In a somewhat puzzling case, the Dallas Court of Appeals has affirmed a trial court order certifying a class action against USAA under Rule 42, TRCP. We say “puzzling” because the court of appeals’ opinion does not refer to the law governing USAA’s standard operating procedure that is at issue in the litigation. The opinion thus leaves the impression—at least to us—that something is going on behind the scenes to transform what appears to be a one-off case with small damages into a class action with hundreds or even thousands of potential claimants.

The case, USAA Casualty Insurance Company v. Sunny Letot, Individually and On Behalf Of All Others Similarly Situated (No. 05-20-01019-CV), arose from a 2009 collision between Letot and USAA’s insured that, according to USAA’s adjuster, damaged Letot’s 1983 Mercedes. USAA’s adjuster determined that while the value of the vehicle was $2728, the cost of repair came to $8859. USAA declared the vehicle a “total loss” and tendered Letot checks totaling $2738.02 to Letot. Letot objected to the vehicle valuation, and her lawyer returned the checks and demanded that USAA pay $10,700 in damages. USAA declined to do so.

As its standard practice when totaling a vehicle, within 3 days of tendering payment of Letot’s claim, USAA filed an owner retained report with TXDOT pursuant to 43 TAC § 217.83(c), which prescribes a procedure by which an owner of a salvage or non-repairable vehicle retains the vehicle. Under § 217.83(a), a vehicle is deemed salvage or non-repairable if the cost of repairs exceeds the market value of the vehicle. Market value is determined from publications commonly recognized by the automotive or insurance industries to establish values, or, if the entity determining the value is an insurance company, by any other procedure recognized by the insurance industry, including market surveys, that is applied in a uniform manner. Similarly, cost of repairs must be determined using a manual of repair costs or other instrument generally recognized and used in the automotive repair industry, or an estimate of actual cost of the repair parts and labor costs by using hourly rate and time allocations that are reasonable and commonly assessed in the repair industry in the community in which the repairs are performed.

From what we can tell from the recital of facts in the opinion, USAA followed this procedure, declared the vehicle unsalvageable, and sent Letot a check. Since USAA did not acquire ownership or possession of the vehicle (in which case USAA would have to apply for a non-repairable or salvage vehicle title), it filed an owner retained report as required by § 217.83(c). This subsection provides that when an insurance company pays a claim on a non-repairable or salvage vehicle and does not acquire ownership, the company shall submit to TXDOT before the 31st day after the date of the payment of the claim, a report stating that the company has paid a claim and has not acquired ownership or possession of the vehicle. When it receives the report, TXDOT places a notation on the vehicle record to prevent registration and transfer of ownership prior to the issuance of a salvage or non-repairable vehicle title. All of that happened in this case as prescribed by law, as nearly as we can ascertain from the court of appeals’ opinion.

So what’s the issue and why is there a class action? Letot alleges that USAA (1) failed to notify her that it filed owner retained reports subsequent to paying claims for non-repairable or salvage vehicles, (2) failed to notify her of the consequences that an owner retained report would have on her title, (3) improperly filed an owner retained report before Letot had accepted payment of the claim, and (4) illegally converted her title in the vehicle by filing the report. Letot further sought class certification for all similarly situated vehicle owners for which USAA had filed owner retained reports within 3 days of paying claims. The trial court certified the class on the basis of a common issue of whether “USAA’s uniform practice of filing Owner Retained Reports prior to paying claims improperly meant it improperly and intentionally asserted rights in Letot’s property.” But nowhere in the court of appeals’ opinion do we find any discussion of what was “improper” about USAA’s conduct in the first place or what “rights in Letot’s property” USAA asserted. The court of appeals focused solely on the propriety of USAA’s “uniform practice” of filing owner retained reports on totaled vehicles as justifying class certification, brushing aside USAA’s argument that at best each conversion claim should be tried individually because in every case except Letot’s nobody has ever complained about it.

Which brings us back to the question: what’s going on? This litigation has been going on since 2009. The total damages in dispute in Letot’s case are around $8,000. The vehicle no longer exists, having been cannibalized for parts by other owners of old Mercedes. The plaintiff’s most recent amended petition—the seventh of a series—added a claim for injunctive relief, which had never been requested before. At this point, the only financial benefit to anyone appears to be the attorney’s fees. Undoubtedly, if the class certification holds up, it will put the company under intense pressure to settle the case, but it is hard to see why it would change standard practice when nothing in the law appears to prohibit it. We’ll see what happens.


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