Smith v. Progressive Halcyon Insurance

THIS OPINION HAS NO PRECEDENTIAL VALUE. IT SHOULD NOT BE
CITED OR RELIED ON AS PRECEDENT IN ANY PROCEEDING
EXCEPT AS PROVIDED BY RULE 268(d)(2), SCACR.

THE STATE OF SOUTH CAROLINA
In The Court of Appeals

Stephanie A. Smith, on behalf of herself and all others
similarly situated, Appellant,

v.

Progressive Halcyon Insurance Company, n/k/a
Progressive Direct Insurance Co., Progressive Max, and
Progressive Casualty Insurance, Respondents.

Appellate Case No. 2013-002133

Appeal From Horry County
Larry B. Hyman, Jr., Circuit Court Judge

Unpublished Opinion No. 2015-UP-392
Heard June 2, 2015 – Filed August 5, 2015

AFFIRMED IN PART AND VACATED IN PART

Natale Fata, of Nate Fata, PA, of Surfside Beach, and
Charles Vance Leonard, of Harris & Leonard, PA, of
Myrtle Beach, for Appellant.

Andrew Preston Brittain and Thomas C. Brittain, both of
The Brittain Law Firm, PA, of Myrtle Beach; Zachary A.
McEntyre and Jeffrey S. Cashdan, both of King &
Spalding, LLP, of Atlanta, GA, for Respondents.
PER CURIAM: Stephanie A. Smith filed this action on behalf of herself and all
others similarly situated against Progressive Halcyon Insurance Company, n/k/a
Progressive Direct Insurance Co., Progressive Max, and Progressive Casualty
Insurance (collectively, Progressive). In her complaint, Smith requested a
declaratory judgment that Progressive's practices regarding medical payments
coverage (med pay) and personal injury protection violated state law and
Progressive's own procedures. She also asserted causes of action for breach of
contract, unjust enrichment, bad faith for failure to pay insurance proceeds, unfair
claims practices, and tortious interference with contracts.

After the parties had engaged in extensive discovery, Smith moved for class
certification. Shortly thereafter, Progressive moved for summary judgment. The
circuit court issued an order certifying the class. The court defined the class as
follows:

All insureds of Progressive Halcyon Insurance Company
n/k/a Progressive Direct[] Co., Progressive Max, and
Progressive Casualty who (1) submitted claims to any of
the Progressive Insurance Companies, including
Progressive Casualty, under the med pay provision of the
respective South Carolina policies during the time period
of November 8, 2007 to the date of this Order, and (2)
whose claims were adjusted by Progressive Casualty, and
(3) who did not receive payment in the amount of their
medical bills, and (4) whose med pay policy limits were
not exceeded.

Progressive moved for reconsideration of this order. While the motion was
pending, Smith offered to narrow the proposed class by including as an additional
qualifier that each member's "file or claim contains documentation or reference to
health insurance." Following a hearing on Progressive's motion, the circuit court
issued an order in which it vacated its prior order granting class certification. In
decertifying the class, the circuit court found (1) Smith had no viable individual
claim and (2) Smith failed to satisfy her burden to show she could adequately
represent the class, either as the class was defined in the prior order or as it was
defined in Smith's proposed revision.
The circuit court denied a motion by Smith for reconsideration and to alter or
amend the order denying class certification, and Smith appealed. As of the date
this court heard oral argument in the matter, the circuit court had not ruled on
Progressive's summary judgment motion. We vacate the finding that Smith had no
viable claim and affirm the finding that Smith could not adequately represent the
proposed class.

1. We agree with Progressive that "[t]he general rule . . . is that class certification
orders are not immediately appealable." Salmonsen v. CGD, Inc., 377 S.C. 442,
448, 661 S.E.2d 81, 85 (2008). However, even though Progressive's summary
judgment motion is still pending, we hold the effect of the circuit court's finding
that Smith lacked a viable claim warrants our taking jurisdiction of this appeal.
See S.C. Code Ann. § 14-3-330(2) (1976) (stating the appellate court "shall review
upon appeal . . . [a]n order affecting a substantial right made in an action when
such order (a) in effect . . . discontinues the action"); Morrow v. Fundamental
Long-Term Care Holdings, LLC, Op. No. 27532 (S.C. Sup. Ct. filed June 17,
2015) (Shearouse Adv. Sh. No. 23 at 24, 29) ("'[A]n appellate court should look to
the effect of an interlocutory order to determine its appealability.'" (alteration by
court) (quoting Thornton v. S.C. Elec. & Gas Corp., 391 S.C. 297, 304, 705 S.E.2d
475, 479 (Ct. App. 2011))); Eldridge v. City of Greenwood, 308 S.C. 125, 127, 417
S.E.2d 532, 534 (1992) (stating orders under Rule 23, SCRCP are generally
considered interlocutory but acknowledging such orders may be immediately
appealable "in certain circumstances"). Because of the presence of an immediately
appealable issue, we also address Smith's challenge to the finding that she failed to
show she could adequately represent the proposed class. See Salmonsen, 377 S.C.
at 449, 661 S.E.2d at 85 ("[The appellate court] has reviewed interlocutory orders
involving class certification when they contain other appealable issues.").

