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1 J. Edward Kerley (175695)
Dylan L. Schaffer (153612)
2
Kerley Schaffer LLP
3 1939 Harrison Street, #500
Oakland, California 94612
4 Telephone: (510) 379-5801
Facsimile: (510) 228-0350
5
6 John R. Parker, Jr. (257761)
Cutter Law, PC
7 401 Watt Avenue
Sacramento, California 95864
8 Telephone: (916) 290-9400
Fascimile: (916) 588-9350
9
10 Attorneys for Plaintiff
11 SUPERIOR COURT OF THE STATE OF CALIFORNIA
12 SAN MATEO COUNTY — UNLIMITED CIVIL JURISDICTION
13
14 DONNA MARIE MESCHI, an Case No. 16CIV02607
individual, VINCENT MESCHI, an
15 individual, on behalf of themselves and a
class of similarly situated persons, and PLAINTIFFS’ REPLY IN SUPPORT OF
16 ROES 1-10. MOTION FOR CLASS CERTIFICATION
17 Date: July 7, 2022
Plaintiffs,
Time: 9:00 a.m.
18
v. Judge: Danny Y. Chou
19
MERCURY CASUALTY COMPANY, a
20 corporation, CALIFORNIA
AUTOMOBILE INSURANCE
21
COMPANY, a corporation, MERCURY
22 INSURANCE SERVICES, LLC, a
limited liability corporation, and DOES 3
23 through 10,
24
Defendants.
25
26
27
28
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REPLY BRIEF ISO MOTION FOR CLASS CERTIFICATION
1 TABLE OF CONTENTS
2
I. INTRODUCTION ..................................................................................................................... 1
3
II. ARGUMENT …………………………………………………………………………………1
4
A. MERCURY’S ARGUMENTS RELY ON MISCHARACTERIZATION OF THE RELIEF
5
SOUGHT BY PLAINTIFFS ................................................................................................. 1
6
B. COMMON QUESTIONS PREDOMINATE PLAINTIFFS’ CLASS CLAIMS. ................ 2
7
C. MESCHI’S CLAIMS ARE TYPICAL .................................................................................. 6
8
D. THE CLASSES PLAINTIFFS SEEK TO CERTIFY ARE ASCERTAINABLE …………8
9
E. PLAINTIFFS’ PROPOSED CLASSES ARE NOT OVERBOARD..................................... 9
10
F. CLASS TREATMENT HERE IS SUPERIOR AND MANAGEABLE ............................... 11
11
III. CONCLUSION ........................................................................................................................13
12
13
14
15
16
17
18
19
20
21
22
23
24
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26
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REPLY BRIEF ISO MOTION FOR CLASS CERTIFICATION
1
TABLE OF AUTHORITIES
2
3
4 Cases
5 Bascuro v. 21st Century Ins., Co.
(2003) 108 Cal. App. 4th 110 ................................................................................................... 5
6
Bell v. Farmers Insurance Exchange
7 (2004) 115 Cal.App.4th 715 ..................................................................................................... 4
8 Bomersheim v. Los Angeles Gay & Lesbian Center
9 (2010) 184 Cal.App.4th 1471 ....................................................................................... 4, 11, 13
10 California Fair Plan Assn. v. Garnes
(2017) 11 Cal.App.5th 1276 ................................................................................................... 10
11
Capitol People First v. State Dept. of Developmental Services
12 (2007) 155 Cal.App.4th 676 ............................................................................................. 2, 3, 9
13 In Re Chevron U.S.A., Inc.
(5th Cir. 1997) ........................................................................................................................... 3
14
15 In re Cipro Cases I & II
(2004) 121 Cal.App.4th 402 ..................................................................................................... 4
16
Clement v. California
17 (1985) 40 Cal.3d 202 .............................................................................................................. 13
18 Collins v. Safeway Stores,
187 Cal.App.3d 62 .................................................................................................................. 10
19
Employment Development Dept. v. Super. Ct.
20
(1981) 30 Cal.3d 256 ................................................................................................................ 4
21
Hale v. Sharp Healthcare
22 (2014) 232 Cal.App.4th 50 ................................................................................................... 8, 9
23 Hefcyzc v. Rady Children’s Hospital-San Diego
(2017) 17 Cal.App.5th 518 ................................................................................................... 8, 9
24
Hicks v. Kauffman & Broad Home Corp.
25
(2001) 89 Cal.App.4th 908 ..................................................................................................... 11
26
Interinsurance Exch. Of Auto. Club of S. Cal. v. Ohio Cas. Ins. Co.
27 (1962) 58 Cal.2d 142 .............................................................................................................. 10
28
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1 Lazar v. Hertz Corp.
(1983) 143 Cal. App.3d 128.................................................................................................... 13
2
3 Linder v. Thrifty Oil Co.
(2000) 23 Cal. 4th 429 ............................................................................................................ 13
4
Lockheed Martin Corp. v. Super. Ct.
5 (2003) 29 Cal.4th 1096 ......................................................................................................... 1, 4
6 Mass. Mutual Life Ins. Co. v. Super. Ct. [Karges]
(2002) 97 Cal.App.4th 1282 ................................................................................................... 12
7
8 Noel v. Thrifty Payless, Inc.
(2019) 7 Cal.5th 955 ................................................................................................................. 8
9
Reyes v. Board of Supervisors
10 (1987) 196 Cal.App.3d 1263............................................................................................... 9, 13
11 Rogers v. United States Dep’t of Housing & Urban Dev.
(N.D. Cal. 1982) 96 F.R.D. 149 .............................................................................................. 11
12
Rose v. City of Hayward
13
(1981) 126 Cal.App.3d 926....................................................................................................... 8
14
Sav-on Drug Stores, Inc. v. Super. Ct.
15 (2004) 34 Cal.4th 319 ......................................................................................................... 2, 13
16 Van Noy v. Mercury Mutual Automobile Ins. Co.
(2001) 16 P.3d 574 .................................................................................................................. 12
17
Vasquez v. Super. Ct.
18 (1971) 4 Cal.3d 800 ............................................................................................................ 4, 13
19
Wilner v. Sunset Life Insurance Co.
20 (2000) 78 Cal.App.4th 952 ..................................................................................................... 12
21 Statutes
22 Ins. Code
§2051 ......................................................................................................................... 1, 2, 10, 12
23 § 2051.5 ........................................................................................................................... 2, 7, 12
24
Other Authorities
25
10 CCR §2695.9(f) ................................................................................................................ 6, 8, 12
26
27
28
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1
2 I. INTRODUCTION
3 Plaintiffs’ opening brief demonstrated that each of the prerequisites for class certification
4 is satisfied here: the classes Plaintiffs seek to certify are ascertainable and there are “(1)
5 predominant common questions of law or fact; (2) class representatives with claims or defenses
6 typical of the class; and (3) class representatives who can adequately represent the class.
7 [citation.]” (Lockheed Martin Corp. v. Super. Ct. (2003) 29 Cal.4th 1096, 1104 (hereafter
8 Lockheed).) Mercury’s opposition misstates the facts, mischaracterizes the claims, and
9 misconstrues the applicable law. Class certification is necessary because it provides the only
10 manageable way to resolve the common questions of law and fact relating to Mercury’s unlawful
11 contents adjustment practices.
12 II. ARGUMENT
13 A. MERCURY’S ARGUMENTS RELY ON MISCHARACTERIZATION OF
THE RELIEF SOUGHT BY PLAINTIFFS.
14
15 Mercury’s arguments attack “straw men”; they are based on a fundamental
16 misinterpretation of the nature of the relief Plaintiff seeks. Meschi seeks injunctive and equitable
17 relief in Trial Phase I on behalf of the Declaratory Relief Class, which constitutes all current
18 Mercury policyholders. A declaratory judgment as to whether Mercury’s contents adjusting
19 practices violate California law will benefit every policyholder. Related rulings will settle existing
20 disputes (including Ms. Meschi’s) about how Mercury accounts for depreciation and pays
21 replacement benefits, how Mercury provides (or fails to provide) a full written explanation of the
22 basis for the depreciation it takes and the replacement cost it pays. Declaratory rulings will
23 provide future guidance for all Mercury policyholders making claims for personal property loss.
