Labrier v. State Farm Fire & Cas. Co.

147 F.Supp.3d 839

Amanda M. Labrier, individually, and on behalf of all others similarly situated, Plaintiff,

v.State Farm Fire and Casualty Company, Defendant.

No. 2:15-cv-04093-NKL

United States District Court, W.D. Missouri, Central Division.

Signed November 30, 2015

Christopher E. Roberts, David T. Butsch, Butsch Roberts & Associates LLC, Clayton, MO, Joe D. Jacobson, Jacobson Press Fields, P.C., T. Joseph Snodgrass, Larson King, LLP, St. Paul, MN, for Plaintiff.

Heidi Dalenberg, Joseph A. Cancila, Jr., Patricia T. Mathy, Tal C. Chaiken, Schiff Hardin LLP, Chicago, IL, Daniel E. Wilke, Wilke & Wilke, P.C., St. Louis, MO, for Defendant.

ORDER

NANETTE K. LAUGHREY, United States District Judge

Defendant State Farm Fire and Casualty Company moves to dismiss the first amended petition for failure to state a claim. [Doc. 21.] The motion is denied.

I. Background¹

Plaintiff Amanda LaBrier's house was damaged in a hail storm. The damage was a covered loss under LaBrier's State Farm insurance policy, and LaBrier made a claim under the section of the policy that provided for payment to be made prior to repair or replacement.

A State Farm adjuster gave LaBrier an estimate of the total cost of repair, including costs for materials, labor, and sales tax on the materials. After subtracting $2,009.79 for depreciation, and $1,421.00 for the deductible, State Farm paid LaBrier the net amount of $4,657.28. The dispute in this case involves State Farm's depreciation of certain labor costs. State Farm depreciated “mixed” costs, that is, costs representing both labor and materials, such as removing and replacing a gutter and downspout. [Id. , p. 18, ¶ 16.] State Farm did not depreciate “pure” labor costs, such as the labor cost of removing, hauling, and disposing of roof shingles. [Doc. 1-1, p. 18, ¶ 17.] LaBrier alleges State Farm breached its obligations under the policy when it depreciated mixed costs, because in doing so, it improperly depreciated the cost of labor.

The Declarations portion of the policy provides in part:

SECTION I—LOSS SETTLEMENT

Only the Loss Settlement provisions shown in the Declarations apply. We will settle covered property losses according to the following.

COVERAGE A—DWELLING

1. Al—Replacement Cost Loss Settlement—Similar Construction

a. We will pay the cost to repair or replace with similar construction and for the same use on the premises shown in the Declarations, the damaged part of the property covered under SECTION I—COVERAGES, COVERAGE A—DWELLING, except for wood fences, subject to the following:

(1) until actual repair or replacement is completed, we will pay only the actual cash value at the time of the loss of the damaged part of the property, up to the applicable limit of liability shown in the Declarations, not to exceed the cost to repair or replace the damaged part of the property ;

(2) when the repair or replacement is actually completed, we will pay the covered additional amount you actually and necessarily spend to repair or replace the damaged part of the property, or an amount up to the applicable limit of liability shown in the Declarations, whichever is less;

(3) to receive any additional payments on a replacement cost basis, you must complete the actual repair or replacement of the damaged part of the property within two years after the date of loss, and notify us within 30 days after the work has been completed;

* * *

[Doc. 21-1, p. 29, Policy, Form FP 7955, emphasis added.]²

The policy contains no definitions of actual cash value or depreciation. The estimate form State Farm gave LaBrier referred to the “Net Actual Cash Value Payment (“ACV”)” and defined “ACV” as “[t]he repair or replacement cost of the damaged part of the property less depreciation and deductible .” [Doc. 1-1, p. 18, ¶ 11, emphasis in original.] The form also included a definition of “depreciation”: “[t]he decrease in the value of property over a period of time due to wear, tear, condition, and obsolescence. A portion or all of this amount may be eligible for replacement cost benefits.” [Id. , p. 18, ¶ 12.]

LaBrier seeks to represent a class of insureds whose payments were reduced by State Farm through depreciation of some costs of labor, for the period from March 30, 2005 to the date of trial. [Id. , p. 20, ¶ 26; p. 23, ¶ 38.]

II. Discussion

A. Count II, breach of contract

State Farm argues that LaBrier's breach of contract claim fails because it does not allege facts to show the “actual cash value” of LaBrier's insured loss. Effectively, State Farm contends that “actual cash value” means the fair market value of the property before and after the insured loss. Therefore, according to State Farm, LaBrier's complaint fails because it calculates “actual cash value” based on replacement cost minus depreciation, a calculation that may or may not reflect the fair market value of the property before and after the insured loss.

