Projected Sold Adjustments Alone Do Not Establish Breach or Support Class Certification: Fourth Circuit Requires Concrete Injury and Individualized Proof of Underpayment in Total-Loss ACV Cases

Projected Sold Adjustments Alone Do Not Establish Breach or Support Class Certification: Fourth Circuit Requires Concrete Injury and Individualized Proof of Underpayment in Total-Loss ACV Cases

Introduction

In Lynn Freeman v. Progressive Direct Insurance Company, the Fourth Circuit reversed a district court’s class certification order in a putative class action challenging Progressive’s use of a “Projected Sold Adjustment” (PSA) in total-loss valuations. The majority, authored by Judge Niemeyer and joined by Judge Wilkinson, held that the named plaintiff lacked Article III standing because she failed to show a concrete financial injury, and, alternatively, that the claims were not suitable for class treatment under Rules 23(a)(2) and 23(b)(3) because liability for breach of contract turned on individualized proof of whether each insured was paid less than the vehicle’s actual cash value (ACV). Judge Berner dissented, arguing both that the plaintiff alleged a classic pocketbook injury and that the legality of the PSA presented a common question suitable for class resolution.

The decision is significant for insurance and class action practitioners: it clarifies that method-specific attacks on ACV determinations—without plaintiff-by-plaintiff proof that the payout was below true market value—do not satisfy predominance, and that a named plaintiff who accepted the valuation and cannot show underpayment lacks standing to represent a class.

Summary of the Judgment

  • Standing (Article III): The court found that Freeman did not suffer a concrete injury. She accepted Progressive’s valuation, paid only her $2,000 deductible, and presented no evidence that the ACV of her vehicle exceeded the amount paid. Her loan’s shortfall was covered by loan payoff coverage and separate gap insurance. Without a showing of underpayment, she lacked standing. Because standing is required for typicality, her claim could not be typical of the class.
  • Rule 23 Commonality and Predominance: Even if Freeman had standing, class certification failed. The policy obligated Progressive to pay ACV but did not prescribe a valuation method or forbid adjustments. Whether Progressive breached depended on whether each insured received less than true ACV, a determination turning on individualized, vehicle- and market-specific facts. The mere use of the PSA did not establish breach across the class, and common issues did not predominate.
  • Result: The Fourth Circuit reversed the district court’s class certification order.

Factual and Procedural Background

After her 2020 Chevrolet Equinox was declared a total loss, Freeman’s policy entitled her to the vehicle’s ACV, defined by market value, age, and condition. Progressive employed the Mitchell International valuation system, which identifies comparable vehicles and adjusts for features and mileage. When actual sold prices are unavailable and listings come from negotiating dealers, the system applies a PSA—an empirically derived estimate of the typical difference between list and sale prices—to estimate transaction prices.

Progressive’s comparables yielded an average base value of $20,531.63 for Freeman’s vehicle, with no further condition adjustments. Freeman had approximately $30,000 outstanding on her loan; her policy included loan payoff coverage, and she also had separate gap insurance. She accepted Progressive’s valuation and paid the $2,000 deductible. She did not invoke the optional appraisal process.

Freeman later filed suit alleging Progressive underpaid her and similarly situated insureds by using the PSA, and the district court certified a class of South Carolina insureds whose ACV was decreased based on PSA in a Mitchell “Instant Report.” Progressive sought Rule 23(f) appellate review, which the Fourth Circuit granted.

Analysis

Precedents Cited and Their Influence

  • Article III and concrete injury:
    • Dreher v. Experian (4th Cir. 2017) and Spokeo, Inc. v. Robins (U.S. 2016) underscore that a bare statutory or contractual violation without concrete harm does not confer standing.
    • Dinerstein v. Google (7th Cir. 2023) reiterated that a “bare breach” “divorced from any concrete harm” fails Article III.
    • Lewis v. GEICO (3d Cir. 2024) is closely aligned: plaintiffs alleged improper downward adjustments in total-loss valuations but ultimately avoided financial injury; standing was absent.
    • TransUnion LLC v. Ramirez (U.S. 2021) requires that each class member show concrete harm to recover damages.
    • The dissent invoked Netro v. Greater Baltimore Med. Ctr. (4th Cir. 2018) to argue that an obligation to pass recovery to a third party does not negate injury.
  • Rule 23 commonality/predominance framework:
    • Wal-Mart v. Dukes (U.S. 2011): commonality requires common answers apt to drive resolution in one stroke.
    • Tyson Foods v. Bouaphakeo (U.S. 2016): common issues are those susceptible to class-wide proof; individual issues require member-specific evidence.
    • Amchem v. Windsor (U.S. 1997), Lienhart v. Dryvit (4th Cir. 2001): predominance is more demanding than commonality and subsumes it.
    • Comcast v. Behrend (U.S. 2013) and In re Zetia (4th Cir. 2021): plaintiffs must prove Rule 23 compliance with evidentiary proof; not a pleading standard.
    • Gariety v. Grant Thornton (4th Cir. 2004), EQT Production v. Adair (4th Cir. 2014), Krakauer v. Dish Network (4th Cir. 2019), Stafford v. Bojangles’ (4th Cir. 2024): courts must conduct a rigorous analysis and ensure that claimed common issues will produce common, outcome-determinative answers.
  • ACV methodology and class certification in other circuits:
    • Sampson v. USAA (5th Cir. 2023): insurer may meet ACV duty using various methodologies; method-focused attacks often run into predominance problems.
    • Stuart v. State Farm (8th Cir. 2018): where contracts do not specify how ACV must be calculated, the question is whether the method produced a reasonable ACV in each case—an individualized inquiry.
    • Kartman v. State Farm (7th Cir. 2011): uniform evaluative practices do not themselves establish breach; individual facts matter.
    • Lara v. First National Insurance (9th Cir. 2022): predominance failed because determining if each insured was underpaid required person-by-person valuation.
    • Drummond v. Progressive (3d Cir. 2025) and Schroeder v. Progressive (7th Cir. 2025): nearly identical PSA challenges failed predominance; courts must examine whether each insured was paid less than true ACV.
    • The dissent cited Jama v. State Farm (9th Cir. 2024), distinguishing between “condition” and “negotiation” adjustments and suggesting that if a negotiation-type deduction is always unlawful, a class might be certifiable. The majority did not adopt this approach.