2. "A court may not look to the merits when determining whether to certify a
class." Tilley v. Pacesetter Corp., 333 S.C. 33, 43, 508 S.E.2d 16, 21 (1998). We
are aware our supreme court, when stating this proposition in Tilley, cited as
supporting authority a decision in which the United States District Court of New
Jersey further stated that "it is appropriate for the court to look at the allegations of
the complaint only enough to determine whether the cause of action may survive a
motion to dismiss." Curley v. Cumberland Farms Dairy, Inc., 728 F. Supp. 1123,
1129 (D.N.J. 1989). In the case before us, however, the circuit court went beyond
considering whether the allegations in the complaint could survive a motion to
dismiss. Instead, the court discussed how Progressive determined it was entitled to
deduct from its payment to Smith the difference between "the amounts [Smith's]
medical providers originally billed for their services and the amount [Smith's
health insurer] actually paid, pursuant to its third-party contracts with the medical
providers," explaining that Progressive's adjuster "deducted this amount because
she determined that because neither [Smith] nor [Smith's health insurer] actually
paid those amounts, they were not expenses that [Smith] had 'incurred.'" The court
proceeded to explain at length "Progressive's Med-Pay Adjustment Methodology,"
which included the use of specialized software to audit the expenses as well as
review of the audit by an adjuster, who approves the amount to be reimbursed,
reaching the conclusion that "[u]nder South Carolina Law and the plain language
of the Policy, . . . [Smith] did not 'incur' expenses that her medical providers billed
that her health insurer did not actually pay." Therefore, even though the finding
that Smith had no viable claim was made to support the circuit court's decision to
decertify the class, we vacate this finding because it involved an analysis of the
merits of the lawsuit.

3. The circuit court cited the finding that Smith did not have a viable individual
claim as one of the reasons to support its determination that she failed to fairly and
adequately represent the members of either the class the circuit court previously
certified or the class Smith proposed in her revised definition. The circuit court,
however, also determined there were additional grounds to decertify the class
regardless of whether Smith's claim was viable. These independent grounds
included findings Smith could not establish commonality or typicality because the
class, even as narrowed according to Smith's proposed revision, could include
insureds who, unlike Smith, were allegedly paid less than the total amounts their
medical providers billed because Progressive, pursuant to terms in its policies to
pay reasonable expenses incurred for necessary medical services, determined the
billed amounts were not "reasonable" or the services provided were not
"necessary." In other words, the court emphasized that adjustments to payments
for these insureds may not have resulted from a determination by Progressive that
the expenses for which reimbursements were sought were not "incurred." The
possibility that the class includes claimants whose payments were adjusted for
reasons other than a determination by Progressive that their medical expenses were
not "incurred" could impact not only the issue of damages but also the question of
whether Progressive is liable at all to these members. Therefore, given our
standard of review, we affirm the circuit court's decision to decertify the class. See
King v. Am. Gen. Fin., Inc., 386 S.C. 82, 88, 687 S.E.2d 321, 324 (2009) ("It is
within a trial court's discretion whether a class should be certified."); Gardner v.
S.C. Dep't of Revenue, 353 S.C. 1, 21, 577 S.E.2d 190, 200 (2003) ("We generally
defer to the trial court's discretion in granting class certification absent an error of
law."); id. ("[F]ailure to satisfy even one prerequisite is fatal to class certification .
. . ."); Tilley, 333 S.C. at 42, 508 S.E.2d at 21 ("A trial judge's ruling on whether an
action is properly maintainable as a class action is within his discretion."); Waller
v. Seabrook Island Prop. Owners Ass'n, 300 S.C. 465, 468, 388 S.E.2d 799, 801
(1990) (citing the same standard when affirming the denial of class certification).
In affirming the decision to decertify the class based on Smith's failure to establish
commonality and typicality, we emphasize our ruling is based on facts presented in
this appeal and does not prevent the circuit court from revisiting the issue of class
certification based on further developments in the case. See Salmonsen, 377 S.C.
at 454, 661 S.E.2d at 88 ("[C]lass certification may be altered at any time prior to a
decision on the merits.").

AFFIRMED IN PART AND VACATED IN PART.

THOMAS, KONDUROS, and GEATHERS, JJ., concur.