24 On behalf of the Declaratory Relief Class, Meschi seeks an injunction that will require
25 Mercury to systematically: (1) depreciate lost personal property based upon the physical condition
26 at the time of the loss, as required by Insurance Code section 2051 1; (2) inform policyholders of
27 their right to depreciation based upon physical condition at the time of loss; (3) pay replacement
28
1
All further statutory references are to the Insurance Code unless otherwise indicated.
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REPLY BRIEF ISO MOTION FOR CLASS CERTIFICATION
1 benefits actually paid by policyholders pursuant to Section 2051.5, and (4) account in writing for
2 its condition findings and application of depreciation in adjusting personal property claims.
3 On behalf of the Injury Classes, Plaintiffs seek in Trial Phase II an injunction requiring
4 Mercury to: (1) allow class members to re-open their claims so that they can have their claims
5 adjusted properly according to Sections 2051 and 2051.5, and (2) produce an offer of payment of
6 contents benefits following the reopening of the claim complies with the Insurance Code. Class
7 members would then have a choice to accept that new offer or go to appraisal to be conducted by
8 a Special Master. Through this process, Plaintiffs seek on behalf of the Damages Class payment
9 of policy benefits that Mercury has systematically withheld as result of its violation of the law.
10 B. COMMON QUESTIONS PREDOMINATE PLAINTIFFS’ CLASS
CLAIMS.
11
Mercury’s opposition is founded upon the mistaken proposition that certification is
12
inappropriate because each class member’s claim involves different circumstances and various
13
lost items of personal property. The opposite is true. Plaintiffs seek certification to address and
14
rectify Mercury’s common claims adjusting practices, as confirmed by its own testimony cited in
15
Plaintiffs’ opening brief. These facts—Mercury’s class-wide age-based depreciation of its
16
insured personal property in defiance of Section 2051, Mercury’s class-wide practice of only
17
paying, at most, recoverable depreciation in the event an item is replaced, in defiance of Section
18
2051.5, and Mercury’s failure to fully explain the basis for its adjustment in writing in defiance of
19
regulation 2696.9(f)—are an appropriate basis for class certification. (Capitol People First v.
20
State Dept. of Developmental Services (2007) 155 Cal.App.4th 676, 692-693 [“[I]n deciding
21
whether the commonality requirement has been satisfied, courts may consider pattern and
22
practice… and other indicators of a given defendant’s classwide practices in order to assess
23
whether that common behavior toward similarly situated plaintiffs renders class certification
24
appropriate”]; (Sav-on Drug Stores, Inc. v. Super. Ct. (2004) 34 Cal.4th 319, 333 (hereinafter
25
“Sav-on Drug Store”) [“[A] class action is not inappropriate simply because each member of the
26
class may at some point be required to make an individual showing as to his or her eligibility for
27
28
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1 recovery or as to the amount of his or her damages [citation]”]. 2
2 Mercury’s contention that individual issues predominate is meritless. First, both
3 Mercury’s Opposition and the declaration of Mercury’s expert ignore undisputed facts showing
4 predominating common issues. 3 Mercury’s Opposition offers no rebuttal to the common course
5 of conduct identified by Plaintiffs in their opening brief, supported by extensive citation to the
6 deposition testimony of Mercury’s own executives and corporate representatives, to wit:
7 Mercury uses third-party vendors that are under its direct control to adjust claims for lost
8 personal property, including determining ACV, depreciation, and replacement cost. (Meschi
9 MPA 7:21-8:4.) All of these vendors use an age-based depreciation formula, market their
10 services as an opportunity for insurers to increase profits by reducing benefit payments to
11 insureds, and use the “Joint Military Industrial Depreciation Guide” to make age-based
12 depreciation determinations. (Meschi MPA 8:4-8:27.) In all claims, Mercury does not explain
13 the basis for depreciation or replacement benefits determination to its insureds, and pays the
14 lesser of expected replacement cost and what the insured actually pays to replace. (Meschi MPA
15 9:9-9:25.)
16 These facts conclusively demonstrate that common questions predominate. These are
17 Mercury’s customary business practices; it engages in them with respect to every policyholder
18 who makes a claim. In short, every class member who ever makes a claim for lost or damaged
19 property will encounter Mercury’s same, unlawful procedure.
20
2
21 Mercury also deploys a confusing tactic—selecting a few items in Ms. Meschi’s claim, and a
few claims among hundreds of claims produced in discovery, where the facts may suggest that it
22 may have acted properly. But these samples are obviously self-serving—they were not identified
on a random basis and are demonstrative of exactly nothing—in contradistinction to the abundant
23 testimony from Mercury itself, cited in Plaintiffs’ opening brief, that describes Mercury’s own
consistent and class-wide conduct. Moreover, the use of “inferential statistics” to “confidently
24 draw inferences about the whole from a representative sample of the whole” requires that “the
sample must be a randomly selected one of sufficient size so as to achieve statistical significance
25 to the desired level of confidence in the result obtained.” (In Re Chevron U.S.A., Inc. (5th Cir.
1997) 109 Fed.3d 1016, 1019-1020.) Accordingly, Mercury’s hand-picked examples cannot be
26 the basis for drawing any conclusions about its own class-wide conduct or for defeating class
certification here. The uncontradicted testimony of Mercury’s employees and persons most
27 qualified controls here.
3
28 See Plaintiffs-concurrently filed objections to Mercury’s evidence, specifically the declaration
of its expert Lola Hogan.
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REPLY BRIEF ISO MOTION FOR CLASS CERTIFICATION
1 Second, it is well settled that “a class action is not inappropriate simply because each
2 member of the class may at some point be required to make an individual showing as to his or her
3 eligibility for recovery or as to the amount of his or her damages.” (Employment Development
4 Dept. v. Super. Ct. (1981) 30 Cal.3d 256, 266.) “[M]ost class actions contemplate individual
5 proof of damages, which necessarily entails the possibility that some class members will fail to
6 prove damages.” (Bell v. Farmers Insurance Exchange (2004) 115 Cal.App.4th 715, 744.) In
7 fact, “if proof of individual damages were required by all potentially affected parties as a
8 condition of class certification, it would go far toward barring all class actions.” (Id. at 744.)
9 Thus, “the necessity for class members to individually establish eligibility and damages does not
10 mean individual fact questions predominate.” (Bomersheim v. Los Angeles Gay & Lesbian Center
11 (2010) 184 Cal.App.4th 1471, 1487-1488 (hereinafter “Bomersheim”) (italics added).)
12 Mercury relies heavily on Lockheed, supra, 29 Cal.4th 1096, but Lockheed emphasized
13 that plaintiffs are not required to demonstrate they can establish each element of their claims by
14 common proof in order to certify the class. The Supreme Court reaffirmed the long-standing rule
15 that “‘the fact that each member of the class must prove his [or her] separate claim to a portion of
16 any recovery by the class is only one factor to be considered in determining whether a class action
17 is proper.’” (In re Cipro Cases I & II (2004) 121 Cal.App.4th 402, 409 (quoting Lockheed,
18 supra, 29 Cal.4th at p. 1105, quoting Vasquez v. Super. Ct. (1971) 4 Cal.3d 800, 809) (hereinafter
19 “Vasquez”).)
20 Third, in Trial Phase II, Plaintiffs will ask the Court to issue declaratory and injunctive
21 relief that will include an order allowing each member of the Injuries Classes to complete a claim
22 form and receive from Mercury a revised offer based upon actual condition, and the actual cost of
23 replacement paid by the insured. Any individual defenses Mercury has can be asserted at this
24 point. The policyholders in the Injury Classes can then either accept the offer or reject it and go
25 to appraisal overseen by a special master for efficiency’s sake.
