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

• Decision Date: 18 April 2005
• Docket Number: No. 04-60577.,04-60577.
• Citation: 406 F.3d 747
• Parties: Charles BLAKELY; Cassandra Burks; Essie Donnelly; Terry Lockhart; Rita Marshall; Joetta Shears, Plaintiffs-Appellants, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY; et al., Defendants, State Farm Mutual Automobile Insurance Company, Defendant-Appellee. Jimmy Blakely; Lee House; Arlene Jones; Thomas McCoy; Scherrie Payne; James Pittman; Sam Short; Mike Uzzle; Bobbie Vaughn, Plaintiffs-Appellants, v. State Farm Mutual Automobile Insurance Company; et al., Defendants, State Farm Mutual Automobile Insurance Company, Defendant-Appellee. Kevin Buffington; Veronica Hudson Carr; Sheila Hicks; Delcina McGlothin; Slovakia McGruder; R.L. Minor; Pricilla Minor; Daphanie Underwood; Sandra Ward, Plaintiffs-Appellants, v. State Farm Mutual Automobile Insurance Company; et al., Defendants, State Farm Mutual Automobile Insurance Company, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

406 F.3d 747

Charles BLAKELY; Cassandra Burks; Essie Donnelly; Terry Lockhart; Rita Marshall; Joetta Shears, Plaintiffs-Appellants, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY; et al., Defendants, State Farm Mutual Automobile Insurance Company, Defendant-Appellee.

Jimmy Blakely; Lee House; Arlene Jones; Thomas McCoy; Scherrie Payne; James Pittman; Sam Short; Mike Uzzle; Bobbie Vaughn, Plaintiffs-Appellants, v. State Farm Mutual Automobile Insurance Company; et al., Defendants, State Farm Mutual Automobile Insurance Company, Defendant-Appellee.

Kevin Buffington; Veronica Hudson Carr; Sheila Hicks; Delcina McGlothin; Slovakia McGruder; R.L. Minor; Pricilla Minor; Daphanie Underwood; Sandra Ward, Plaintiffs-Appellants, v. State Farm Mutual Automobile Insurance Company; et al., Defendants, State Farm Mutual Automobile Insurance Company, Defendant-Appellee.

No. 04-60577.

United States Court of Appeals, Fifth Circuit.

April 18, 2005.

William Gordon Ball, Ball & Scott, Knoxville, TX, Heber S. Simmons, III (argued), Christopher Garrett Henderson, Simmons Law Group, Jackson, MS, for Plaintiffs-Appellants.

Hal Scott Spragins, Goodloe Tankersley Lewis, Hickman, Goza & Spragins, Oxford, MS, Joseph A. Cancila, Jr. (argued) Schiff, Hardin & Waite, Chicago, IL, for Defendant-Appellee.

Appeal from the United States District Court for the Southern District of Mississippi.

Before DAVIS, SMITH and DeMOSS, Circuit Judges.

PER CURIAM:

Plaintiffs-Appellants Charles Blakely, et al. ("Appellants"), appeal the district court's granting of summary judgment in favor of Defendant-Appellee State Farm Automobile Insurance Co. ("State Farm") on Appellants' various claims and the court's denial of Appellants' motion to alter or amend the judgment. For the following reasons, we AFFIRM the court's orders.

BACKGROUND

Each of the Appellants was an insured policyholder of State Farm and suffered a partial loss to his or her vehicle as a result of an automobile accident. Under each Appellant's automobile insurance policy with State Farm (the "policy"), "loss" was defined in part as:

[E]ach direct and accidental loss of or damage to:

1. your car;

2 its equipment which is common to the use of your car as a vehicle....

The policy provided under "Limit of Liability—Comprehensive and Collision Coverages," in relevant part:

The limit of [State Farm's] liability for loss to property or any part of it is the lower of:

1. the actual cash value; or

2. the cost of repair or replacement.

Under the same Limits of Liability, the policy also expressly defined the "cost of repair or replacement":

The cost of repair or replacement is based upon one of the following:

1. the cost of repair or replacement agreed upon by you and [State Farm];

2. a competitive bid approved by [State Farm]; or

3. an estimate written based upon the prevailing competitive price. The prevailing competitive price means prices charged by a majority of the repair market in the area where the car is to be repaired as determined by a survey made by [State Farm]. If you ask, [State Farm] will identify some facilities that will perform the repairs at the prevailing competitive price. [State Farm] will include in the estimate parts sufficient to restore the vehicle to its pre-loss condition. You agree with [State Farm] that such parts may include either parts furnished by the vehicle's manufacturer or parts from other sources including non-original equipment manufacturers.

Any deductible amount is then subtracted.

In addition, the policy contained a subsection titled "Settlement of Loss—Comprehensive and Collision Coverages." The "settlement of loss" provision read, in relevant part:

[State Farm] ha[s] the right to settle a loss with you or the owner of the property in one of the following ways:

1. pay the agreed upon actual cash value of the property at the time of the loss in exchange for the damaged property. If the owner and [State Farm] cannot agree on the actual cash value, either party may demand an appraisal as described below. If the owner keeps the damaged property, [State Farm] will deduct its value after the loss from [State Farm's] payment. The damaged property cannot be abandoned to [State Farm];

2. pay to:

a. repair the damaged property or part, or

b. replace the damaged property or part.

