Mitchell v. State Farm Fire & Cas. Co., : 3:17cv00170-M

335 F.Supp.3d 847

Lorine MITCHELL, Plaintiff

v.STATE FARM FIRE AND CASUALTY COMPANY, Defendant

No.: 3:17cv00170-M

United States District Court, N.D. Mississippi, Oxford Division.

Signed September 24, 2018

George Patrick Murphy, Murphy Murphy LLC, Marion, IL, James Brandon McWherter, Gilbert Russell McWherter Scott Bobbitt PLC, Franklin, TN, David Malcolm McMullan, Jr., Sarah Sterling Starns, Don Barrett, P.A., Lexington, MS, Thomas Joseph Snodgrass, Pro Hac Vice, David Charles Linder, Larson King LLP, St. Paul, MN, for Plaintiff.

Hal S. Spragins, Lawrence John Tucker, Jr., Hickman, Goza & Spragins, PLLC, Oxford, MS, Joseph Anthony Cancila, Jr., Mariangela Seale, Patricia T. Mathy, Tal C. Chaiken, Heidi Dalenberg, Pro Hac Vice, Jacob Lenga Kahn, Pro Hac Vice, Riley Safer Holmes & Cancila LLP, Chicago, IL, for Defendant.

MEMORANDUM OPINION AND ORDER

MICHAEL P. MILLS, UNITED STATES DISTRICT JUDGE

Presently before the Court is Defendant's Rule 12(b)(6) Motion to Dismiss for Failure to State a Claim [8]. Plaintiff filed a response in opposition. The Court has reviewed and considered the parties' submissions and is now prepared to rule.

Factual Background

Plaintiff, Lorine Mitchell, maintains a residence in Waterford, Mississippi. Plaintiff insured the dwelling under a Homeowners Policy provided by Defendant, State Farm Fire and Casualty Company, and paid the requisite annual premiums for the coverage. The policy provides the following provisions for structural damages claims:

COVERAGE A – DWELLING

1. A1 – 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 Declarations , the damaged part of the property covered under SECTION 1 – COVERAGES, COVERAGE A – DWELLING , except for wood fences, subject to the following:

(1) until actual repair or replacement is completed, we will pay out 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 ....

According to Defendant, obtaining benefits under the policy is a "two-step" process. First, Defendant initially pays the actual cash value ("ACV") "up to" and "not to exceed" the insured's coverage limit or the cost to repair. Then, only after repairs have been completed, the insured may request and recover additional funds to cover excess necessary expenses incurred.

In Spring 2017, while insured under the policy, Plaintiff's dwelling suffered storm damage. On or about May 13, 2017, Plaintiff notified Defendant of the loss and made a claim under the policy. Defendant then had an adjuster inspect the property to determine the loss and damages suffered. The adjuster determined that the damage was covered under the policy and prepared an initial estimate for the cost of repair.

On May 24, 2017, Defendant notified Plaintiff that the payment she was receiving was the ACV as calculated by Defendant. ACV, defined in the Building Estimate Summary Guide provided to Plaintiff after a claim, is the "repair or replacement cost of the damaged part of the property less depreciation and deductible." In calculating ACV, the Defendant deducted depreciation from the replacement cost value (RCV). RCV and depreciation are also defined in the Building Estimate Summary Guide. RCV is the "[e]stimated cost to repair or replace damaged property." Depreciation is "[t]he decrease in the value of property over a period of time due to wear, tear, condition, and obsolescence."

Defendant's initial repair cost estimate listed the ACV for Plaintiff's claim as $646.19. This number was derived by taking the RCV, $3,246.42, and subtracting both the estimated depreciation of $1,600.23 and the $1,000 deductible. The estimate lists the inspected areas separately and includes a line item for the estimated RCV; the applied tax; the age, life, and condition of the property; the percentage applied for depreciation; and the ACV.

Plaintiff alleges that Defendant's method of calculating the ACV resulted in payment significantly lower than the amount Plaintiff should have received under the Policy. Plaintiff argues that Defendant, in calculating the ACV, depreciated costs associated with labor when labor is not susceptible to aging, wearing, or tearing. Specifically, certain line items, such as line item 2 (composition shingle roofing), accounted for both labor and materials and then the estimated depreciation percentage was applied to the entire line item. However, other line items that listed pure labor, such as line item 1 (remove shingle roofing), were not subjected to labor cost depreciation. Based on Defendant's practice to depreciate labor costs, Plaintiff contends that her ACV payment was less than the amount she was entitled to receive under the policy.

