Clippinger v. State Farm Mut. Auto. Ins. Co.

JESSICA CLIPPINGER, on behalf of herself and all others similarly situated, Plaintiff, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE CO., Defendant.

No. 2:20-cv-02482-TLP-cgc

UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TENNESSEE WESTERN DIVISION

November 17, 2020

JURY DEMAND

ORDER DENYING DEFENDANT'S MOTION TO DISMISS OR, IN THE ALTERNATIVE, TO COMPEL APPRAISAL AND STAY

Defendant State Farm Mutual Automobile Insurance Co. moves to dismiss Plaintiff Jessica Clippinger's claims for lack of subject matter jurisdiction and failure to state a claim upon which relief may be granted. (ECF No. 25.) In the alternative, Defendant asks that the Court compel appraisal and stay this action. (Id.) Plaintiff responded in opposition, and Defendant replied. (ECF Nos. 33 & 42.) For the reasons below, the Court DENIES Defendant's motion to dismiss and, in the alternative, to compel appraisal and stay the case. But it does so without prejudice.

BACKGROUND

I. Plaintiff's Allegations

This is a class action brought by Plaintiff on behalf of herself and all others similarly situated. (ECF No. 1-1 at PageID 12.) Plaintiff alleges these facts in her complaint.¹ State Farm sells automobile insurance that provides coverage for property damage to an insured's vehicle. (Id. at PageID 15.) Plaintiff has an insurance contract with Defendant. (Id.; ECF No. 33-1 at PageID 298.) The contract requires Defendant to cover the total loss of her vehicle. (Id.) Defendant may cover that loss by replacing the vehicle or giving Plaintiff the "actual cash value" of the loss vehicle. (Id. at PageID 15-16.)

Plaintiff here owned a 2017 Dodge Grand Caravan SXT 2WD 4-door passenger van. (Id. at PageID 19.) Plaintiff had a wreck. The insurance adjuster considered it a total loss. So she submitted a claim for the total loss of her vehicle, and Defendant provided a total loss valuation for her claim. (Id. at PageID 20.) In determining the loss vehicle's cash value, Defendant calculated the vehicle's fair market value.² (Id. at PageID 16.) But it did not offer Plaintiff the full amount.

Instead, Defendant deducts an amount that reflects "typical negotiation" adjustment. Plaintiff claims that Defendant violates its insurance contracts by relying on "manipulated data and reports" to calculate its payments on total loss claims. (Id.) Plaintiff highlights that Defendant uses a third-party company, Audatex, to conduct a market valuation report. (Id.) Audatex uses a software program, Autosource Market-Driven Valuation ("AMDV"), to calculate the value of a total loss vehicle. (Id.) To determine the loss vehicle's fair market value, theAMDV software looks at itemized internet sales prices for vehicles comparable to the loss vehicle. (Id. at PageID 17.) But rather than using the actual price data for the comparable vehicles, the report applies a deduction "to account for typical negotiation." (Id.) As a result, Plaintiff claims that Defendant pays its insureds less than cash value for their loss vehicles. (Id.)

The negotiation adjustment in Plaintiff's case led to a deduction of 8.5%. (Id. at PageID 17, 20.) The valuation report's only explanation for the adjustment is that "[t]he selling price may be substantially less than the asking price," and so "the asking price has been adjusted to account for typical negotiation according to each comparable price." (ECF No. 1-4 at PageID 58.) The report does not explain how Audatex determined that 8.5% is an appropriate deduction. (ECF No. 1-1 at Page ID 18.) And the report does not include the specific dollar amount that Defendant deducted when determining the actual cash value of Plaintiff's vehicle. (ECF No. 1-1 at PageID 19; see ECF No. 1-4 at PageID 54-62.) Plaintiff alleges that Defendant uses this "unreasonable, inappropriate, and unspecific" negotiation adjustment to "artificially reduce the values of comparable vehicles," and so reduces the actual cash value of the insured's total loss vehicle. (Id. at 16.) What is more, Plaintiff claims that the negotiation adjustment is baseless and goes against industry practice. (Id. at PageID 16-17.)

Plaintiff sues for breach of contract and breach of the covenant of good faith and fair dealing. (Id. at PageID 23-25.) Plaintiff also seeks a declaratory judgment that Defendant's conduct breaches its contracts with its insureds and violates Tennessee law. (Id. at PageID 26-27.)

Meanwhile Defendant argues that this lawsuit is premature because the insurance contract says that Plaintiff must seek an independent appraisal before she can even raise this issue. And so the Court next discusses the alleged appraisal provision.