If the repair or replacement results in betterment, you must pay for the amount of betterment; or

3. return the stolen property and pay for any damage due to the theft.

Appellants all submitted claims to State Farm for repairs and reimbursements for losses suffered. State Farm adjusted and paid for such repairs and losses. However, Appellants believed the policy additionally entitled them to payment from State Farm for the diminished value of their automobiles—the difference in the fair market value of their vehicles just prior to the accident and the fair market value of their vehicles post-repair. Appellants filed suit in Mississippi state court on or about July 1, 2002, against State Farm and two of its agents. Appellants' claims included breach of contract, breach of the covenant of good faith and fair dealing, conspiracy, bad faith, breach of fiduciary duty, fraud, and punitive damages.

On July 17, 2002, State Farm and the two agent defendants filed their notice of removal. On July 24, 2003, the parties signed an agreed order dismissing the two agents. Appellants filed an amended complaint on December 17, 2003. State Farm moved to dismiss on December 24, 2003. The district court granted this motion on April 26, 2004. The district court first determined it need only address Appellants' claims for breach of contract, bad faith, and fraud.¹ The court found the policy language was unambiguous and did not provide for any recovery by Appellants for the diminished value in their vehicles; there thus could be no breach of contract or bad faith claim. The court also found Appellants raised no issue of material fact on the fraud claim. Finally, the court found Appellants' argument that the policy was unconscionable and thus unenforceable lacked merit. Appellants then filed a motion to alter or amend the judgment, which the court denied on June 18, 2004. Appellants timely appealed.

DISCUSSION

This Court reviews the grant of summary judgment de novo, applying the same standards employed by the district court.² Am. Int'l Specialty Lines Ins. Co. v. Canal Indem. Co., 352 F.3d 254, 259-60 (5th Cir.2003). We review the legal question of the district court's interpretation of an insurance contract de novo, id. at 260, as well as its determination of state law, id. Under Federal Rule of Civil Procedure 56(c), summary judgment is proper when, viewing the evidence in the light most favorable to the nonmoving party, the "pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issues as to any material fact and that the moving party is entitled to judgment as a matter of law." FED.R.CIV.P. 56(c); see Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

In this diversity case, we are bound by the substantive insurance law from the forum state, Mississippi. See Erie R. Co. v. Tompkins, 304 U.S. 64, 78-79, 58 S.Ct. 817, 82 L.Ed. 1188 (1938); Am. Nat'l Gen. Ins. Co. v. Ryan, 274 F.3d 319, 328 (5th Cir.2001). Mississippi insurance policies are subject to the same rules of construction as other contracts. Krebs v. Strange, 419 So.2d 178, 181 (Miss.1982). When courts construe a contract, they read the contract as a whole, to give effect to all of its clauses. Royer Homes of Miss., Inc. v. Chandeleur Homes, Inc., 857 So.2d 748, 752 (Miss.2003) (citing Brown v. Hartford Ins. Co., 606 So.2d 122, 126 (Miss.1992)). "Our concern is not nearly so much with what the parties may have intended, but with what they said, since the words employed are by far the best resource for ascertaining the intent and assigning meaning with fairness and accuracy." Id. (citation omitted). Policy language that is clear and unambiguous is construed and must be enforced as written; that policy is binding and cannot be modified to create an ambiguity where none exists. Farmland Mut. Ins. Co. v. Scruggs, 886 So.2d 714, 717 (Miss.2004); State Farm Mut. Auto. Ins. Co. v. Universal Underwriters Ins. Co., 797 So.2d 981, 985-86 (Miss.2001). Policy terms should be understood "in their plain, ordinary, and popular sense rather than in a philosophical or scientific sense." Blackledge v. Omega Ins. Co., 740 So.2d 295, 298 (Miss.1999) (citation omitted).

I. Whether the district court erred in finding the policy language unambiguous as not providing for payment to Appellants for diminished value.

Appellants primarily argue that Mississippi law requires that the term "cost of repair or replacement" necessarily includes the concept of diminished value, so that the district court was erroneous in holding the terms of the policy excluded diminished value recovery. Appellants rely on a series of Mississippi cases—Potomac Ins. Co. v. Wilkinson, 213 Miss. 520, 57 So.2d 158 (1952); Motors Ins. Co. v. Smith, 218 Miss. 268, 67 So.2d 294 (1953); Calvert Fire Ins. Co. v. Newman, 240 Miss. 10, 124 So.2d 686 (1960); and Scott v. Transport Indem. Co., 513 So.2d 889 (Miss.1987)—for this proposition.

Appellants stress that in Wilkinson, the Mississippi Supreme Court defined "measure of loss to an automobile damaged, but not destroyed, by a collision" as: "the difference between its reasonable market value immediately prior to the collision and its reasonable market value after all reasonable and feasible repairs have been made." 57 So.2d at 160. "If, despite such repairs, there yet remains a loss in actual market value, estimated as of the collision date, such deficiency is to be added to the cost of the repairs." Id....