26 Fourth, Mercury’s contention that an “individualized inquiry” will be specifically required
27 on each claim is equally incorrect. In order for Plaintiffs’ Injury Class claims to proceed, the
28 Court will have already found in the Declaratory Relief trial that Mercury was violating the
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REPLY BRIEF ISO MOTION FOR CLASS CERTIFICATION
1 Insurance Code when it calculated depreciation and paid replacement benefits, and failed to
2 adequately explain the basis for adjustment in writing. No individualized inquiry into Mercury’s
3 motivations is required: the dictates of the Code are in plain English, and any contention that they
4 were misunderstood or overlooked is not credible.
5 Last, Mercury heavily relies on the Second District case Bascuro to argue that individual
6 issues will predominate. (Bascuro v. 21st Century Ins., Co. (2003) 108 Cal. App. 4th 110
7 (hereinafter “Bascuro”).). Basurco is readily distinguishable. In Basurco, the subject class action
8 involved bad faith and unfair dealing claims arising from the Northridge earthquake of 1994, once
9 barred by contractually imposed statute of limitations but later revied by the legislature. (Id. at
10 113) The Basurco court denied class certification there because many of the facts of each
11 insurance claim would bear heavily on the statute of limitations issue as to each class member—
12 for example, when damage was discovered by the homeowner and when notice of claim was
13 made; additionally, many of the claims were denied for reasons other than the statute of
14 limitations. (Ibid. at 118-19) (discussing various factual issues that would have to be resolved in
15 each case). An individual analysis was seen as necessary because the source of the claimed
16 damage may have arisen from sources other than the earthquake; this required the employment of
17 engineers, geologists, and other experts. (Ibid. at 115.) The court in Bascuro also relied on the
18 fact that the trial court had set up an expedited and streamlined system for managing the
19 avalanche of litigation stemming from the earthquake, and thus there would be no benefit to class
20 treatment. (Ibid. at 122.)
21 Unlike in Bascuro where the facts bear on liability (i.e., whether the insureds’ claim was
22 barred by the statute of limitations), here Mercury breached its duty in every claim where
23 property was depreciated using Mercury’s illicit methodology and where Mercury failed to
24 provide a written basis for its adjustment. It is unnecessary to individually analyze each claim
25 because the basis for liability is Mercury’s application of the methodology—not the extent to
26 which that resulted overpayment, underpayment, or no payment. Also, Mercury’s claims
27 adjustment process, unlike those in the Bascuro case, is not a factually nor scientifically driven
28 one that could reveal facts relevant to whether Mercury is liability at all. Indeed, the process
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REPLY BRIEF ISO MOTION FOR CLASS CERTIFICATION
1 cannot even explain how the depreciation is calculated; rather, the process entails untrained third-
2 party vendors applying a uniform depreciation method based on age and underpayment of
3 replacement cost across the board in violation of Sections 2051 and 2051.5.
4 Finally, it is worth emphasizing that the Basurco Court relied on the unique circumstance
5 that the Los Angeles Superior Court had established a streamlined system for managing
6 thousands of Northridge insurance cases, so class treatment was ultimately redundant of the
7 process already in place. Here there is no ongoing litigation that will resolve this important
8 dispute between Mercury and its insureds. No court has set up any system for resolution of these
9 claims. If class treatment is denied at this early stage in the proceedings, few Mercury customers
10 other than Plaintiff have any hope of compensation for Mercury’s systematic violation of
11 California law, and the carrier will retain a large windfall as a result.
12 C. MESCHI’S CLAIMS ARE TYPICAL.
13 Mercury makes three factual allegations to support its contention that Ms. Meschi’s
14 allegations are not typical. First, Mercury asserts Ms. Meschi’s contents claim was depreciated by
15 reference to condition and age, and when she complained about any particular amount of
16 depreciation taken, the carrier made an adjustment. (Opposition 12:2-9.) Second, it alleges that
17 Ms. Meschi “accepted all the replacement cost prices after some adjustments were made. . . .
18 Insofar as [Mercury] may not have paid the full cost incurred by Meschi, on certain items that she
19 replaced, there is no evidence presented that such monies were incorrectly withheld.” (Opposition
20 12:11-14.) Finally, Mercury argues there is no evidence it failed to satisfy its duty under 10 CCR
21 §2695.9(f) to “fully explain to the claimant in writing” the “basis for [its depreciation].” In
22 support of that assertion, it explains that it told Ms. Meschi Enservio would apply “the
23 appropriate betterment.” Also, Mercury’s contents inventory lists included columns for condition
24 and age. And, finally, Mercury says Ms. Meschi must have understood “how depreciation was
25 applied as she contested it . . . .” (Opposition 12:15-22.)
26 From these assertions, Mercury argues that because none of the harms alleged by the
27 putative class apply to Meschi, her claims are not typical, and thus she is not a proper class
28 representative. (Opposition 23:16-24:8.) But Mercury’s contentions regarding the handling of Ms.
6
REPLY BRIEF ISO MOTION FOR CLASS CERTIFICATION
1 Meschi’s claim are wrong. Her claims are identical to the classes Plaintiffs seek to certify.
2 Mercury’s typicality argument is accordingly unavailing.
3 Ms. Meschi’s Mercury policy afforded $205,500 in contents coverage. After the fire, she
4 made a claim under that coverage. Mercury told Ms. Meschi it would pay actual cash value for
5 destroyed contents (the priced replacement cost less depreciation), and after replacement would
6 pay only up to the amount of the withheld deprecation. (Meschi MPA, 10:26-11:3.) That is
7 exactly what it did, both in violation of California law in precisely the manner alleged on behalf
8 of the classes Plaintiffs seek to certify. (Meschi MPA, 11:15-24; 11:25-12:14.)
9 Mercury applied depreciation to Ms. Meschi’s claim, and all of its insureds’ claims, by
10 use of a model its own employees and managers do not understand and cannot explain. (Meschi
11 MPA, 8:9-27; 9:8-9, 15-17.) Mercury uses age to set depreciation, and then uses condition as a
12 slight modifier to age-based depreciation. Ms. Meschi and the class allege that model is illegal.
13 The fact that Ms. Meschi challenged some depreciation amounts or that the carrier made some
14 adjustments is irrelevant. Ms. Meschi has shown that depreciation was taken in her claim
15 pursuant to what she contends is an illegal model. Thus, Ms. Meschi shares with the classes both
16 the liability and damages claim as relates to Mercury’s unlawful application of depreciation to her
17 contents claim.
18 Ms. Meschi replaced some of her items destroyed in the fire, spent more than Mercury’s
19 assigned price, and made a claim for the full replacement cost that she paid. (Meschi MPA,
20 11:25-12:14.) Mercury violated California law in Ms. Meschi’s claim, as it does class-wide, by
21 failing in its duty under Ins. Code § 2051.5 to pay the actual cost of replacement, when that cost
22 exceeded Mercury’s assigned replacement cost. Ms. Meschi and the class share the allegation of
23 unlawfulness. They likewise share the resulting damages, which are the difference between the
24 actual cost and the replacement value assigned by Mercury and its vendors. That Ms. Meschi did
25 not complain during the claim is neither surprising, nor relevant to the typicality calculus. Ms.
26 Meschi did not know she had a right to the actual cost of each replaced item, because Mercury
27 lied to her repeatedly in its payment letters about her rights. (Meschi MPA 10:26-11:11.) Ms.
