N.D. Ohio Court finds commonality in suit against health insurer

In Meznarich v. Morgan Waldron Insurance Management, LLC (N.D. Ohio Sept. 30, 2011), 2011 U.S. Dist. LEXIS 113237, **15-16, Judge Pearson recently certified a class of 1100 employees, under Rule 23(b)(1)(A), who alleged breach of fiduciary duty, ERISA violations and fraud against Morgan Waldron Insurance management LLC and others.  The gist of the complaint is that false representations were made which caused the employees to enroll in a new health insurance plan which they thought was a fully insured plan, when it was in fact a self-funded plan.  The Plan eventually ran out of funds and was unable to pay claims.

In its decision, the Court went through the ordinary analysis of reviewing each subpart of Rule 23 (a) and then moved to Rule 23(a)(1)(A).  In addressing commonality and typicality, Defendants argued that individualized evidence of reliance and causation would be necessary and, therefore, class certification should be denied for lack of commonality and typicality. 

First, Defendants argued that not all of the class members heard the alleged misrepresentations at the meetings at which the Plan was presented.  Second, not all of the class members relied on the misrepresentations.  Third, only 675 of the 1100 class members have unpaid healthcare claims.  Defendants asserted that this inconsistency and variance of facts and damages required the court to deny the motion for class certification. 

The Court disagreed.  As a “preliminary matter,” the Court found that these arguments are only directed at the fraud claim.  Defendants did not address the other claims.  As a result, the Court was not convinced that the motion was broad enough to cover the other claims. 

More importantly, however, the Court rejected Defendants' arguments regarding reliance and causation.  In analyzing this issue, the Court stated:

[w]hile defendants correctly recognize that proving the elements of reliance and causation for fraud require individualized determinations, when a misrepresentation is made to a class of similarly situated individuals, the requirement that a plaintiff prove reliance or causation will not, by itself, defeat class certification.  See Edwards v. First American Corp., 385 Fed. Appx. 629, 631 (9th Cir. 2010)( citing Fed.R.Civ.P. 23(b)(3) advisory committee's note (“[A] fraud perpetrated on numerous persons by the use of similar representations may be an appealing situation for a class action . . . [unless] there [is] material variation in the representations made or in the kind of degrees of reliance by the persons to whom they were addressed); see also Sprague v. General Motors Corp. 133, F.3d 388, 397 (6th Cir. 1998)(recognizing that claims based on largely uniform representations to a discrete group could be certified in the appropriate case).

The Court focused on the fact that all of the oral presentations and the written materials portrayed the Plan as fully insured.  The Court distinguished this case from those where different representations are made to different class members.  In the end, the Court concluded “Plaintiffs' plausible allegation that Defendants made the same representations to all the class members is sufficient to satisfy the commonality and typicality requirement of the Fraud count.” Id. at * 18.

Federal Class Action Law, Insurance Industry, Sixth Circuit Class Action Law