Policyholder Pulse
When wildfires, floods or other disasters strike, multiple policyholders can be affected in similar ways. But historically, each policyholder would take on their insurance company alone—a tough task, especially for individual policyholders and especially when any given policyholder’s claim is dwarfed by the relative legal and financial might of the insurer. The recent ruling in Pitkin v. State Farm, however, shows how class actions can level the playing field.
What Happened in Pitkin
Two homeowners sued State Farm for reducing insurance payouts by subtracting sales tax from the replacement value of lost personal property. They claimed State Farm’s practice violates California law. Unusually, however, the homeowners brought their claims as a “class action.” Class actions are often mentioned in the media, but it bears revisiting what this familiar term involves. A class action is a form of lawsuit recognized in federal and state courts allowing a few people (or even one person) to sue on behalf of a “class” (i.e., a larger group) who’ve been harmed in the same way. Thus, a class action—if allowed to go forward (more on that next)—turns many small claims into one big powerful case. (See where this is going?)
In Pitkin, the homeowners asked to represent a class of roughly 200,000 State Farm policyholders who were affected by State Farm’s actions the same way. On July 15, 2025, the court approved, finding that the class of policyholders met all the requirements under Federal Rule of Civil Procedure 23, which governs class actions:
- Numerosity: There were too many individual policyholders to sue State Farm individually.
- Commonality: Everyone’s claim raised the same legal issue (that is, whether State Farm’s practice was illegal).
- Typicality: The lead plaintiffs’ claims were typical of the claims of all the other plaintiff policyholders.
- Adequacy: The plaintiffs and their lawyers were well-suited to represent the group.
- Predominance & Superiority: The core issue (that is, was sales tax depreciation legal?) applied to everyone, and a class action was the most practical way to handle it.
Why It Matters
The Pitkin decision shows that when insurers use a standard practice across policies and/or claims, courts may allow affected policyholders to challenge it together, especially when individual claims are too small to pursue alone.
Other Courts Are Doing the Same Thing
- Meek v. Kansas City Life (8th Cir. 2025): Policyholders challenged hidden charges that reduced policy value. The court approved class treatment because the contract terms were standard and the issue applied to everyone, even if the individualized damages differed.
- Lewis v. GEICO (3d Cir. 2024): The court upheld class certification over GEICO’s failure to pay certain taxes and fees in vehicle total-loss cases. Class certification was appropriate because the company had a common practice that affected everyone similarly and class members could be readily identified using objective criteria
- Burnett v. Conseco Life (S.D. Ind. 2021): A settlement class was approved where a standardized policy change effectively forced people to cancel their life insurance coverage. The court emphasized the relatively modest individual damage amounts in determining that a class action was superior to individual suits.
The Bigger Picture
As extreme weather events increase, class actions may become an essential tool to hold insurers accountable when many people are affected by the same conduct. In all events, don’t give up. If you believe you have been treated unfairly by your insurer, experienced coverage counsel can provide valuable assistance.