Legal Reasoning

1) Standing and Typicality

The majority underscored that Article III standing is a threshold issue even on a Rule 23(f) appeal. Freeman accepted Progressive’s ACV offer, did not invoke the optional appraisal process, and did not submit evidence that her vehicle’s market value exceeded the amount paid. Because her policy deductible would apply in any event, and because loan payoff coverage plus separate gap insurance eliminated out-of-pocket loss on the loan, the court saw no “real-world financial injury.”

Crucially, the policy did not guarantee any specific valuation method; it promised payment of ACV. Progressive’s “Settlement of Claims” clause expressly allowed use of internal or third-party valuation systems. Without proof that she received less than ACV, Freeman alleged, at most, a bare breach theory tied to Progressive’s methodology rather than a concrete underpayment. On this record, the court found no injury in fact and therefore no standing—defeating typicality as well.

The majority’s approach aligns with Lewis v. GEICO (3d Cir. 2024) and Dinerstein (7th Cir. 2023), which require underpayment (or comparable concrete harm) rather than mere disagreement with valuation methodology. The dissent countered that if the PSA is illegal and always depresses valuations, then Progressive owes more, creating a classic pocketbook injury even if a third-party gap insurer ultimately pays or is reimbursed—citing Netro to argue that the obligation to pass recovery to a third party does not erase injury. The majority did not adopt that view on the facts presented.

2) Commonality and Predominance

Turning to Rule 23, the majority emphasized that breach of contract requires proof that Progressive failed to pay ACV and that the insured suffered damages. Because the policies did not require or forbid specific valuation methods, the mere use of a PSA cannot establish breach. Liability turns on whether each insured received less than ACV—an individual inquiry given:

  • Vehicle-specific factors (model, trim, options, aftermarket parts)
  • Usage and history (mileage, accident record)
  • Condition at loss
  • Local market demand (e.g., Charleston v. Greenville pricing)

The court criticized the certified class as encompassing persons who accepted payments, negotiated higher payments, or used appraisal, so long as a PSA affected the Instant Report. Some such members would lack injury entirely, running afoul of TransUnion’s requirement that every damages class member show concrete harm. For class members who did not resolve their claims, each would still need to prove that true ACV exceeded the amount paid—a claim-by-claim “mini-trial.” The court considered PSA usage “essentially irrelevant” to breach absent individualized proof of underpayment, concluding that commonality and predominance were not met.

On this point, the majority aligned with decisions from the Fifth, Seventh, Eighth, and Ninth Circuits (in Lara)—and with the Third and Seventh Circuits’ 2025 PSA decisions (Drummond and Schroeder)—that method-focused challenges to ACV valuations typically cannot be resolved “in one stroke.” The dissent contended that Freeman’s expert embraced all aspects of Progressive’s model except the PSA, and that if the PSA is unlawful categorically, then the class rises or falls together—an approach the Ninth Circuit suggested could be viable in Jama for negotiation-type adjustments. The majority rejected the premise that PSA is categorically unlawful or that its use alone answers breach classwide.

3) The Jurisdictional Debate (Raised by the Dissent)

The dissent argued that once the majority found no standing, it should not have reached class certification at all, invoking the Supreme Court’s jurisdiction-first principle (e.g., Royal Canin U.S.A., Inc. v. Wullschleger, 604 U.S. 22 (2025); Steel Co. v. Citizens for a Better Environment, 523 U.S. 83 (1998)). The majority’s discussion of Rule 23 therefore reads, to the dissent, as advisory. Practitioners should note this procedural tension: while the panel ultimately reversed the certification order, the opinion contains both a standing holding and an alternative Rule 23 analysis that district courts in the Fourth Circuit are likely to treat as controlling guidance.

