Making Mountains Out of Molehills

What might seem to be a small claim can actually turn into a class-action lawsuit

Sometimes the craziest thing can trigger a class action lawsuit that turns a small claim for an individual into a multimillion-dollar settlement on behalf of a large number of people. That’s what happened when I went to see my massage therapist one fine day. 

My massage therapist mentioned that she’d been in a minor car accident and that her insurance company refused to pay a claim of $425. Of course, as a specialist in handling legal disputes between policyholders and insurance companies, I asked her why the company wouldn’t pay up. She wasn’t exactly sure, so I called the company to find out.

When I spoke to the claim adjuster, I discovered that the company refused to pay the $425 because the repairs to the car boosted the value beyond what the vehicle would have been worth before the accident. The legal term for this is “betterment.” If the property is worth more after the damage is repaired, the insurance company could claim that it should be responsible for paying only enough to put the property back in the condition it was in prior to the claim.

Let’s look at another example. Say you get in a car accident and one of your tires is destroyed. The tire was 50 percent worn out. The company could claim that the new tire was better than the old one, and pay only half the value of the new tire. In some states, that’s legal, but it isn’t in Florida. I dug deeper and discovered that the company was adjusting settlements to account for betterment in all its Florida cases.

You’re probably familiar with class-action lawsuits from all those TV commercials you see from law firms representing victims of black lung disease, lead poisoning, and asbestos-caused cancer. The ads ask you to call for a free consultation. The law firm wants you to join the “class” of similarly impacted individuals. The bigger the class, the more the company will have to pay to settle all the claims.

I set the ball in motion in small claims court when I made the case that the company was adjusting claims down to account for betterment. The case moved up to circuit court, and three years later the company settled for $25 million. The money was paid out to each individual in the class. Although it may sound puzzling, many claimants entitled to a settlement payment fail to return the paperwork out of sheer laziness or because they don’t understand the language on the forms. If you’re part of a class, follow through on paperwork.

Most cases don’t qualify for a class-action lawsuit, but when they do, joining a class can greatly enhance your clout. If your attorney suggests that you either lead a class or join in a class-action lawsuit, give it some serious thought. There is definitely strength in numbers.