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Weber v. Government Employees Insurance Co.

September 30, 2009


The opinion of the court was delivered by: Simandle, District Judge




This matter is before the Court upon Plaintiffs' unopposed motion for final approval of the class action settlement and for an award of attorneys' fees and costs in the matter of Weber v. Government Employees Insurance Company, et al. In this action, Plaintiffs, on behalf of themselves and all others similarly situated, allege that Defendants Government Employees Insurance Company, GEICO Casualty Company, GEICO Indemnity Company, and GEICO General Insurance Company (collectively, "GEICO") failed to comply with N.J. Stat. Ann. 39:6A-4.3, which requires that insurance companies selling "standard automobile liability insurance" policies in New Jersey disclose and obtain written consent from consumers for sales of policies providing personal injury protection ("PIP") expense benefits in an amount less than $250,000.

After extensive arm's-length negotiations supervised by U.S. Magistrate Judge Joel Schneider, the parties reached a settlement agreement, the approval of which is the subject of the primary motion presently before the Court [Docket Items 104 & 112]. At the initial fairness hearing for approval of class certification, the class settlement, and for Class Counsel's attorneys' fees and costs, the Court determined, in an abundance of caution, to require sending a second notice of the proposed settlement and an extension of the claim filing deadline for the putative class members, as explained in this Court's Memorandum Opinion and Order filed August 11, 2009. The re-notification is now complete, and no opt-out requests or objections to the proposed class settlement have been received. The supplemental arguments of counsel at the second fairness hearing on September 29, 2009 have been considered and the matters are ripe for determination.


A. Plaintiffs' Allegations

Plaintiffs' claims center around certain provisions of the Automobile Insurance Cost Reduction Act ("AICRA"), N.J. Stat. Ann. 39:6A-1.1 to -35, which was enacted in 1998. In Britten v. Liberty Mut. Ins. Co., 389 N.J. Super. 556 (App. Div. 2007), the Appellate Division provided a concise summary of that law and its background:

In the area of PIP benefits, prior to AICRA, all underwriters of New Jersey auto insurance policies were required to include PIP coverage of $250,000. With the enactment of AICRA, the Legislature added N.J.S.A. 39:6A-4.3, which provides in pertinent part:

With respect to personal injury protection coverage provided on an automobile in accordance with section [39:6A-4], the automobile insurer shall provide the following coverage options: . . . .

e. Medical expense benefits in amounts of $150,000, $75,000, $50,000 or $15,000 per person per accident; . . . . The coverage election form shall contain a statement, clearly readable and in 12-point bold type, . . . that election of any of the aforesaid medical expense benefits options results in less coverage than the $250,000 medical expense benefits coverage mandated prior to the effective date of [AICRA].

If none of the aforesaid medical expense benefits options is affirmatively chosen in writing, the policy shall provide $250,000 medical expense benefits coverage[.] [N.J. Stat. Ann. 39:6A-4.3(e).]

Under this provision, the Legislature eliminated the mandatory $250,000 PIP coverage and afforded to insureds, at reduced costs, a wide range of PIP benefit levels with commensurate premiums. See Id.

Britten, 389 N.J. Super. at 559-60. Significantly for purposes of this lawsuit, section 39:6A-4.3(e), supra, requires insurance providers to give consumers written "notice that election of a lower benefits option, in consideration of a reduced premium, denies eligibility for the $250,000 of benefits formerly mandated," and requires that a consumer's election of such a lower benefits option be "affirmatively chosen in writing." Id. at 560.

Plaintiffs herein allege that GEICO did not comply with section 39:6A-4.3(e)'s requirements. In short, they allege as follows:

Rather than comply with the mandates of New Jersey law, . . . Geico has had a policy and practice of deceptively selling such policies with PIP medical expense benefits in an amount of less than $250,000 without making the pr[e]scribed disclosures or obtaining the required affirmative written waivers. Accordingly, Plaintiff Weber and numerous other consumers have been illegally sold such policies with PIP medical expense benefits in amounts less than $250,000. [] When Plaintiffs and numerous other consumers have needed the additional coverage, they have been denied it by Geico, citing the illegally procured lower PIP limits. This conduct by Geico violates New Jersey's Consumer Fraud Act, . . . pursuant to which Plaintiffs . . . are entitled to relief. (Second Am. Compl. ¶¶ 3-4.) The Amended Complaint alleges that Defendants violated section 39:6A-4.3(e) (Count I); breached the implied covenant of good faith and fair dealing (Count II); breached their contracts with Plaintiffs (Count III); and should be held liable to Plaintiffs under the New Jersey Consumer Fraud Act (the "CFA"), N.J. Stat. Ann. 56:8-1, et seq. (Count IV).

B. Procedural History

1. Motion Practice, Discovery, and Settlement Negotiations

After Plaintiffs filed this action, the parties engaged in extensive motion practice and discovery. GEICO first moved to dismiss the Complaint on March 29, 2007 [Docket Item 5], and amended its motion on April 2, 2007 [Docket Item 7]. In response, Plaintiffs filed an Amended Complaint on April 1, 2007 [Docket Item 8], and, subsequently (and with the leave of the Court), Plaintiffs filed a Second Amended Class Complaint [Docket Item 49], which prompted the Court to dismiss GEICO's then-pending motion to dismiss the Amended Complaint without prejudice to renewal [Docket Item 48].