28 Meschi complained by way of filing this lawsuit.
7
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1 Finally, because Mercury itself has no real understanding of the formula its vendors use to
2 apply deprecation, other than that they use age, primarily, and then apply a condition factor, it is
3 hard to know how Mercury can suggest it satisfied its 10 CCR §2695.9(f) obligation as relates to
4 Ms. Meschi, or the class. That Mercury assured Ms. Meschi that Enservio would get depreciation
5 right is not exactly what the Department of Insurance had in mind when it required a “full written
6 explanation” of the basis for application of depreciation. Likewise, as to Ms. Meschi and the
7 class, the circumstance that the inventory lists age and condition does not begin to provide a full
8 written explanation for how Mercury applies depreciation. In any case, the question of liability is
9 not before the Court. Ms. Meschi has plainly demonstrated that she and the class share an
10 allegation that Mercury routinely violates 10 CCR §2695.9(f) in its contents adjusting.
11 D. THE CLASSES PLAINTIFFS SEEK TO CERTIFY ARE
ASCERTAINABLE.
12
A class is ascertainable when it is defined “in terms of objective characteristics and
13
common transactional facts” that make “the ultimate identification of class members possible
14
when that identification becomes necessary.” (Noel v. Thrifty Payless, Inc. (2019) 7 Cal.5th 955,
15
968 (hereinafter “Noel”). Mercury, citing Rose v. City of Hayward (1981) 126 Cal.App.3d 926
16
(hereinafter “Rose”), reads into ascertainability a requirement that class members be “readily
17
identifiable without unreasonable expense or time by reference to official records,” but that is
18
incorrect; the California Supreme court has specifically held that ascertainability does not
19
incorporate this additional evidentiary burden applied by the Rose Court. (Noel, supra, 7 Cal.5th
20
at 961.) The court explained, in largely overruling Rose, that “a conception of ascertainability
21
concerned with whether class members can be identified without an unreasonable commitment of
22
expense or time is at cross purposes with its jurisprudence” that “stress[es] the importance of a
23
careful weighing of both the benefits and the burdens that may be associated with a proposed
24
class action.” (Id at 986.) Thus, Mercury’s reference to Rose, which has been overruled in
25
relevant part, should be disregarded.
26
Mercury’s reference to Hale v. Sharp Healthcare (2014) 232 Cal.App.4th 50, 59-61
27
(hereinafter “Hale”) and Hefcyzc v. Rady Children’s Hospital-San Diego (2017) 17 Cal.App.5th
28
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1 518, 538-540 (hereinafter “Hefcyzc”) should also be disregarded because these cases’ holdings
2 rely on Rose’s overruled ascertainbility standard requiring identification to be accomplished
3 without unreasonable to expense or time. Even then, unlike Hale, where identification to
4 determine class membership could require individually analyzing 122,000 separate sets of
5 patients’ records or Hefcyzc, which also required individual patient record analysis, here,
6 identification of subclass members can be accomplished without unreasonable expense or time.
7 Mercury’s injury subclasses consist of those who made personal property claims and were paid
8 less than their policy limits which is information indicated facially by Mercury’s records. These
9 members are identifiable without requiring an analysis of their individual records or a line-by-line
10 analysis of each item of lost property.
11 Additionally, difficulties identifying class members is not a proper basis for denying
12 certification. In Reyes v. Board of Supervisors (1987) 196 Cal.App.3d 1263 (hereinafter “Reyes”),
13 the class definition included an objective and easily identifiable class of only those who were
14 injured (i.e., those that were sanctioned as a result of the program in question) during a particular
15 time frame, and the class was therefore found to be ascertainable. The defendant argued that the
16 extraordinary effort needed to obtain information to identify class members should act to negate
17 the ascertainability of the class. (Id. at 1275) However, the court found that trial courts should not
18 decline to certify a class at the certification stage in anticipation of identification difficulties at the
19 remedy stage (Ibid.)
20 Like the class definitions in Reyes, the ACV and RCV class definitions here include an
21 objective and identifiable class: policy members who made claims within the time period that
22 were not paid policy limits. To the extent there is any difficulty identifying these clearly and
23 objectively defined class members, that point it not relevant to whether these classes should be
24 certified.
25 E. PLAINTIFFS’ PROPOSED CLASSES ARE NOT OVERBROAD.
26 Mercury is equally incorrect in contending that Plaintiffs’ proposed classes are overbroad.
27 First, Plaintiffs propose an opt-out class for the damages phase of this case. Accordingly,
28 policyholders who believe they were treated fairly or were overpaid will presumably opt out; only
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REPLY BRIEF ISO MOTION FOR CLASS CERTIFICATION
1 policyholders who think that they were harmed will submit a claim. Accordingly, there is no
2 requirement that the class members be “net losers”—they will have a claim for every item that
3 was not depreciated appropriately. Mercury has asserted no counterclaim here, and there is no
4 basis for it to seek an “offset” (consistent with its duties of good faith and fair dealing) for items
5 that may have been under-depreciated or which it paid too much in Replacement cost.
6 Second, Mercury’s overbreadth argument is again premised on its mischaracterization of
7 the parties’ dispute. Ascertainability of the proposed class is not dependent upon identifying
8 which particular insureds had which particular items of property that were in better than average
9 condition for their age and which were adjusted on an actual cash value basis. Rather, the parties’
10 dispute concerns whether across claims, as an institutional practice, Mercury violates the
11 Insurance Code and the Fair Claims Regulations, and thereby breaches the standard insurance
12 contract. Mercury’s failure to comply with section 2051, section 2051.5 and related regulations
13 necessarily constitutes a breach of contract—a breach that is common to each class member. It is
14 well settled that “statutory and decisional law in force at the time the policy is issued” are “read
15 into each policy issued thereunder, and become a part of the contract with full binding effect upon
16 each party.” (Interinsurance Exch. Of Auto. Club of S. Cal. v. Ohio Cas. Ins. Co. (1962) 58
17 Cal.2d 142, 148 [citation]; see also California Fair Plan Assn. v. Garnes, (2017) 11 Cal.App.5th
18 1276, 1304.
19 Therefore, Plaintiffs’ breach of contract claims and UCL claims exist independently of
20 whether application of Mercury’s unlawful methodologies resulted in overpayment, adequate
21 payment, or underpayment. In all three instances, Mercury has violated California law and
22 breached the parties’ agreement. Thus, liability here turns on Mercury’s systematic practices, not
23 on whether, as in Collins v. Safeway Stores, Inc., (1986) 187 Cal.App.3d 62, each class member
24 happened to purchase a container of eggs contaminated with pesticide. Every class member who
25 made a claim for personal property damage was subject to Mercury’s systematic practices of
26 failing to depreciate according to section 2051, failure to pay replacement cost under 2051.5, and
27 failure to provide the basis for adjustment in writing under regulation.
28 Third, the Damages Class is appropriate for certification even if some members may not
10
REPLY BRIEF ISO MOTION FOR CLASS CERTIFICATION
1 assert claims. Plaintiffs have specifically defined the Damages Class using “objective criteria and
2 common transactional facts.” (Bomersheim, supra, 184 Cal. App.4th at 1483; see also Hicks v.
3 Kauffman & Broad Home Corp. (2001) 89 Cal.App.4th 908, 916 (hereinafter “Hicks”)[as a
4 general rule if the defendant’s liability can be determined by facts common to all members of the
5 class, a class will be certified even if the members must individually prove their damages] [citing
6 Employment Development Dept. v. Superior Court (1981) 30 Cal. 3d 256, 266.].) At any rate, “if
7 necessary to preserve the case as a class action, the court itself can and should redefine the class
8 where the evidence before it shows such a redefined class would be ascertainable.” (Hicks, supra,
9 89 Cal. App. 4th at 916 [citing Woolsey v. State of California (1992) 3 Cal. 4th 758, 795].)
