HASSETT'S OBJECTIONS - Supreme Court Roundup

As a threshold matter, my teenage son is wrong. Brown v. Entertainment Merchants Ass'n, Case No. 88-1448 (U.S. June 27, 2011), is not the most important case of this term to everyone, including insurers. That case recognized that minors have a First Amendment right to video games. While perhaps good news for liability insurers writing video game risks, most insurers are unaffected. As an aside, my son was frustrated to learn that the First Amendment applies only to the government and not to parents.

However, the Supreme Court issued several opinions of interest to the insurance industry. For example, it issued three decisions addressing class actions. While two were pro-business generally, they will have less impact on insurer class actions.

In Wal-Mart Stores, Inc. v. Dukes, Case No. 10-277, slip op. (U.S. June 20, 2011), the Court rejected class certification in an employment discrimination claim under Title VII. In that case, the plaintiffs generally alleged female employees suffered discrimination in promotion and pay. The Court held a class could be certified only by "significant proof that an employer operated under a general policy of discrimination." Wal-Mart Stores v. Dukes citing General Tel. Co. of Southwest v. Falcon, 457 U.S. 147, 157-158 (1982). Because Wal-Mart's general policy forbade sex discrimination, general evidence of stereotypical thinking could not provide the glue to hold together the class. While Title VII does recognize disparate impact claims, and Wal-Mart's policy of according significant local control to employment decisions could support a disparate impact claim, class certification was inappropriate.

While Wal-Mart's central holding would apply to employment discrimination cases within the insurance industry, as much as any other, it likely will be of limited application in the typical insurance class action where a plaintiff alleges a centralized business practice that damages a class.

However, a second holding in Wal-Mart may prove more valuable. The Court also held that individualized damage claims could not be wrapped into a class action under Federal Rule 23(b)(3)'s authorization of injunctive relief. The Court recognized but did not reach the question of whether monetary relief may be allowed at all under a Rule 23(b)(2) certification but squarely held that individualized claims may not be certified under that provision.

Additionally, the Court squarely rejected individual adjudication of monetary...