Meanwhile, the parties engaged in extensive discovery. As Plaintiffs represent in the brief in support of their class certification motion, "[d]uring this entire period, the parties engaged in document discovery during which GEICO produced approximately 50,000 pages of documents (which were reviewed by Plaintiffs' counsel) and the Plaintiffs started preparing to conduct numerous depositions of GEICO's executives and employees in Buffalo, New York." (Pls.' Br. at 4.)

The prospect of settlement was broached initially during a November 28, 2007 conference call with the Honorable Joel Schneider, United States Magistrate Judge. (Galpern Decl. ¶ 4(n).) Plaintiffs detail the extensive and contentious settlement negotiation process that ensued thereafter as follows:

In January 2008, the parties were planning further motion practice regarding documents produced and were preparing to take Defendant's employees' depositions. On January 25, 2008, the parties attend a settlement conference with Magistrate Judge Schneider during which several different settlement scenarios were discussed[.] . . .

During January and February 2008, motion briefing continued while the parties also negotiated about possible settlement. Eventually, discovery was stayed while the parties, between themselves, and with Magistrate Judge Schneider, held numerous meetings and discussions in the winter and spring of 2008 -- some of which were quite adversarial -- and slow progress was achieved over a number of months[.] . . .

During the entire summer of 2008, the discussions of potential settlement proceed in earnest, as the parties negotiated each and every substantive issue. Counsel exchanged innumerable emails and telephone calls which finally resulted in an agreement in principle in August 2008[.] . . .

Only after the settlement in principle was reached was there a negotiation of fees. The details of the Settlement, the Claims processes, the post-settlement arbitration process, and the notice, all took many weeks to iron out[.] . . .

From August through December 2008, the Settlement Agreement and it accompanying documents were negotiated. The parties spent several rounds and numerous drafts negotiating the form and substance of the proposed notice and claims forms, the framework of the post-settlement arbitration process, a supplemental notice to GEICO policyholders to ensure that, going forward, they read statutory warnings and thereafter knowingly and affirmatively chose lower PIP limits, and the provisions of the Settlement Agreement itself. Concerning the specific contents of the notice -- the two sides being unable to reach agreement -- it took specific and further recourse to Magistrate Judge Schneider to obtain resolution of this issue . . .

On January 25, 2009, the Settlement Agreement . . . was fully executed . . . .

There can be no question that the parties were fully informed, when they met to discuss Settlement, as to the risks of continued litigation and as to the scope of the legal and factual issues presented in the case. A review and analysis of the documents and other information gathered through Class Counsel's investigation and prosecution of this case materially assisted Class Counsel in determining the strengths and weaknesses of the case, the likelihood of obtaining a significant class recovery (if any) and ultimately in evaluating the fairness and reasonableness of the proposed Settlement. Based upon the discovery and review and pretrial preparation, Class Counsel was able to evaluate the substantial time and expense that would be required to prosecute the case further and realized that appeals would be likely even in the event of a successful resolution of any claims -- individual or class. Ultimately, both parties possessed a clear understanding of the strengths and weaknesses of their respective cases and utilized that information during the course of the intensive settlement negotiations . . .

Having been engaged in multiple class action settlements over time -- including many fairly significant and large cases as well as quite contentious matters -- Class Counsel can state that the negotiations here were arm's-length and fiercely negotiated as any in which they have ever been involved. In fact, following the reaching of the agreement in principle, extensive negotiations continued over nearly every detail of the agreement . . .

In short, it is fair to say that in negotiating the document that ultimately became the final Settlement Agreement, there was hardly a word or a term that was not extensively negotiated. (Id. at ¶¶ 4-9.)

2. Settlement Agreement Terms and Preliminary Approval

The parties executed the Settlement Agreement presently under consideration on January 25, 2009, and filed the motion for class certification and settlement approval [Docket Item 104] on February 13, 2009. This motion was withdrawn and refiled on August 3, 2009 [Docket Item 112], deleting the late Elizabeth Weber as a class representative and proceeding with the three remaining representatives. The Settlement Agreement defines the Settlement Class as the named Plaintiffs (Patricia Pacheco, Donna Cobbs, and Sandra Rodriguez) plus all natural persons:

(1) who were issued a New Jersey Standard Automobile Liability Insurance Policy by a GEICO entity during the Class Period [between August 16, 2004 and October 1, 2008];

(2) whose policy indicated personal injury protection medical expense ("PIP") coverage limit of less than $250,000, and for whom GEICO did not possess a signed Coverage Selection Form ("CSF");

(3) who submitted PIP claim(s) in excess of $10,000 to GEICO during the Class Period; and

(4) whose PIP coverage limit has not already been reformed in writing by GEICO to reflect the statutory maximum of $250,000. (Galpern Decl. Ex. 1 at 3.) According to the parties, this class includes 975 persons.

Under the terms of the parties' Settlement Agreement, GEICO has established a program by which to handle the claims of Settlement Class members, pursuant to which class members would be compensated for medical expenses in excess of the limits provided by their insurance policies, up to $250,000, "consistent with terms of the insurance policies, as reformed, New Jersey PIP law, and GEICO's usual claims handling procedures." (Galpern Decl. Ex. 1-C at 2-3.) The Agreement establishes a claims period of ninety days from the date the settlement notices were mailed within which members of the Settlement Class could submit claims to GEICO. (Id. at 1.) The Agreement provides that "[u]pon receipt of a claim, GEICO will adjust and/or grant or deny the claim, in whole or in part, within 60 days of the [date of the Court's entry of final judgment] . . . ," (id. at 2), and it further provides the ...

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