10 F. CLASS TREATMENT HERE IS SUPERIOR AND MANAGEABLE.
11 Plaintiffs seek specific relief, namely, reformation of Mercury’s practices so that they
12 conform to the Insurance Code and associated regulations. The benefit for class members is
13 obvious: the relief sought on behalf of the Declaratory Relief class will allow all policyholders to
14 receive
Preview
1 J. Edward Kerley (175695) Dylan L. Schaffer (153612) 2 Kerley Schaffer LLP 3 1939 Harrison Street, #500 Oakland, California 94612 4 Telephone: (510) 379-5801 Facsimile: (510) 228-0350 5 6 John R. Parker, Jr. (257761) Cutter Law, PC 7 401 Watt Avenue Sacramento, California 95864 8 Telephone: (916) 290-9400 Fascimile: (916) 588-9350 9 10 Attorneys for Plaintiff 11 SUPERIOR COURT OF THE STATE OF CALIFORNIA 12 SAN MATEO COUNTY — UNLIMITED CIVIL JURISDICTION 13 14 DONNA MARIE MESCHI, an Case No. 16CIV02607 individual, VINCENT MESCHI, an 15 individual, on behalf of themselves and a class of similarly situated persons, and PLAINTIFFS’ REPLY IN SUPPORT OF 16 ROES 1-10. MOTION FOR CLASS CERTIFICATION 17 Date: July 7, 2022 Plaintiffs, Time: 9:00 a.m. 18 v. Judge: Danny Y. Chou 19 MERCURY CASUALTY COMPANY, a 20 corporation, CALIFORNIA AUTOMOBILE INSURANCE 21 COMPANY, a corporation, MERCURY 22 INSURANCE SERVICES, LLC, a limited liability corporation, and DOES 3 23 through 10, 24 Defendants. 25 26 27 28 1 REPLY BRIEF ISO MOTION FOR CLASS CERTIFICATION 1 TABLE OF CONTENTS 2 I. INTRODUCTION ..................................................................................................................... 1 3 II. ARGUMENT …………………………………………………………………………………1 4 A. MERCURY’S ARGUMENTS RELY ON MISCHARACTERIZATION OF THE RELIEF 5 SOUGHT BY PLAINTIFFS ................................................................................................. 1 6 B. COMMON QUESTIONS PREDOMINATE PLAINTIFFS’ CLASS CLAIMS. ................ 2 7 C. MESCHI’S CLAIMS ARE TYPICAL .................................................................................. 6 8 D. THE CLASSES PLAINTIFFS SEEK TO CERTIFY ARE ASCERTAINABLE …………8 9 E. PLAINTIFFS’ PROPOSED CLASSES ARE NOT OVERBOARD..................................... 9 10 F. CLASS TREATMENT HERE IS SUPERIOR AND MANAGEABLE ............................... 11 11 III. CONCLUSION ........................................................................................................................13 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 i REPLY BRIEF ISO MOTION FOR CLASS CERTIFICATION 1 TABLE OF AUTHORITIES 2 3 4 Cases 5 Bascuro v. 21st Century Ins., Co. (2003) 108 Cal. App. 4th 110 ................................................................................................... 5 6 Bell v. Farmers Insurance Exchange 7 (2004) 115 Cal.App.4th 715 ..................................................................................................... 4 8 Bomersheim v. Los Angeles Gay & Lesbian Center 9 (2010) 184 Cal.App.4th 1471 ....................................................................................... 4, 11, 13 10 California Fair Plan Assn. v. Garnes (2017) 11 Cal.App.5th 1276 ................................................................................................... 10 11 Capitol People First v. State Dept. of Developmental Services 12 (2007) 155 Cal.App.4th 676 ............................................................................................. 2, 3, 9 13 In Re Chevron U.S.A., Inc. (5th Cir. 1997) ........................................................................................................................... 3 14 15 In re Cipro Cases I & II (2004) 121 Cal.App.4th 402 ..................................................................................................... 4 16 Clement v. California 17 (1985) 40 Cal.3d 202 .............................................................................................................. 13 18 Collins v. Safeway Stores, 187 Cal.App.3d 62 .................................................................................................................. 10 19 Employment Development Dept. v. Super. Ct. 20 (1981) 30 Cal.3d 256 ................................................................................................................ 4 21 Hale v. Sharp Healthcare 22 (2014) 232 Cal.App.4th 50 ................................................................................................... 8, 9 23 Hefcyzc v. Rady Children’s Hospital-San Diego (2017) 17 Cal.App.5th 518 ................................................................................................... 8, 9 24 Hicks v. Kauffman & Broad Home Corp. 25 (2001) 89 Cal.App.4th 908 ..................................................................................................... 11 26 Interinsurance Exch. Of Auto. Club of S. Cal. v. Ohio Cas. Ins. Co. 27 (1962) 58 Cal.2d 142 .............................................................................................................. 10 28 ii REPLY BRIEF ISO MOTION FOR CLASS CERTIFICATION 1 Lazar v. Hertz Corp. (1983) 143 Cal. App.3d 128.................................................................................................... 13 2 3 Linder v. Thrifty Oil Co. (2000) 23 Cal. 4th 429 ............................................................................................................ 13 4 Lockheed Martin Corp. v. Super. Ct. 5 (2003) 29 Cal.4th 1096 ......................................................................................................... 1, 4 6 Mass. Mutual Life Ins. Co. v. Super. Ct. [Karges] (2002) 97 Cal.App.4th 1282 ................................................................................................... 12 7 8 Noel v. Thrifty Payless, Inc. (2019) 7 Cal.5th 955 ................................................................................................................. 8 9 Reyes v. Board of Supervisors 10 (1987) 196 Cal.App.3d 1263............................................................................................... 9, 13 11 Rogers v. United States Dep’t of Housing & Urban Dev. (N.D. Cal. 1982) 96 F.R.D. 149 .............................................................................................. 11 12 Rose v. City of Hayward 13 (1981) 126 Cal.App.3d 926....................................................................................................... 8 14 Sav-on Drug Stores, Inc. v. Super. Ct. 15 (2004) 34 Cal.4th 319 ......................................................................................................... 2, 13 16 Van Noy v. Mercury Mutual Automobile Ins. Co. (2001) 16 P.3d 574 .................................................................................................................. 12 17 Vasquez v. Super. Ct. 18 (1971) 4 Cal.3d 800 ............................................................................................................ 4, 13 19 Wilner v. Sunset Life Insurance Co. 20 (2000) 78 Cal.App.4th 952 ..................................................................................................... 12 21 Statutes 22 Ins. Code §2051 ......................................................................................................................... 1, 2, 10, 12 23 § 2051.5 ........................................................................................................................... 2, 7, 12 24 Other Authorities 25 10 CCR §2695.9(f) ................................................................................................................ 6, 8, 12 26 27 28 iii REPLY BRIEF ISO MOTION FOR CLASS CERTIFICATION 1 2 I. INTRODUCTION 3 Plaintiffs’ opening brief demonstrated that each of the prerequisites for class certification 4 is satisfied here: the classes Plaintiffs seek to certify are ascertainable and there are “(1) 5 predominant common questions of law or fact; (2) class representatives with claims or defenses 6 typical of the class; and (3) class representatives who can adequately represent the class. 7 [citation.]” (Lockheed Martin Corp. v. Super. Ct. (2003) 29 Cal.4th 1096, 1104 (hereafter 8 Lockheed).) Mercury’s opposition misstates the facts, mischaracterizes the claims, and 9 misconstrues the applicable law. Class certification is necessary because it provides the only 10 manageable way to resolve the common questions of law and fact relating to Mercury’s unlawful 11 contents adjustment practices. 12 II. ARGUMENT 13 A. MERCURY’S ARGUMENTS RELY ON MISCHARACTERIZATION OF THE RELIEF SOUGHT BY PLAINTIFFS. 