July 7, 2010
Written By Attorney: G. Franklin McKnight IV
This article is an interpretation of current law and is offered for informational purposes only. This material is not legal advice and should not be construed or used as a substitute for the advice of an attorney.
In a surprising move, the Pennsylvania Supreme Court granted plaintiffs' Petition for Permission to Appeal in a group of consolidated insurance property loss class actions wherein plaintiffs argue that the defendant insurance companies must pay general contractor's overhead and profit under typical homeowner's insurance policies whenever more than one subcontractor "trade" is required to perform repairs. The single issue accepted by the Court, whether plaintiffs' claims satisfy Pennsylvania rules regarding maintaining these matters as class actions, was previously answered in the negative by the trial and appellate courts. In the consolidated actions, Mee v. Safeco, Helo v. Encompass, DiCiccio v. Allstate, Salera v. State Farm, and Crowley v. Travelers, plaintiffs assert in their Petition that the trial court improperly addressed issues reserved for the jury by finding that the determination of whether general contractor's overhead and profit is needed on a particular loss is made on a case-by-case basis that requires consideration of criteria other than the number of trades.
In holding that plaintiffs' failed to meet their burden to certify a class under Pennsylvania law in these consolidated matters, the Philadelphia Court of Common Pleas relied on the decisions in Gilderman v. State Farm Ins. Co., 649 A.2d 941 (Pa. Super. 1994) and Mee v. Safeco Ins. Co. of America, 908 A.2d 344 (Pa. Super. Ct. 2006), wherein the Superior Court disagreed with the notion that general contractor's overhead and profit must be paid whenever more than one trade is involved in repairs to a structure. The Superior Court instead found that a "reasonableness" standard is used to determine when the services of a general contractor are needed on a particular loss. Elaborating on the reasonableness standard, the Mee court noted that factors beyond the number of trades are considered when evaluating whether the payment of general contractor's overhead and profit is necessary, including the nature of the damage, the extent of the damage, the degree of trade coordination, and the degree of trade supervision.
Outside of Pennsylvania, courts have reached opposing decisions with respect to the correctness of certifying general contractor's overhead and profit classes for adjudication. Many courts, including federal courts, have found that the payment of general contractor's overhead and profit is an individualized claim decision, not subject to uniform adjudication. Conversely, some courts have found that the number of trades is a significant enough factor to warrant class action treatment, finding that the merits of plaintiffs' claims should be decided before a judge or jury. While the Pennsylvania courts have taken the former view, the Pennsylvania Supreme Court's decision to weigh in on this issue suggests an interest in taking a closer look a Pennsylvania's class action law. In accepting these cases, the Court may feel compelled to evaluate the extent to which Pennsylvania courts rely on factual and expert testimony in resolving class certification. NLdH will continue to monitor these important cases.
