The Illinois Supreme Court reversed the certification of a nationwide contract class in Avery v. State Farm Mutual Auto Ins. Co., No. 91404 ( Ill. August 18, 2005), the $1.06 billion suit over the use of aftermarket auto parts.
The suit was originally filed in 1998 when plaintiffs claimed that the use of non-Original Equipment Manufacturer (OEM) parts in repairing damaged vehicles constituted a breach of contract between State Farm and its insureds. Plaintiffs contended that State Farm's standard contract promised to “restore policyholders' cars to their pre-loss condition by using parts of like kind and quality,” and the use of non-OEM parts violated that contract provision.
The Circuit Court of Williamson County “certified plaintiffs' claims as a 48-state class action.” The jury found in favor of the plaintiffs and plaintiffs were awarded damages totaling $1,186,180,000, which were reduced to $1,056,180,000 by the appellate court.
Before the state supreme court, State Farm argued that the class should not have been certified and that “individual questions predominate over any questions common to the class.”
The court listed the qualifications for certification of a class according to Illinois law:
1. numerosity (the class is so large that joinder of parties is not possible)
2. commonality (“[t]here are questions of fact or law common to the class, which common questions predominate over any questions affecting only individual members”)
3. adequacy of representation (the interest of the class is fairly and adequately protected)
4. appropriateness (class action is the appropriate method for adjudication)
The question before the supreme court was if the circuit court correctly concluded that State Farm's various policies could be uniformly interpreted.
Two main policy forms were at issue in the case. One policy promised to “pay to repair or replace the property or part with like kind and quality.” The other policy stated, “We will include in the estimate [on which the cost of repair or replacement is based] parts sufficient to restore the vehicle to its pre-loss condition. You agree with us that such parts may include either parts furnished by the vehicle's manufacturer or parts from other sources including non-original equipment manufacturers.”
Other State Farms policies did not contain either provision and merely promised to pay actual cash value for parts or, for most assigned risk policies, “an [a]mount necessary to repair or replace the property.” However, the lower courts determined that all of the policies “conveyed the same contractual promise.”
The supreme court, though, found that “there is simply no evidentiary support for the lower court's conclusion that all of State Farm's various policies are uniform. Where a putative class includes members who are insured under policies that are materially different, the commonality and predominance requirement of [ Illinois statutes] cannot be met.”
Thus, the court reversed the class certification.
The court also found that the breach of contract verdict could not be upheld for any subclass within the class. One type of policy insuring some members of the class expressly stated that the insured agreed that non-OEM parts could be used for repair or replacement, while other policies contained no standard for parts quality at all. The court also found that the “like kind and quality” language in other State Farm policies meant “sufficient to restore a vehicle to its pre-loss condition,” and the use of non-OEM parts “would not necessarily constitute a breach of the 'like kind and quality' promise.”