FIFTH CIRCUIT AFFIRMS DISMISSAL OF PROPOSED CLASS ACTION LAWSUIT ALLEGING DISCRIMINATION AGAINST NUMEROUS INSURERS ISSUING AUTOMOBILE POLICIES IN TEXAS

September 16, 2011

Also last week, in Hollinger v. Home State Mut. Ins. Co., --- F.3d ----, 2011 WL 3890833 (5th Cir. Sept.

6, 2011), the Fifth Circuit Court of Appeals affirmed a district court’s order dismissing a proposed class action against numerous automobile insurers in Texas.  The plaintiffs, Toni Hollinger and others as class representatives (collectively “the Insureds”), filed a class action case alleging insurance discrimination in the non-standard insurance market, which serves lower income individuals and those drivers with less than ideal driving records.  The Insureds alleged, among other things, that the named defendants (collectively  the  “Insurance  Companies”)  violated  the  anti-discrimination  provisions  of  the   Texas Insurance Code by charging certain consumers higher policy fees on their automobile insurance than they charged other consumers, when those consumers were of the same class and hazard.

The jurisdictional basis for the district court’s original jurisdiction was diversity of citizenship pursuant to the Class Action Fairness Act (“CAFA”).  CAFA grants the federal courts original jurisdiction to hear interstate class actions where: (1) the proposed class contains more than 100 members; (2) minimal diversity exists between the parties (i.e., at least one plaintiff and one defendant are from different states); (3) the amount in controversy exceeds $5,000,000; and (4) the primary defendants are not states, state officials, or other governmental entities.  However, CAFA requires federal courts to decline jurisdiction over a proposed class action if the local controversy or home state exceptions apply.  In general, these exceptions apply when, among other things, it is shown that greater than two-thirds of the members of the proposed class are citizens of the state in which the litigation is filed.

Taking into account United States census data and other statistical data offered by the Insurance Companies, the Fifth Circuit held the district court correctly concluded that two-thirds or more of the Insured’s proposed class of insurance policy holders were citizens of Texas with both residency and the intention to remain in Texas, such that the local controversy and home state exceptions to CAFA applied. Thus, the judgment dismissing the case was affirmed.