For those who practice in the area of insurance-related class actions, I highly recommend an article posted yesterday by Robinson and Cole Partner Wystan Ackerman, who is the primary contributor to his firm’s Insurance Class Actions Insider blog. The article, Standing to Sue in Insurance Class Action Addressed By Second Circuit, summarizes the Second Circuit Court of Appeals decision late last month in Mahon v. Ticor Title Ins. Co., No. 10-3005-cv, 2012 U.S. App. LEXIS 12947 (2d Cir. Jun. 25, 2012), which held that the “juridical link” doctrine could not be used to give a plaintiff who bought insurance from one insurance company standing to represent a class of insureds who purchased policies from the defendant’s sister companies.
The Mahon decision is an important development in the area of insurance class action law. Insurance companies are commonly organized into holding company systems. (The primary reason for this is not to make it more difficult to sue them, but rather so that they can comply with individual states’ domicile, risk-based capital, rate filing, and other regulatory requirements, as well as to allow the introduction of new products without disrupting the expectations of existing policyholders.) As a result, the same insurance brand can be sold through a number of different underwriting companies. At the risk of grossly oversimplifying the concept, the “juridical link” argument, as it has been raised in the insurance class action context, is that companies that are linked together through common ownership, brand, business practices, or sharing of resources can be sued in the same lawsuit by a representative plaintiff that has a claim against any one of them.
Those who prosecute or defend insurance class actions on a regular basis will recognize that the juridical link argument is nothing new. Use of the juridical doctrine as a tactic to sue multiple, related defendants in a single class action hit its peak in the middle part of the last decade. However, the tactic has waned in recent years as plaintiffs’ lawyers realized that it was much more efficient to simply round up a separate class representative for each underwriting company than to spend their time and effort briefing the complex procedural and constitutional issues implicated by the juridical link doctrine.
Even so, as the recentness of the Mahon decision suggests, the argument has not gone away for good, and practical considerations in any given case can make it a tactic worth pursuing. And, if the doctrine is on the comeback trail as a litigation tactic, Mahon provides an arrow in the quiver of defense attorneys for defeating it.