FEDERAL DISTRICT COURT APPLIES “PRIMARY JURISDICTION DOCTRINE” – STAYS CASE AND REFERS PUTATIVE CLASS ACTION DISPUTE OVER VEHICLE TOTAL LOSS EVALUATION METHODOLOGY TO TEXAS DEPARTMENT OF INSURANCE

Last Wednesday, a federal district court applied the Primary Jurisdiction Doctrine in a dispute over an insurer’s use of Work Center Total Loss’s (WCTL) methodology and reports to determine the pre-cash value of insured’s total loss vehicle. The court concluded that the Texas Department of Insurance (TDI) was the proper entity to make a threshold determination and issued a stay in the case pending the TDI’s determination. In Mian v. Progressive County Mutual Ins. Co., 2020 WL 6158645 (S.D. Tex. Oct. 21, 2020), Progressive used a WCTL report to determine the pre-crash value of the insured’s total loss vehicle. Dissatisfied with the amount, the insured filed suit on behalf of himself and others similarly situated claiming the WTCL reports were “statistically invalid and do[ ] not result in a proper valuation for total loss vehicles in Texas.” The insured also alleged contractual and extra-contractual claims against Progressive, joined the valuation companies in the lawsuit and asserted tortuous interference and civil conspiracy claims against all defendants.

The court dismissed the claims against the valuation defendants without prejudice and granted Progressive’s motion to stay the case under the Primary Jurisdiction Doctrine, finding that the valuation methodology dispute falls within the scope of the TDI’s jurisdiction. The court noted that a primary jurisdiction referral is appropriate when referral will promote “even-handed treatment and uniformity in a highly regulated area.” And, when the agency possesses specialized expertise in areas “which the courts are relatively unfamiliar.” The court also noted that WCTL reports are used by multiple insurers in Texas and the TDI has the necessary expertise and resources to develop uniform rules to apply on a larger scale to the methodology used in generating the reports. In this case, the court determined referral to the TDI was appropriate.

Lastly, the court considered the two exceptions to the Primary Jurisdiction Doctrine raised by the insured and recognized by the Texas Supreme Court. First, it rejected the argument that the issues are inherently judicial in nature, observing that the “complex statistical analyses that are not ‘inherently judicial’ and are better assessed by the TDI.” Second, the court observed that the TDI is not “powerless to grant the relief sought.” And the insured “may proceed with his common law claims once the TDI has answered the threshold question of whether the WCTL methodology is valid.” Accordingly, the court ordered the insured to file an administrative complaint against Progressive with the TDI before November 19, 2020, and aside from filing notice of filing the administrative complaint with the court and quarterly status reports, the case was stayed.