14 15 Mercury’s arguments attack “straw men”; they are based on a fundamental 16 misinterpretation of the nature of the relief Plaintiff seeks. Meschi seeks injunctive and equitable 17 relief in Trial Phase I on behalf of the Declaratory Relief Class, which constitutes all current 18 Mercury policyholders. A declaratory judgment as to whether Mercury’s contents adjusting 19 practices violate California law will benefit every policyholder. Related rulings will settle existing 20 disputes (including Ms. Meschi’s) about how Mercury accounts for depreciation and pays 21 replacement benefits, how Mercury provides (or fails to provide) a full written explanation of the 22 basis for the depreciation it takes and the replacement cost it pays. Declaratory rulings will 23 provide future guidance for all Mercury policyholders making claims for personal property loss. 24 On behalf of the Declaratory Relief Class, Meschi seeks an injunction that will require 25 Mercury to systematically: (1) depreciate lost personal property based upon the physical condition 26 at the time of the loss, as required by Insurance Code section 2051 1; (2) inform policyholders of 27 their right to depreciation based upon physical condition at the time of loss; (3) pay replacement 28 1 All further statutory references are to the Insurance Code unless otherwise indicated. 1 REPLY BRIEF ISO MOTION FOR CLASS CERTIFICATION 1 benefits actually paid by policyholders pursuant to Section 2051.5, and (4) account in writing for 2 its condition findings and application of depreciation in adjusting personal property claims. 3 On behalf of the Injury Classes, Plaintiffs seek in Trial Phase II an injunction requiring 4 Mercury to: (1) allow class members to re-open their claims so that they can have their claims 5 adjusted properly according to Sections 2051 and 2051.5, and (2) produce an offer of payment of 6 contents benefits following the reopening of the claim complies with the Insurance Code. Class 7 members would then have a choice to accept that new offer or go to appraisal to be conducted by 8 a Special Master. Through this process, Plaintiffs seek on behalf of the Damages Class payment 9 of policy benefits that Mercury has systematically withheld as result of its violation of the law. 10 B. COMMON QUESTIONS PREDOMINATE PLAINTIFFS’ CLASS CLAIMS. 11 Mercury’s opposition is founded upon the mistaken proposition that certification is 12 inappropriate because each class member’s claim involves different circumstances and various 13 lost items of personal property. The opposite is true. Plaintiffs seek certification to address and 14 rectify Mercury’s common claims adjusting practices, as confirmed by its own testimony cited in 15 Plaintiffs’ opening brief. These facts—Mercury’s class-wide age-based depreciation of its 16 insured personal property in defiance of Section 2051, Mercury’s class-wide practice of only 17 paying, at most, recoverable depreciation in the event an item is replaced, in defiance of Section 18 2051.5, and Mercury’s failure to fully explain the basis for its adjustment in writing in defiance of 19 regulation 2696.9(f)—are an appropriate basis for class certification. (Capitol People First v. 20 State Dept. of Developmental Services (2007) 155 Cal.App.4th 676, 692-693 [“[I]n deciding 21 whether the commonality requirement has been satisfied, courts may consider pattern and 22 practice… and other indicators of a given defendant’s classwide practices in order to assess 23 whether that common behavior toward similarly situated plaintiffs renders class certification 24 appropriate”]; (Sav-on Drug Stores, Inc. v. Super. Ct. (2004) 34 Cal.4th 319, 333 (hereinafter 25 “Sav-on Drug Store”) [“[A] class action is not inappropriate simply because each member of the 26 class may at some point be required to make an individual showing as to his or her eligibility for 27 28 2 REPLY BRIEF ISO MOTION FOR CLASS CERTIFICATION 1 recovery or as to the amount of his or her damages [citation]”]. 2 2 Mercury’s contention that individual issues predominate is meritless. First, both 3 Mercury’s Opposition and the declaration of Mercury’s expert ignore undisputed facts showing 4 predominating common issues. 3 Mercury’s Opposition offers no rebuttal to the common course 5 of conduct identified by Plaintiffs in their opening brief, supported by extensive citation to the 6 deposition testimony of Mercury’s own executives and corporate representatives, to wit: 7 Mercury uses third-party vendors that are under its direct control to adjust claims for lost 8 personal property, including determining ACV, depreciation, and replacement cost. (Meschi 9 MPA 7:21-8:4.) All of these vendors use an age-based depreciation formula, market their 10 services as an opportunity for insurers to increase profits by reducing benefit payments to 11 insureds, and use the “Joint Military Industrial Depreciation Guide” to make age-based 12 depreciation determinations. (Meschi MPA 8:4-8:27.) In all claims, Mercury does not explain 13 the basis for depreciation or replacement benefits determination to its insureds, and pays the 14 lesser of expected replacement cost and what the insured actually pays to replace. (Meschi MPA 15 9:9-9:25.) 16 These facts conclusively demonstrate that common questions predominate. These are 17 Mercury’s customary business practices; it engages in them with respect to every policyholder 18 who makes a claim. In short, every class member who ever makes a claim for lost or damaged 19 property will encounter Mercury’s same, unlawful procedure. 20 2 21 Mercury also deploys a confusing tactic—selecting a few items in Ms. Meschi’s claim, and a few claims among hundreds of claims produced in discovery, where the facts may suggest that it 22 may have acted properly. But these samples are obviously self-serving—they were not identified on a random basis and are demonstrative of exactly nothing—in contradistinction to the abundant 23 testimony from Mercury itself, cited in Plaintiffs’ opening brief, that describes Mercury’s own consistent and class-wide conduct. Moreover, the use of “inferential statistics” to “confidently 24 draw inferences about the whole from a representative sample of the whole” requires that “the sample must be a randomly selected one of sufficient size so as to achieve statistical significance 25 to the desired level of confidence in the result obtained.” (In Re Chevron U.S.A., Inc. (5th Cir. 1997) 109 Fed.3d 1016, 1019-1020.) Accordingly, Mercury’s hand-picked examples cannot be 26 the basis for drawing any conclusions about its own class-wide conduct or for defeating class certification here. The uncontradicted testimony of Mercury’s employees and persons most 27 qualified controls here. 3 28 See Plaintiffs-concurrently filed objections to Mercury’s evidence, specifically the declaration of its expert Lola Hogan. 3 REPLY BRIEF ISO MOTION FOR CLASS CERTIFICATION 1 Second, it is well settled that “a class action is not inappropriate simply because each 2 member of the class may at some point be required to make an individual showing as to his or her 3 eligibility for recovery or as to the amount of his or her damages.” (Employment Development 4 Dept. v. Super. Ct. (1981) 30 Cal.3d 256, 266.) “[M]ost class actions contemplate individual 5 proof of damages, which necessarily entails the possibility that some class members will fail to 6 prove damages.” (Bell v. Farmers Insurance Exchange (2004) 115 Cal.App.4th 715, 744.) In 7 fact, “if proof of individual damages were required by all potentially affected parties as a 8 condition of class certification, it would go far toward barring all class actions.” (Id. at 744.) 9 Thus, “the necessity for class members to individually establish eligibility and damages does not 10 mean individual fact questions predominate.” (Bomersheim v. Los Angeles Gay & Lesbian Center 11 (2010) 184 Cal.App.4th 1471, 1487-1488 (hereinafter “Bomersheim”) (italics added).) 12 Mercury relies heavily on Lockheed, supra, 29 Cal.4th 1096, but Lockheed emphasized 13 that plaintiffs are not required to demonstrate they can establish each element of their claims by 14 common proof in order to certify the class. The Supreme Court reaffirmed the long-standing rule 15 that “‘the fact that each member of the class must prove his [or her] separate claim to a portion of 16 any recovery by the class is only one factor to be considered in determining whether a class action 17 is proper.’” (In re Cipro Cases I & II (2004) 121 Cal.App.4th 402, 409 (quoting Lockheed, 18 supra, 29 Cal.4th at p. 1105, quoting Vasquez v. Super. Ct. (1971) 4 Cal.3d 800, 809) (hereinafter 19 “Vasquez”).) 