Speculative Damages not Legally Cognizable

Class Action for Increased Premiums Fails

Insurance is a promise to indemnify a person insured against specified risks of loss. Insurance premiums are set by the insurer based upon the risks of loss anticipated by an actuarial study of the costs of particular risks in an area. The premiums selected by insurers are required, in most states, to be approved by the state and vary from one insurer to another and involve multiple issues used by the insurer’s actuaries who calculate the proper premium to allow for the insurer to profit from taking the risk of issuing an insurance policy.

In Matt Meier; Sheryl Meier; Kai Bach, on behalf of themselves and all others similarly situated v. Chesapeake Operating L.L.C.; Devon Energy Production Company, LP; Midstates Petroleum Company LLC; New Dominion, Llc; Range Production Company, LLC; Special Energy Corporation; White Star Petroleum, LLC, United States Court of Appeals for the Tenth Circuit, No. 18-6152, (D.C. No. 5:17-CV-00703-F) (June 21, 2019) several Oklahoma homeowners brought a class-action lawsuit against operators of wastewater disposal wells for hydraulic fracturing operations. The suit alleged the injection wells were significantly increasing seismic activity across large portions of Oklahoma but did not seek damages resulting from earthquakes. Rather, the only damages the homeowners sought were the increased costs of obtaining and maintaining earthquake insurance. The district court dismissed the lawsuit for failure to state a claim, reasoning that Oklahoma law does not permit recovery of increased insurance premiums stemming from a defendant’s creation of risk where plaintiffs have not suffered any actual earthquake damage to their persons or property.


The defendants are seven oil and gas companies whose hydraulic fracturing operations in Oklahoma involve the injection of wastewater deep into the ground. The homeowners allege that the Defendants caused an unprecedented rise in Oklahoma earthquake activity. This increase in earthquake activity, they alleged, “has caused some earthquake insurance companies to hike their premiums by as much as 260 percent in the last three years alone, and many companies have ceased writing new insurance policies.” (italics added)

All of the defendants moved to dismiss the homeowners’ complaint arguing the homeowners lacked standing to bring their suit and had failed to state a claim for relief. The district court held the homeowners did have standing to sue, but it dismissed their suit for failure to state a claim, predicting that the Oklahoma Supreme Court, if confronted with the issue, would find the relief requested by plaintiffs not legally cognizable under the circumstances present in the case at bar.”


Certification to Oklahoma Supreme Court

Where a district court declines to certify a question, a motion for certification may be brought independently and anew to the court of appeals. Such a motion requires the appellate court to determine whether certification is appropriate without regard to the district court’s assessment.

For an appellate court to decide whether to certify a case to the state Supreme Court, the federal appellate court must find, first, that the question presented is clearly determinative of the case at hand, since it is the ground on which the district court granted the defendants motion and the sole substantive question on appeal. Second, the court must determine whether the question is “sufficiently novel.” Admittedly, the question whether a plaintiff may collect damages for increased insurance premiums absent any physical damage is novel insofar as the Oklahoma Supreme Court has not specifically addressed it. However, because the Tenth Circuit could pursue a clear and principled course without troubling the Oklahoma Supreme Court for guidance, the second factor weighs against certification.

Damages for Increased Insurance Premiums

The district court dismissed the homeowners’ lawsuit for failure to state a claim, reasoning that Oklahoma law does not recognize a claim for increased insurance premiums based on a risk that “has not materialized”—that is, where plaintiffs have suffered no damage to their homes or their persons.

Although no Oklahoma authority specifically addresses the question at hand, other states have consistently failed to recognize a cause of action for increased insurance premiums based on a tortfeasor’s negligence. The Tenth Circuit, after reviewing authorities from across the country, concluded that it is highly unlikely the Oklahoma Supreme Court would allow proportional recovery for unmaterialized risk here, given its refusal to extend the loss-of-a-chance doctrine elsewhere.

Injury-in-fact for standing purposes simply requires that the plaintiff have a sufficient personal stake in the outcome of the litigation; it in no way depends on the merits of the claim. In contrast, the “injury” required for purposes of a motion to dismiss is one that satisfies the damage element of the plaintiff’s tort claim under Oklahoma law. Of course, an essential element in every common-law negligence-based tort claim is the occurrence of damage proximately caused by the breach of an alleged duty. The homeowners did not adequately allege such an injury under Oklahoma law.

Oklahoma courts have repeatedly recognized that where it is shown that some damage has resulted from a defendant’s wrongful act, uncertainty as to the exact amount is no reason for denying damages altogether. But that principle is inapposite in this case where the homeowners have failed to plead any legally cognizable harm.

The question presented is not simply what damages the homeowners are entitled to, but, rather, whether the sole “relief” they request in their complaint “is legally cognizable.” Because the homeowners pleaded no legally cognizable claim for relief, the district court properly dismissed their complaint.


No one should be able to obtain damages from a defendant whose actions, even if negligent, caused no direct physical damage to the plaintiff. In this case the plaintiffs asked the court to allow them to collect speculative damages that might require the plaintiffs to pay higher earthquake premiums. Since such speculative damages are not cognizable is like suing a plaintiff for injuring a baby that might be born in the future when the plaintiff is not pregnant.

© 2019 – Barry Zalma

This article, and all of the blog posts on this site, digest and summarize cases published by courts of the various states and the United States.  The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 50 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Over the last 51 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

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About Barry Zalma

An insurance coverage and claims handling author, consultant and expert witness with more than 48 years of practical and court room experience.
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