USAA Fights Class Certification in Case of Junked Mercedes

Insurance company USAA Casualty Insurance Co. is trying to block hundreds of motorists from forming a class action lawsuit in a case that began when a Texas woman involuntarily relinquished the title to her vintage Mercedes-Benz when USAA refused to repair it.

USAA took the fight to the Texas Supreme Court on Wednesday. Trying to shut down the class action status that two lower courts approved, the insurance company argued that it should defend the case against the woman only, as damages can’t be proven by other would-be plaintiffs.

“This is an individualized issue incapable of class certification,” said USAA lawyer Rachel Ekery, of Alexander Dubose & Jefferson LLP.

The court’s decision will shape the scope of a case that began 15 years ago with a standard car wreck, escalating into a fight over USAA’s practice for resolving claims for a wrecked vehicle it determines would cost more to fix than it was worth before the wreck.

If the Supreme Court approves class action status, the case against the San Antonio-based insurance company could grow by hundreds of additional plaintiffs, weakening USAA’s position in settlement negotiations.

A restored 1983 Mercedes-Benz 300SD was rear-ended by a vehicle insured by USAA. The Benz’s owner, Sunny Letot, filed a claim for repairs. USAA determined the cost to repair the vehicle exceeded its value and, accordingly, declared the vehicle as a total loss. USAA offered $2,738 to settle the claim, and, although Letot disputed it, believing the vehicle to be worth thousands of dollars more, the company sent her a check for that amount. USAA two years later admitted to undervaluing the vehicle and incorrectly determining it as a total loss, but that wasn’t at issue Wednesday.

“Keep in mind, the issue here is class certification,” Ekery said.

In Texas, when an insurance company determines a vehicle is a loss, as USAA did with Letot’s car, it must send notice to the state. USAA did this, a day after it mailed Letot the check. After receiving notice, the state invalidated the car’s registration, prohibiting Letot from driving or selling the car.

Letot sued the insurance company, arguing that she never approved USAA’s offer or cashed the check for the disputed amount.

During the case, Letot’s lawyers learned that it’s USAA’s practice to notify the state within three days of mailing a settlement offer on a vehicle it considers to be salvaged—even when the vehicle’s owner disputes the settlement amount. Armed with that information, her lawyers moved to add additional plaintiffs through a class action.

A Dallas trial court certified a class action for damages and injunctive relief, prohibiting USAA from filing notices with the state until a claim has been approved. On appeal, the ruling was affirmed.

In arguing against class action status, USAA says that Letot is the only rightful plaintiff. As instructed by the trial court, the insurance company reviewed more than 500 claims paid by check over a nearly six-year period. Of those, only Letot rejected the total loss payment or challenged USAA’s determination that their vehicle was salvage.

Justice Jimmy Blacklock seemed unconvinced that additional plaintiffs should join Letot’s suit.

“She has an interesting claim,” he said. “I cna’t see how those people would be typical of the situation Ms. Letot finds herself in.”

USAA is represented by lawyers from Alexander Dubose & Jefferson LLP and Martin, Disiere, Jefferson & Wisdom LLP.

Letot is represented by Jeffrey Tillotson. At trial, she was represented by Robert Kubicki.

The case is USAA Casualty Ins. Co. v. Letot, Tex., No. 22-0238, oral argument 1/10/24.