20 Third, in Trial Phase II, Plaintiffs will ask the Court to issue declaratory and injunctive 21 relief that will include an order allowing each member of the Injuries Classes to complete a claim 22 form and receive from Mercury a revised offer based upon actual condition, and the actual cost of 23 replacement paid by the insured. Any individual defenses Mercury has can be asserted at this 24 point. The policyholders in the Injury Classes can then either accept the offer or reject it and go 25 to appraisal overseen by a special master for efficiency’s sake. 26 Fourth, Mercury’s contention that an “individualized inquiry” will be specifically required 27 on each claim is equally incorrect. In order for Plaintiffs’ Injury Class claims to proceed, the 28 Court will have already found in the Declaratory Relief trial that Mercury was violating the 4 REPLY BRIEF ISO MOTION FOR CLASS CERTIFICATION 1 Insurance Code when it calculated depreciation and paid replacement benefits, and failed to 2 adequately explain the basis for adjustment in writing. No individualized inquiry into Mercury’s 3 motivations is required: the dictates of the Code are in plain English, and any contention that they 4 were misunderstood or overlooked is not credible. 5 Last, Mercury heavily relies on the Second District case Bascuro to argue that individual 6 issues will predominate. (Bascuro v. 21st Century Ins., Co. (2003) 108 Cal. App. 4th 110 7 (hereinafter “Bascuro”).). Basurco is readily distinguishable. In Basurco, the subject class action 8 involved bad faith and unfair dealing claims arising from the Northridge earthquake of 1994, once 9 barred by contractually imposed statute of limitations but later revied by the legislature. (Id. at 10 113) The Basurco court denied class certification there because many of the facts of each 11 insurance claim would bear heavily on the statute of limitations issue as to each class member— 12 for example, when damage was discovered by the homeowner and when notice of claim was 13 made; additionally, many of the claims were denied for reasons other than the statute of 14 limitations. (Ibid. at 118-19) (discussing various factual issues that would have to be resolved in 15 each case). An individual analysis was seen as necessary because the source of the claimed 16 damage may have arisen from sources other than the earthquake; this required the employment of 17 engineers, geologists, and other experts. (Ibid. at 115.) The court in Bascuro also relied on the 18 fact that the trial court had set up an expedited and streamlined system for managing the 19 avalanche of litigation stemming from the earthquake, and thus there would be no benefit to class 20 treatment. (Ibid. at 122.) 21 Unlike in Bascuro where the facts bear on liability (i.e., whether the insureds’ claim was 22 barred by the statute of limitations), here Mercury breached its duty in every claim where 23 property was depreciated using Mercury’s illicit methodology and where Mercury failed to 24 provide a written basis for its adjustment. It is unnecessary to individually analyze each claim 25 because the basis for liability is Mercury’s application of the methodology—not the extent to 26 which that resulted overpayment, underpayment, or no payment. Also, Mercury’s claims 27 adjustment process, unlike those in the Bascuro case, is not a factually nor scientifically driven 28 one that could reveal facts relevant to whether Mercury is liability at all. Indeed, the process 5 REPLY BRIEF ISO MOTION FOR CLASS CERTIFICATION 1 cannot even explain how the depreciation is calculated; rather, the process entails untrained third- 2 party vendors applying a uniform depreciation method based on age and underpayment of 3 replacement cost across the board in violation of Sections 2051 and 2051.5. 4 Finally, it is worth emphasizing that the Basurco Court relied on the unique circumstance 5 that the Los Angeles Superior Court had established a streamlined system for managing 6 thousands of Northridge insurance cases, so class treatment was ultimately redundant of the 7 process already in place. Here there is no ongoing litigation that will resolve this important 8 dispute between Mercury and its insureds. No court has set up any system for resolution of these 9 claims. If class treatment is denied at this early stage in the proceedings, few Mercury customers 10 other than Plaintiff have any hope of compensation for Mercury’s systematic violation of 11 California law, and the carrier will retain a large windfall as a result. 12 C. MESCHI’S CLAIMS ARE TYPICAL. 13 Mercury makes three factual allegations to support its contention that Ms. Meschi’s 14 allegations are not typical. First, Mercury asserts Ms. Meschi’s contents claim was depreciated by 15 reference to condition and age, and when she complained about any particular amount of 16 depreciation taken, the carrier made an adjustment. (Opposition 12:2-9.) Second, it alleges that 17 Ms. Meschi “accepted all the replacement cost prices after some adjustments were made. . . . 18 Insofar as [Mercury] may not have paid the full cost incurred by Meschi, on certain items that she 19 replaced, there is no evidence presented that such monies were incorrectly withheld.” (Opposition 20 12:11-14.) Finally, Mercury argues there is no evidence it failed to satisfy its duty under 10 CCR 21 §2695.9(f) to “fully explain to the claimant in writing” the “basis for [its depreciation].” In 22 support of that assertion, it explains that it told Ms. Meschi Enservio would apply “the 23 appropriate betterment.” Also, Mercury’s contents inventory lists included columns for condition 24 and age. And, finally, Mercury says Ms. Meschi must have understood “how depreciation was 25 applied as she contested it . . . .” (Opposition 12:15-22.) 26 From these assertions, Mercury argues that because none of the harms alleged by the 27 putative class apply to Meschi, her claims are not typical, and thus she is not a proper class 28 representative. (Opposition 23:16-24:8.) But Mercury’s contentions regarding the handling of Ms. 6 REPLY BRIEF ISO MOTION FOR CLASS CERTIFICATION 1 Meschi’s claim are wrong. Her claims are identical to the classes Plaintiffs seek to certify. 2 Mercury’s typicality argument is accordingly unavailing. 3 Ms. Meschi’s Mercury policy afforded $205,500 in contents coverage. After the fire, she 4 made a claim under that coverage. Mercury told Ms. Meschi it would pay actual cash value for 5 destroyed contents (the priced replacement cost less depreciation), and after replacement would 6 pay only up to the amount of the withheld deprecation. (Meschi MPA, 10:26-11:3.) That is 7 exactly what it did, both in violation of California law in precisely the manner alleged on behalf 8 of the classes Plaintiffs seek to certify. (Meschi MPA, 11:15-24; 11:25-12:14.) 9 Mercury applied depreciation to Ms. Meschi’s claim, and all of its insureds’ claims, by 10 use of a model its own employees and managers do not understand and cannot explain. (Meschi 11 MPA, 8:9-27; 9:8-9, 15-17.) Mercury uses age to set depreciation, and then uses condition as a 12 slight modifier to age-based depreciation. Ms. Meschi and the class allege that model is illegal. 13 The fact that Ms. Meschi challenged some depreciation amounts or that the carrier made some 14 adjustments is irrelevant. Ms. Meschi has shown that depreciation was taken in her claim 15 pursuant to what she contends is an illegal model. Thus, Ms. Meschi shares with the classes both 16 the liability and damages claim as relates to Mercury’s unlawful application of depreciation to her 17 contents claim. 18 Ms. Meschi replaced some of her items destroyed in the fire, spent more than Mercury’s 19 assigned price, and made a claim for the full replacement cost that she paid. (Meschi MPA, 20 11:25-12:14.) Mercury violated California law in Ms. Meschi’s claim, as it does class-wide, by 21 failing in its duty under Ins. Code § 2051.5 to pay the actual cost of replacement, when that cost 22 exceeded Mercury’s assigned replacement cost. Ms. Meschi and the class share the allegation of 23 unlawfulness. They likewise share the resulting damages, which are the difference between the 24 actual cost and the replacement value assigned by Mercury and its vendors. That Ms. Meschi did 25 not complain during the claim is neither surprising, nor relevant to the typicality calculus. Ms. 26 Meschi did not know she had a right to the actual cost of each replaced item, because Mercury 27 lied to her repeatedly in its payment letters about her rights. (Meschi MPA 10:26-11:11.) Ms. 28 Meschi complained by way of filing this lawsuit. 