Arkansas Supreme Court Affirms Class Certification Over Progressive’s Med‑Pay ‘Code 563’ Adjustments

The Arkansas Supreme Court on Oct. 3, 2024 affirmed a Pope County Circuit Court order certifying a class of insureds who say Progressive Northwestern Insurance Company reduced Med‑Pay (medical‑expense) payments by applying a uniform “Code 563” adjustment tied to secondary health insurance. The class covers Arkansas insureds whose Med‑Pay claims were adjusted with Code 563 and who received less than their policy limits between Feb. 16, 2017, and Sept. 28, 2023.

The issue centers on Arkansas’ Med‑Pay statute and insurance rules. Ark. Code Ann. § 23‑89‑202 and the Arkansas Insurance Commission’s guidance require Med‑Pay to provide primary coverage for medical expenses following an automobile accident “without consideration of other insurance,” but the complaint alleges Progressive’s internal “Guidelines for Health Insurance Payments—State Specific” directed use of Code 563 to align Med‑Pay reimbursements with amounts paid or expected to be paid by an insured’s health insurer, reducing payments below billed amounts.

Misty Huddleston filed the suit on behalf of her minor son and similarly situated insureds after a Med‑Pay claim was adjusted using Code 563. Huddleston sought class certification, a declaration that the adjustment practice is unlawful, and damages for breach of contract, arguing Progressive’s policy promised Med‑Pay benefits unadjusted for secondary insurance payments. Progressive appealed the certification order, arguing the class‑action prerequisites of commonality, predominance, typicality, and superiority were not met.

Associate Justice Shawn A. Womack, writing for the court, applied Arkansas Rule of Civil Procedure 23 and affirmed the circuit court’s findings on the four contested prerequisites. The court explained that a single common question—whether the 563‑Code adjustment practice is lawful under Arkansas insurance law—sufficed for commonality because the practice is alleged to be uniformly applied to all class members. The opinion observed that “[t]he factual and legal basis of Defendant’s alleged liability are common to all members of the Class and represent a common cause of action to Plaintiff and the Class members.”

On predominance, the court said the alleged common wrong—the uniform calculation method that reduced Med‑Pay benefits based on secondary payments—“dominates the case” and can be resolved on a class‑wide basis even if individual damages inquiries follow. The court rejected Progressive’s argument that variations in who received payments (provider, insured, or insurer) or differences in damages defeated predominance, citing precedent that differing damage amounts do not negate predominance when a uniform company practice is at issue.

The court also held Huddleston satisfied typicality because her claim arose from the same course of conduct—the 563 Code adjustment practice—that gives rise to the claims of other class members. Finally, the court found class treatment superior to dozens or hundreds of individual suits that would duplicate litigation over the same adjustment practice and risk inconsistent outcomes.

The Supreme Court therefore affirmed the circuit court’s class‑certification order. The opinion does not resolve the merits of whether Progressive’s adjustment practice violates Arkansas law; it holds only that the case may proceed as a class action so the common legal question can be decided for the class as a whole.

Background and procedural posture: the appeal arose from Pope County Circuit Court cause No. 58CV‑22‑74, presided over by the Hon. Jack “Jay” T. Patterson II. The Supreme Court’s decision cites Ark. R. Civ. P. 23 and multiple controlling Arkansas precedents on class certification standards. Counsel of record include Kymberly Kochis and Tracey K. Ledbetter for appellant Progressive Northwestern Insurance Company, and James A. Streett, Joe P. Leniski, and Brian G. Brooks for the appellees.