Class Action Against State Auto For Allegedly Inflating Home Values to Inflate Premium Revenues Can Proceed Ohio Federal Court Rules

The cost of everything goes up with inflation and insurance is no different. As the value of our things increases with time, it makes sense that people would want sufficient coverage for all of their belongings. This can become an issue though, when insurance companies insist on raising the limits on a plan (and thus raising the premiums) to levels that are much higher than the property can possibly be worth. Such is allegedly the case in a recent class action lawsuit against State Auto.

According to the complaint, the named plaintiffs, Mark and Andrea Schumacher, bought their home in 2001 for $234,000. They claim that they have made no improvements to the home since then, other than normal maintenance, and that its market value remains about the same. As evidence to support this assertion, the plaintiffs pointed out that the builder from whom they bought their home continues to construct homes in their neighborhood that are similar to the ones that they own, and sell them at a comparable price.

Despite that, State Auto, which has been insuring the Schumachers for years, allegedly increased their policy limit over the years until it stood at more than $500,000 as of 2013. According to the Schumachers, that is much more than what it would cost them to rebuild or replace their home, though it is important to note that there are two different ways of looking at that cost: 1) rebuilding from the ground up; and  2) buying a similar, older home. The cost of these two options can vary dramatically, depending on the market, and some people have a strong preference to buy insurance for one over the other.

The named plaintiffs are suing State Auto for tortious breach of the duty of good faith and fair dealing; negligent misrepresentation and fraud; violation of the Ohio Deceptive Trade Practices Act; fraudulent inducement; breach of contract; and breach of the duty of good faith and fair dealing.

State Auto moved to have the case dismissed on all six counts, but the Ohio federal court denied most of that motion. It denied the motion based on the claim of breach of contract, because all of the improper conduct that was allegedly performed by State Auto occurred before each new policy was issued. As the court pointed out, “[a]n act or omission that occurs before a contract is formed cannot later be evidence of a[n] alleged breach.”

The federal court did not dismiss the tort and statutory claims though. According to the court, since the plaintiffs are accusing the defendant of allegedly constructing an elaborate scheme, it is likely that the creation and planning of the alleged misconduct took place at the company’s headquarters in Ohio. As a result, Ohio law should govern the plaintiffs’ tort claims and determine whether they should survive the defendant’s motion to dismiss. This directly contradicts other rulings that have stated that such breaches should be governed by the laws of the state in which the plaintiff resides, rather than the defendant.

The court also determined that the plaintiffs had sufficiently stated a plausible claim for breach of the implied covenant of good faith and fair dealing by alleging that State Auto had “concocted a plot … to sizably increase their premium revenue by selling an overpriced and superfluous product to their insureds”. Likewise, the court also denied the motion to dismiss based on the claims of fraud, negligent misrepresentation, and violation of the Ohio Deceptive Trade Practices Act.

Our Naperville, Illinois consumer rights private law firm handles individual and class action predatory lending, unfair debt collection, lemon law and other consumer fraud cases that government agencies and public interest law firms such as the Illinois Attorney General may not pursue. Class action lawsuits our law firm has been involved in or spear-headed have led to substantial awards totalling over a million dollars to organizations including the National Association of Consumer Advocatesthe National Consumer Law Center, and local law school consumer programs. The Chicago consumer lawyers at Lubin Austermuehle are proud of our achievements in assisting national and local consumer rights organizations obtain the funds needed to ensure that consumers are protected and informed of their rights. By standing up to consumer fraud and consumer rip-offs, and in the right case filing consumer protection lawsuits and class-actions you too can help ensure that other consumers’ rights are protected from consumer rip-offs and unscrupulous or dishonest practices.

Our Aurora and Elgin consumer attorneys provide assistance in fair debt collection, consumer fraud and consumer rights cases including in Illinois and throughout the country. You can click here to see a description of the some of the many individual and class-action consumer cases our Chicago consumer lawyers have handled. A video of our lawsuit which helped ensure more fan friendly security at Wrigley Field can be found here. You can contact one of our Geneva consumer protection attorneys who can assist in consumer fraud, consumer rip-off, lemon law, unfair debt collection, predatory lending, wage claims, unpaid overtime and other consumer, or consumer class action cases by filling out the contact form at the side of this blog or by clicking here.

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