Impact

  • ACV total-loss class actions face higher certification hurdles in the Fourth Circuit. Plaintiffs challenging valuation methodologies (like PSAs) must still prove underpayment relative to true ACV for each member. Uniform use of a tool or adjustment is insufficient to establish breach or predominance.
  • Standing is a gating issue for named plaintiffs. Insureds who accept payments and cannot demonstrate underpayment—or whose losses are fully offset by loan payoff coverage and gap insurance—risk dismissal for lack of standing. Plaintiffs’ counsel may need concrete valuation evidence that ACV exceeded payout for the named plaintiff from the outset, and subrogation or assignment arrangements where a third-party insurer paid the shortfall.
  • Contract drafting matters. Policies that promise ACV without prescribing a method allow insurers to use a range of valuation systems and adjustments. Plaintiffs attacking a method must show that its use led to an underpayment in fact, not merely that the method exists.
  • Class definition strategy is critical. Overbroad classes that include insureds who accepted, negotiated, or appraised their claims (and thus may have no injury) will founder under TransUnion. Narrower classes focused on insureds who accepted initial valuations without further negotiations or appraisals may still struggle under predominance unless plaintiffs can establish that the challenged adjustment is categorically unlawful and always yields underpayment—an argument the Fourth Circuit’s majority did not accept here.
  • Inter-circuit landscape: The Fourth Circuit’s approach mirrors recent Third and Seventh Circuit decisions rejecting PSA-based classes (Drummond, Schroeder) and is consistent with Fifth, Seventh, Eighth, and Ninth Circuit authority emphasizing individualized ACV proof (e.g., Sampson, Kartman, Stuart, Lara). The dissent’s reliance on Jama highlights a potential pathway in the Ninth Circuit for a narrowly framed “categorically unlawful adjustment” theory, but the Fourth Circuit majority declined to treat PSA as such.
  • Litigation posture going forward: Expect more individualized evidence (e.g., independent appraisals, market data) and fewer “method-only” class theories in ACV cases. Defendants will continue to argue that any breach turns on true ACV at the time of loss, not on valuation tools used to arrive at offers.

Complex Concepts Simplified

  • Actual Cash Value (ACV): The market value of the vehicle immediately before the loss, considering age, condition, features, and local market conditions.
  • Projected Sold Adjustment (PSA): An adjustment applied when the system lacks actual sale prices for comparable vehicles listed by negotiating dealerships. It estimates the typical difference between list and sale prices to approximate the likely transaction price.
  • Gap Insurance vs. Loan Payoff Coverage: Gap insurance (often from a third party) covers the difference between the insurance payout and the remaining loan balance. Loan payoff coverage (here, part of the Progressive policy) adds a percentage of ACV to help satisfy outstanding loans. Neither automatically proves injury; the named plaintiff must still show underpayment relative to true ACV.
  • Standing (Article III): A plaintiff must show a concrete injury caused by the defendant and redressable by the court. A “bare breach” without financial harm generally does not suffice to sue in federal court for damages.
  • Commonality and Predominance (Rule 23): Commonality requires a common question capable of a common answer. Predominance requires that those common questions outweigh individual issues. In ACV cases, whether each insured was underpaid is typically individualized.
  • Appraisal Clause: A contract provision allowing either party to demand an appraisal if they disagree on ACV. It was optional here; the plaintiff did not invoke it. Optionality does not bar suit, but declining appraisal does not prove injury.

Practical Takeaways

  • For plaintiffs:
    • Develop concrete, insured-specific valuation evidence showing true ACV exceeded the payout for the named plaintiff, notwithstanding gap or loan payoff coverage.
    • Consider narrowly tailored classes and a liability theory that does not rely solely on the existence of a methodology, unless you can prove that the adjustment is categorically unlawful and always produces underpayment.
    • Address standing risks where third-party coverage eliminated out-of-pocket loss; explore assignments/subrogation and ensure damages are not speculative.
  • For insurers:
    • Maintain clear policy language authorizing the use of valuation systems and avoid promising specific methods unless intended.
    • Document vehicle- and market-specific factors in the file; such records will underpin individualized defenses to breach and defeat predominance.
    • When opposing class certification, highlight the individualized nature of ACV and any lack of concrete harm across proposed class members.

Conclusion

The Fourth Circuit’s decision establishes an important benchmark for total-loss ACV litigation. It holds that use of a Projected Sold Adjustment, without more, neither creates injury in fact nor furnishes a common, classwide path to proving breach. The touchstone remains whether each insured was paid less than true ACV—an inherently individualized question tied to the specific vehicle and local market at the time of loss. By insisting on concrete injury for standing and individualized proof for predominance, the court aligns the Fourth Circuit with a growing consensus across circuits disfavoring methodology-only class claims in ACV cases.

While the dissent identifies a potential classwide route where a negotiation-type adjustment is categorically unlawful (drawing on the Ninth Circuit’s Jama), the majority’s analysis signals that, in the Fourth Circuit, plaintiffs must move beyond method critiques and marshal evidence of actual underpayment. This decision will likely reshape pleading and certification strategies in automotive total-loss disputes and underscores the continuing vitality of Article III and Rule 23 as rigorous gatekeepers in federal class actions.

Case Details

Year: 2025
Court: Court of Appeals for the Fourth Circuit

Comments