State Farm also seeks dismissal because LaBrier's complaint does not show whether LaBrier replaced the damaged property and received a replacement value payment. State Farm suggests that such a payment could fully compensate LaBrier because it would normally repay her any amount previously withheld for depreciation, regardless of whether the depreciation is based on materials or labor.

The interpretation of an insurance policy is a question of law to be determined by the Court. Mendota Ins. Co. v. Lawson , 456 S.W.3d 898, 903 (Mo.Ct.App.2015). Missouri courts read insurance contracts “as a whole and determine the intent of the parties, giving effect to that intent by enforcing the contract as written.” Thiemann v. Columbia Pub. Sch. Dist. , 338 S.W.3d 835, 840 (Mo.Ct.App.2011). The language used in the policy will be afforded the meaning that would ordinarily be understood by the lay person who bought and paid for the policy. Krombach v. Mayflower Ins. Co., Ltd. , 827 S.W.2d 208, 210–11 (Mo.1992) (en banc)

If an ambiguity exists, the policy language will be construed against the insurance company. Gulf Ins. Co. v. Noble Broadcast , 936 S.W.2d 810, 814 (Mo.1997) (en banc); 30 MO. PRAC., INSURANCE LAW & PRACTICE § 1:22 (2d ed. 2014) (the most favorable construction to the insured must be adopted). There are at least two reasons for doing so. “First, insurance is designed to furnish protection to the insured, not defeat it.” Krombach , 827 S.W.2d at 210–11 (citation omitted). “Second, as the drafter of the insurance policy, the insurance company is in the better position to remove ambiguity from the contract.” Id.

Ambiguity exists when the language is reasonably open to different constructions. Cowin v. Shelter Mut. Ins. Co. , 460 S.W.3d 76, 79 (Mo.Ct.App.2015) ; Grable v. Atlantic Cs. Ins. Co. , 280 S.W.3d 104, 107 (Mo.Ct.App.2009). “If a conflict arises between a technical definition of a term and the meaning of the term which would reasonably be understood by the average lay person, the lay person's definition will be applied unless it is obvious the technical meaning was intended.” Cowin , 460 S.W.3d at 79.

1. Does Missouri have a common law definition of actual cash value?

The LaBrier policy does not define actual cash value, nor does it provide a method for calculating an actual cash value payment, but State Farm argues that Missouri law supplies the missing definition of actual cash value. For this proposition, State Farm relies primarily on Wells v. Mo. Property Ins. Placement Facility , 653 S.W.2d 207 (Mo.1983) (en banc), and Porter v. Shelter Mut. Ins. Co. , 242 S.W.3d 385, 390 (Mo.Ct.App.2008). State Farm suggests that those cases define actual cash value as the fair market value of the insured property before and after the loss. It further argues that Missouri law requires the insured to plead and prove actual cash value. [Doc. 22, p. 12, citing Fire Ins. Exch. v. Bowers , 994 S.W.2d 110, 112 (Mo.Ct.App.1999) ]. In contrast, LaBrier argues that actual cash value means replacement cost minus depreciation, which was the definition used by State Farm to calculate the actual cash value payment it made to LaBrier.

The Court concludes that Missouri law does not supply the definition of actual cash value as that term is used in the LaBrier policy. It is true that the Missouri Supreme Court in Wells held that for purposes of the insurance policy in dispute there, actual cash value meant the before and after fair market value of the insured loss. But in Wells the damage to the insured property was caused by fire and therefore involved an interpretation of Mo. Rev. Stat. § 379.140 and § 379.150, two statutes that deal with damage caused by fire. Specifically the Missouri Supreme Court stated:

There is no express indication of how ‘the damage done on the property’ is to be calculated, but [Missouri] courts have long held that under that section [§ 379.140 ] and its predecessors[,] damages are to be measured by the difference between the reasonable values of the property immediately before and immediately after the casualty.

Id. at 210 (citing Tinsley v. Aetna Ins. Co. of Hartford, Conn. , 205 S.W. 78, 81 (Mo.Ct.App.1918) ) (other citations omitted). Neither Wells nor any case cited by State Farm defines actual cash value except when the insured loss resulted from fire and Mo. Rev. Stat. § 379.140 or § 379.150 were found to be applicable. Those cases are not applicable here because LaBrier's insured loss resulted from hail, not fire.

Therefore, the only on point guidance the Court has is the Eighth Circuit Court of Appeals' decision in Cincinnati Ins. Co. v. Bluewood , 560 F.3d 798 (8th Cir.2009). In that case, the Eighth Circuit was squarely presented the question of whether § 379.150's definition of actual cash value controlled when a loss was caused by something other than fire. The insured suffered a partial loss due to water damage. The jury was instructed that actual cash value meant “the cost to replace the damaged property less a deduction that reflects depreciation, age, condition and obsolescence, if...