II. The Appraisal Provision

Defendant argues that this Court should dismiss Plaintiff's claims because she failed to complete the appraisal process before suing as State Farm Policy Form 9842A ("Policy Form") requires. (See ECF No. 26-1.) Under the Policy Form's appraisal provision:

(1) The owner of the covered vehicle and we³must agree upon the actual cash value of the covered vehicle. If there is disagreement as to the actual cash value of the covered vehicle, then the disagreement will be resolved by appraisal upon written request of the owner or us, using the following procedures:

(a) The owner and we will each select a competent appraiser.

(b) The two appraisers will select a third competent appraiser. If they are unable to agree on a third appraiser within 30 days, then either the owner or we may petition a court that has jurisdiction to select the third appraiser.

(c) Each party will pay the cost of its own appraiser, attorneys, and expert witnesses, as well as any other expenses incurred by that party. Both parties will share equally the cost of the third appraiser.

(d) The appraisers shall only determine the actual cash value of the covered vehicle. Appraisers shall have no authority to decide any other questions of fact, decide any questions of law, or conduct appraisal on a class-wide or class representative basis.

(e) A written appraisal that is both agreed upon by and signed by any two appraisers, and that also contains an explanation of how they arrived at their appraisal, will be binding on the owner of the covered vehicle and us.

(f) We do not waive any of our rights by submitting to an appraisal.

(Id. at PageID 187) (emphasis in original). What is more, the Policy Form provides that "[l]egal action may not be brought against [Defendant] until there has been full compliance with all the provisions of this policy." (Id. at PageID 196.)

But Plaintiff denies ever receiving a copy of the Policy Form or agreeing to that provision. (ECF No. 33-1 at PageID 298.) She renewed her insurance policy periodically but did not receive a copy of the full policy booklet upon renewal. (Id. at PageID 299.) In fact,Defendant did not send Plaintiff a copy of the Policy Form until after she sued, even though her attorney requested a copy before suing. (See ECF No. 33-2.)

Defendant now argues that Plaintiff lacks standing to sue because she did not first participate in the appraisal process, as required by the Policy Form. (ECF No. 26 at PageID 153.) Next Defendant argues that, without engaging in the appraisal process, Plaintiff cannot properly allege any damages. (Id. at PageID 154-58.) Defendant also argues that the Court should dismiss Plaintiff's declaratory judgment claim because it duplicates Plaintiff's breach of contract claim. (Id. at PageID 158-61.) Finally, Defendant argues that, in the alternative, the Court should compel appraisal and stay this action. (Id. at PageID 161-64.)

The Court addresses each argument in turn.⁴

SUBJECT MATTER JURISDICTION UNDER THE CLASS ACTION FAIRNESS ACT

Subject matter jurisdiction concerns "the courts' statutory or constitutional power to adjudicate the case." Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 89 (1998) (emphasis in original). Defendant removed this case to federal court from Shelby County Circuit Court under the Class Action Fairness Act ("CAFA"), 28 U.S.C. §§ 1332(d), 1441(a)-(b), and 1453. (ECF No. 1 at PageID 1.) The Court finds that subject matter jurisdiction under CAFA is proper.

Under CAFA, federal courts have original jurisdiction over a class action if: (1) the class has more than 100 members; (2) the parties are minimally diverse; and (3) the matter in controversy exceeds the sum or value of $5,000,000. 28 U.S.C. § 1332(d)(2), (d)(5)(B); see alsoStandard Fire Ins. Co. v. Knowles, 568 U.S. 588, 592 (2013). CAFA's provisions "should be read broadly, with a strong preference that interstate class actions should be heard in federal court if properly removed by any defendant." Graiser v. Visionworks of Am., Inc., 819 F.3d 277, 287 (6th Cir. 2016) (quoting S. Rep. 109-14, at 43 (2005)). And to remove a case under CAFA, a defendant must file notice of removal with "a short and plain statement of the grounds for removal."⁵ 28 U.S.C. § 1446(a); Dart Cherokee Basin Operating Co. v. Owens, 574 U.S. 81, 87 (2014) ("Section 1446(a) tracks the general pleading requirement stated in Rule 8(a) of the Federal Rules of Civil Procedure.").

The parties here satisfy CAFA's statutory requirements. First, Plaintiff filed this case as a class action. (See ECF No. 1-1 at PageID 20.) She also alleged that the class has "at least one hundred" members. (Id. at PageID 21.) Second, the parties are minimally diverse. Minimal diversity requires that "any member of a class of plaintiffs is a citizen of a State different from any defendant." § 1332(d)(2)(A). Plaintiff and all proposed class members here are citizens of Tennessee. (ECF No. 1-1 at PageID 14.) And Defendant alleges that it is a citizen of Illinois. (ECF Nos. 1 at PageID 5; 1-2 at PageID at 29.) The parties are therefore minimally diverse.

And third, Plaintiff meets the amount in controversy requirement. To see if the class meets the amount in controversy requirement, courts look to the aggregate amount in controversy. Standard Fire Ins. Co., 568 U.S. at 592 ("[T]he statu...