Plaintiff, in her complaint, alleges that: Defendant breached a contractual duty to pay Plaintiff and members of the proposed class the true ACV of their claims when Defendant depreciated labor costs (Count I); Defendant was negligent and/or grossly negligent when it breached its duty to "fully, fairly, adequately, and correctly investigate and adjust Plaintiff's loss and claims" by conducting unreasonable adjustments, by failing to fully pay the true ACVs of claims, and by arbitrarily interpreting the Policy (Count II); and Defendant's conduct constituted bad faith because Defendant failed to fully inform Plaintiff and members of the proposed class of their rights under the policy, failed to properly adjust, and deprived those insured of the true amounts owed under the policy by depreciating labor costs (Count III). Plaintiff also seeks a declaratory judgment decreeing that the policy prohibits Defendant from depreciating labor costs when calculating losses (Count IV). Pursuant to Federal Rule of Civil Procedure 12(b)(6), Defendant now moves to dismiss Plaintiff's entire complaint.

Standard

Before the Court can grant a motion to dismiss, Defendant must show that Plaintiff has not met the relevant pleading standard to state a claim. Defendant must show that Plaintiff's complaint fails to contain enough facts to "state a claim to relief that is plausible on its face." Ashcroft v. Iqbal , 556 U.S. 662, 697, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (citing Bell Atlantic Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). A claim is facially plausible "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. at 678, 129 S.Ct. 1937. It is not necessary that a complaint contain detailed factual allegations, but it must set forth "more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Colony Ins. Co. v. Peachtree Constr., Ltd. , 647 F.3d 248, 252 (5th Cir.2011) (quoting Twombly , 550 U.S. at 555, 127 S.Ct. 1955.

Upon reviewing a motion to dismiss pursuant to Rule 12(b)(6), the Court must limit its examination to the complaint, documents attached to the complaint, and documents accompanying the motion to dismiss that reference the complaint. Lone Star Fund V (U.S.), LP v. Barclays Bank PLC , 594 F.3d 383, 387 (5th Cir.2010). The Court must liberally construe the complaint in the light most favorable to Plaintiff and accept all well-pleaded facts as true. Woodard v. Andrus , 419 F.3d 348, 351 (5th Cir.2005).

Discussion

Defendant, State Farm, moves to dismiss the Plaintiff's complaint in its entirety for failure to state a claim pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. Plaintiff asserts claims against the Defendant for declaratory judgment and relief; breach of contract; negligence and/or gross negligence; and bad faith. The Court finds that the facts alleged by the Plaintiff in her complaint are sufficient for a reasonable jury to find plausibility in each of her claims.

1) Plaintiff Has Sufficiently Pled Her Breach of Contract Claim

Assuming the facts in the complaint as true and construing them in the light most favorable to the plaintiff, the Court finds Plaintiff to have sufficiently pled a breach of contract claim. In a diversity action, a federal district court must apply the substantive law of the forum state. Mills v. Davis Oil Co. , 11 F.3d 1298, 1304 (5th Cir. 1994). Under Mississippi law, a breach of contract claim requires a showing of "(1) ‘the existence of a valid and binding contract,’ and (2) a showing ‘that the defendant has broken, or breached it." Maness v. K & A Enterprises of Mississippi, LLC. (Miss. 2018), 2018 WL 774010 *8 (citing Bus. Commc'ns, Inc. v. Banks , 90 So.3d 1221, 1224 (Miss. 2012).

"Mississippi treats insurance policies as contracts, which ‘are to be enforced according to their provisions.’ " State Farm Mut. Auto. Ins. Co. v. LogistiCare Solutions, LLC. , 751 F.3d 684, 688 (5th Cir. 2014) (quoting Noxubee Cnty. Sch. Dist. v. United Nat'l Ins. Co. , 883 So.2d 1159, 1166 (Miss. 2004) ). A contract "must be interpreted as written" only if it is "clear and unambiguous." State Farm Mut. Auto. Ins. Co. v. LogistiCare Solutions, LLC. , 751 F.3d 684, 688 (5th Cir. 2014) (quoting U.S. Fid. & Guar. Co. of Miss. v. Martin , 998 So.2d 956, 963 (Miss. 2008). Ambiguity exists when the "policy language is susceptible of two or more...