Imagine a scenario where insurance companies and other businesses could potentially dismiss class-action lawsuits early on because some claimants haven’t suffered direct harm. This possibility may soon become reality.
The U.S. Supreme Court is set to decide a case that could reshape the class action landscape significantly. The court has agreed to determine whether courts can certify class actions that include members who haven’t experienced tangible harm. This ruling, expected around mid-2025, could fundamentally change litigation strategies for insurance companies, financial institutions, and businesses across numerous industries that face high-stakes lawsuits.
On January 24, 2025, the Supreme Court granted certiorari in Lab. Corp. of Am. Holdings v. Davis. The case centers on a core issue in class action litigation: whether a federal court can certify a class action under Federal Rule of Civil Procedure 23(b)(3) if some proposed class members lack Article III standing.
A Fragmented Legal Landscape
The Supreme Court’s ruling will carry significant weight, especially for insurance carriers often targeted by class actions. This issue is a direct result of the 2021 decision in TransUnion LLC v. Ramirez. In TransUnion, the Supreme Court declared that “[e]very class member must have Article III standing in order to recover individual damages.” The TransUnion ruling, however, left open a crucial question: Can a class be certified if it includes members who haven’t been injured?
In the years since TransUnion, federal courts of appeals have diverged in their interpretations. Some circuits, such as the Second and Eighth Circuits, have determined that Article III prevents class certification if any class members lack standing. Conversely, other circuits, like the First and D.C. Circuits, have allowed certification as long as the class doesn’t contain more than a minimal number of members without standing. The Ninth Circuit has adopted a more flexible stance, even rejecting the premise that Rule 23 forbids certification of a class that may include more than a minimal number of uninjured members.
The Supreme Court’s decision in LabCorp will resolve this split and clarify when and how class member standing must be established.
Impact on the Insurance Industry
For insurers, the Supreme Court’s ruling carries considerable implications, shaping how the industry manages risk and liability. The insurance industry is frequently the target of class-action litigation, ranging from cases alleging improper claims handling to premium overcharges and other widespread issues. If the Court rules against certifying classes with uninjured members, insurers may gain a powerful tool to defeat class actions early, which could drastically reduce litigation costs and exposure to significant damages.
Conversely, if the Supreme Court adopts a more permissive stance, the insurance industry will likely continue to face large-scale class actions, commonly involving groups that include members who suffered no actual harm. In such cases, courts might increasingly rely on statistical modeling or claims process analysis to distinguish between the injured and uninjured during later stages of litigation.
Beyond direct litigation exposure, the ruling could also impact how insurers structure policies and handle claims. If class actions remain viable despite the inclusion of uninjured members, insurers might be motivated to adjust risk assessments, modify coverage exclusions, or revise premium structures to help mitigate possible litigation risks.
Implications for Other Industries
While the insurance industry has significant exposure, the Supreme Court’s decision has broader implications across various sectors, including finance, pharmaceuticals, and technology. Companies in these areas frequently encounter consumer class actions where only some plaintiffs experience concrete damages. If the Supreme Court rules against certifying such classes, many businesses might be able to resist large-scale litigation more effectively.
Additionally, businesses that provide services to class action defendants—such as litigation funders, data analytics firms, and expert witnesses—may need to rethink their strategies. A more restrictive ruling may then reduce the volume of class action work, whereas a broader interpretation of class certification could maintain or expand opportunities in this space.
Potential Legislative Response
Regardless of the Supreme Court’s decision, legislative bodies might seek to intervene. If the ruling drastically curtails class actions, consumer advocacy groups and some legislators may advocate for reforms to allow broader class certification. Conversely, if the high court allows more lenient certification standards, business-friendly lawmakers might pursue changes to federal or state laws to limit class actions in high-risk industries.
A ruling that favors stricter standing requirements could also spur state-level action, especially in jurisdictions known for plaintiff-friendly class action laws. In states like California, where courts have historically been welcoming to consumer class actions, plaintiffs might attempt to bring claims under state laws with lower standing thresholds.
What’s Next?
The Supreme Court has established an accelerated briefing schedule for the LabCorp case. The petitioner’s merits brief was due March 5, 2025, the respondents’ brief is due March 31, and the reply brief is due by April 21. Given this schedule, a ruling can be expected by June or July 2025.
A decision barring certification of classes with even a minimal number of uninjured members could be a significant shift for defendants. Such a ruling would raise the bar for class actions and reduce overall liability risks. A ruling that grants some flexibility for uninjured members, on the other hand, could solidify the Ninth Circuit’s approach and maintain a more plaintiff-friendly landscape. LabCorp is poised to affect class certification doctrine and define the future of aggregate litigation in the U.S. Insurance companies will be wise to monitor this case closely.
