purchase an automobile liability insurance policy marketed, sold or administered by GEICO Insurance Company, which contains substantially the following provisions in such liability, or uninsured, or underinsured motorist coverage as follows:

"`... the amount payable under this coverage will be reduced by all amounts:

"`. . . .

"`(b) Paid or payable under the Bodily Injury Coverage or Medical Payments Coverage of this policy....'

This class action is to proceed under all theories advanced by Plaintiffs in their complaint and amended complaint for declaratory and injunctive relief and equitable restitution.

"2. Class II—Class II shall be maintained as a Rule 23(b)(2) class action with Walter S. Kenney and Thelma June Kenney as the named class representatives on behalf of the following defined class of Plaintiffs:

"Each and every individual or entity within the State of Alabama, who has an action, or who will purchase an automobile liability insurance policy marketed, sold or administered by GEICO Insurance Company, which contained substantially the provision in such liability, or uninsured, or underinsured motorist coverage as follows:

"`... the amount payable under this coverage will be reduced by all amounts:

"`. . . .

"`(b) Paid or payable under the Bodily Injury Coverage or Medical Payments Coverage of this policy....'

This class action is to proceed under all theories advanced by Plaintiffs in their complaint and amended complaint for declaratory and injunctive relief and equitable restitution."

GEICO petitions for a writ of mandamus directing the trial court to vacate the conditional class certification. GEICO argues that the trial court abused its discretion in certifying the classes of plaintiffs in this action because, it says, the court's analysis did not meet the rigorous-analysis requirement of Rule 23, Ala. R. Civ. P., for certification of a class action. Ex parte American Bankers Life Assurance Co. of Florida, 715 So.2d 186 (Ala.1997).

II. Conditional Class-Certification Review

"We note at the outset that the [trial] court maintains substantial discretion in determining whether to certify a class action, a decision we review only for abuse." Allison v. Citgo Petroleum Corp., 151 F.3d 402, 408 (5th Cir.1998). This Court is not in the position of deciding the merits of this action today. "The question of class certification is a procedural one distinct from the merits of the action." Garcia v. Gloor, 618 F.2d 264, 267 (5th Cir.1980), cert. den., 449 U.S. 1113, 101 S.Ct. 923, 66 L.Ed.2d 842 (1981).

Based on our analysis of the four elements required for class-action certification in Alabama, we conclude that the trial court did not abuse its discretion in certifying the class action under Rules 23(b)(1) and (b)(2), except as to Mr. Kenney's claims alleging fraud, bad-faith failure to pay a claim, and breach of contract. Those claims were inappropriate for class action treatment under Rule 23(b)(1) and (b)(2).

III. The Four Prerequisites for Class Certification

We must determine if, in fact, the circuit court performed a rigorous analysis of the four prerequisites for conditionally certifying a class action.

Rule 23(a), Ala. R. Civ. P. provides as follows concerning certification of a class action:

"(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."

A. Numerosity

The trial court found, and we agree, that the plaintiffs met the numerosity requirement. The plaintiffs presented evidence that...