Third Circuit Reverses Class Action Certification in Progressive Auto Total Loss Valuation Case

A recent decision by the US Court of Appeals for the Third Circuit reversed an earlier class certification in a lawsuit against Progressive Specialty Insurance Co. and Progressive Advanced Insurance Co. The plaintiffs claimed that Progressive underpaid total loss auto claims through the use of a "Projected Sold Adjustment" (PSA), which reduces the listed price of comparable vehicles to reflect dealer negotiations. They argued this practice led to lower actual cash value (ACV) settlements than contractually required under their policies. However, Progressive defended its approach, noting that its valuation process combines data from Mitchell International and the National Automobile Dealers Association (NADA), with further adjustments based on vehicle-specific factors.

The Third Circuit found that determining whether individual insureds were underpaid would require analyzing each claim separately due to the variable application of PSA, undermining the predominance requirement necessary for class action certification. The court clarified that a breach of contract depends on whether Progressive paid less than the ACV, not merely on the use of PSA. This individualized inquiry led to the reversal of the class certification and a remand for further proceedings.

This ruling highlights critical insights for insurance industry professionals regarding standardized valuation methods like PSAs. Even systematic adjustments may not expose carriers to class-wide liability if payout effects vary per claim. Furthermore, auto insurance policies that incorporate third-party data tools with documented, variable inputs can strengthen carriers' defenses against broad breach claims.

Overall, the decision underscores the complexities of class actions involving auto total loss claims and the importance of carefully structured valuation methodologies in limiting legal exposure. It signals that insurance carriers should consider claim-specific factors in their practices to mitigate class action certification risks. Additionally, regulatory compliance around contractual language concerning ACV calculations remains pivotal. The case will now proceed with more individualized claim assessments rather than a uniform class-wide approach.