7 REPLY BRIEF ISO MOTION FOR CLASS CERTIFICATION 1 Finally, because Mercury itself has no real understanding of the formula its vendors use to 2 apply deprecation, other than that they use age, primarily, and then apply a condition factor, it is 3 hard to know how Mercury can suggest it satisfied its 10 CCR §2695.9(f) obligation as relates to 4 Ms. Meschi, or the class. That Mercury assured Ms. Meschi that Enservio would get depreciation 5 right is not exactly what the Department of Insurance had in mind when it required a “full written 6 explanation” of the basis for application of depreciation. Likewise, as to Ms. Meschi and the 7 class, the circumstance that the inventory lists age and condition does not begin to provide a full 8 written explanation for how Mercury applies depreciation. In any case, the question of liability is 9 not before the Court. Ms. Meschi has plainly demonstrated that she and the class share an 10 allegation that Mercury routinely violates 10 CCR §2695.9(f) in its contents adjusting. 11 D. THE CLASSES PLAINTIFFS SEEK TO CERTIFY ARE ASCERTAINABLE. 12 A class is ascertainable when it is defined “in terms of objective characteristics and 13 common transactional facts” that make “the ultimate identification of class members possible 14 when that identification becomes necessary.” (Noel v. Thrifty Payless, Inc. (2019) 7 Cal.5th 955, 15 968 (hereinafter “Noel”). Mercury, citing Rose v. City of Hayward (1981) 126 Cal.App.3d 926 16 (hereinafter “Rose”), reads into ascertainability a requirement that class members be “readily 17 identifiable without unreasonable expense or time by reference to official records,” but that is 18 incorrect; the California Supreme court has specifically held that ascertainability does not 19 incorporate this additional evidentiary burden applied by the Rose Court. (Noel, supra, 7 Cal.5th 20 at 961.) The court explained, in largely overruling Rose, that “a conception of ascertainability 21 concerned with whether class members can be identified without an unreasonable commitment of 22 expense or time is at cross purposes with its jurisprudence” that “stress[es] the importance of a 23 careful weighing of both the benefits and the burdens that may be associated with a proposed 24 class action.” (Id at 986.) Thus, Mercury’s reference to Rose, which has been overruled in 25 relevant part, should be disregarded. 26 Mercury’s reference to Hale v. Sharp Healthcare (2014) 232 Cal.App.4th 50, 59-61 27 (hereinafter “Hale”) and Hefcyzc v. Rady Children’s Hospital-San Diego (2017) 17 Cal.App.5th 28 8 REPLY BRIEF ISO MOTION FOR CLASS CERTIFICATION 1 518, 538-540 (hereinafter “Hefcyzc”) should also be disregarded because these cases’ holdings 2 rely on Rose’s overruled ascertainbility standard requiring identification to be accomplished 3 without unreasonable to expense or time. Even then, unlike Hale, where identification to 4 determine class membership could require individually analyzing 122,000 separate sets of 5 patients’ records or Hefcyzc, which also required individual patient record analysis, here, 6 identification of subclass members can be accomplished without unreasonable expense or time. 7 Mercury’s injury subclasses consist of those who made personal property claims and were paid 8 less than their policy limits which is information indicated facially by Mercury’s records. These 9 members are identifiable without requiring an analysis of their individual records or a line-by-line 10 analysis of each item of lost property. 11 Additionally, difficulties identifying class members is not a proper basis for denying 12 certification. In Reyes v. Board of Supervisors (1987) 196 Cal.App.3d 1263 (hereinafter “Reyes”), 13 the class definition included an objective and easily identifiable class of only those who were 14 injured (i.e., those that were sanctioned as a result of the program in question) during a particular 15 time frame, and the class was therefore found to be ascertainable. The defendant argued that the 16 extraordinary effort needed to obtain information to identify class members should act to negate 17 the ascertainability of the class. (Id. at 1275) However, the court found that trial courts should not 18 decline to certify a class at the certification stage in anticipation of identification difficulties at the 19 remedy stage (Ibid.) 20 Like the class definitions in Reyes, the ACV and RCV class definitions here include an 21 objective and identifiable class: policy members who made claims within the time period that 22 were not paid policy limits. To the extent there is any difficulty identifying these clearly and 23 objectively defined class members, that point it not relevant to whether these classes should be 24 certified. 25 E. PLAINTIFFS’ PROPOSED CLASSES ARE NOT OVERBROAD. 26 Mercury is equally incorrect in contending that Plaintiffs’ proposed classes are overbroad. 27 First, Plaintiffs propose an opt-out class for the damages phase of this case. Accordingly, 28 policyholders who believe they were treated fairly or were overpaid will presumably opt out; only 9 REPLY BRIEF ISO MOTION FOR CLASS CERTIFICATION 1 policyholders who think that they were harmed will submit a claim. Accordingly, there is no 2 requirement that the class members be “net losers”—they will have a claim for every item that 3 was not depreciated appropriately. Mercury has asserted no counterclaim here, and there is no 4 basis for it to seek an “offset” (consistent with its duties of good faith and fair dealing) for items 5 that may have been under-depreciated or which it paid too much in Replacement cost. 6 Second, Mercury’s overbreadth argument is again premised on its mischaracterization of 7 the parties’ dispute. Ascertainability of the proposed class is not dependent upon identifying 8 which particular insureds had which particular items of property that were in better than average 9 condition for their age and which were adjusted on an actual cash value basis. Rather, the parties’ 10 dispute concerns whether across claims, as an institutional practice, Mercury violates the 11 Insurance Code and the Fair Claims Regulations, and thereby breaches the standard insurance 12 contract. Mercury’s failure to comply with section 2051, section 2051.5 and related regulations 13 necessarily constitutes a breach of contract—a breach that is common to each class member. It is 14 well settled that “statutory and decisional law in force at the time the policy is issued” are “read 15 into each policy issued thereunder, and become a part of the contract with full binding effect upon 16 each party.” (Interinsurance Exch. Of Auto. Club of S. Cal. v. Ohio Cas. Ins. Co. (1962) 58 17 Cal.2d 142, 148 [citation]; see also California Fair Plan Assn. v. Garnes, (2017) 11 Cal.App.5th 18 1276, 1304. 19 Therefore, Plaintiffs’ breach of contract claims and UCL claims exist independently of 20 whether application of Mercury’s unlawful methodologies resulted in overpayment, adequate 21 payment, or underpayment. In all three instances, Mercury has violated California law and 22 breached the parties’ agreement. Thus, liability here turns on Mercury’s systematic practices, not 23 on whether, as in Collins v. Safeway Stores, Inc., (1986) 187 Cal.App.3d 62, each class member 24 happened to purchase a container of eggs contaminated with pesticide. Every class member who 25 made a claim for personal property damage was subject to Mercury’s systematic practices of 26 failing to depreciate according to section 2051, failure to pay replacement cost under 2051.5, and 27 failure to provide the basis for adjustment in writing under regulation. 28 Third, the Damages Class is appropriate for certification even if some members may not 10 REPLY BRIEF ISO MOTION FOR CLASS CERTIFICATION 1 assert claims. Plaintiffs have specifically defined the Damages Class using “objective criteria and 2 common transactional facts.” (Bomersheim, supra, 184 Cal. App.4th at 1483; see also Hicks v. 3 Kauffman & Broad Home Corp. (2001) 89 Cal.App.4th 908, 916 (hereinafter “Hicks”)[as a 4 general rule if the defendant’s liability can be determined by facts common to all members of the 5 class, a class will be certified even if the members must individually prove their damages] [citing 6 Employment Development Dept. v. Superior Court (1981) 30 Cal. 3d 256, 266.].) At any rate, “if 7 necessary to preserve the case as a class action, the court itself can and should redefine the class 8 where the evidence before it shows such a redefined class would be ascertainable.” (Hicks, supra, 9 89 Cal. App. 4th at 916 [citing Woolsey v. State of California (1992) 3 Cal. 4th 758, 795].) 10 F. CLASS TREATMENT HERE IS SUPERIOR AND MANAGEABLE. 11 Plaintiffs seek specific relief, namely, reformation of Mercury’s practices so that they 12 conform to the Insurance Code and associated regulations. The benefit for class members is 13 obvious: the relief sought on behalf of the Declaratory Relief class will allow all policyholders to 14 receive