Bond v. Liberty Ins. Corportation, 2:15-cv-04236-NKL

• Decision Date: 01 May 2017
• Docket Number: No. 2:15-cv-04236-NKL,2:15-cv-04236-NKL
• Parties: DAVID BOND and REBECCA BOND, individually and on behalf of others similarly situated, Plaintiffs, v. LIBERTY INSURANCE CORPORTATION, Defendant.
• Court: U.S. District Court — Western District of Missouri

DAVID BOND and REBECCA BOND,individually and on behalf of others similarly situated, Plaintiffs, v. LIBERTY INSURANCE CORPORTATION, Defendant.

No. 2:15-cv-04236-NKL

UNITED STATES DISTRICT COURT WESTERN DISTRICT OF MISSOURI CENTRAL DIVISION

May 1, 2017

ORDER

Plaintiffs David and Rebecca Bond move for class certification. [Doc. 50]. The motion is granted.

I. Background

In April 2014, the Bonds' home sustained hail damage, and they submitted a claim for coverage to Defendant Liberty Insurance Corporation. The Bonds made their claim under the section of their Liberty Mutual policy that provided for an "actual cash value" payment for damages prior to reimbursement for repair or replacement. The dispute in this case involves Liberty's assessment of a $1,522 deductible on the Bonds' actual cash value claim, which the Bonds contend should not have been assessed under the terms of the policy.

A. The Insurance Policy and Liberty's General Claims Handling Procedure

Liberty's homeowner's insurance policies are generally made up of three components: the declarations, the base policy language, and the endorsements. These sections work together to define the parameters of the policyholder's coverage. The declarations set out the limits on recovery under the policy, list the endorsements included in the policy, and note the deductibles that may be assessed under the policy. The base policy language contains the standard terms of the policy. The endorsements contain additions to the policy which customize the coverage and terms of the base policy language to create the specific coverage purchased by the policyholder. The terms of the endorsements control over conflicting provisions in the declarations or base policy language. Grable v. Atlantic Cas. Ins. Co., 280 S.W.3d 104, 108 (Mo. Ct. App. 2009).

When a homeowner sustains damage to their dwelling or other structure that is covered by a Liberty Guard Deluxe Homeowners Insurance Policy, the claim is handled and paid in two phases: (1) the actual cash value ("ACV") phase and (2) the replacement cost value ("RCV") phase. [Doc. 51-1]. This procedure is set out in the base policy,¹ which provides as follows:

SECTION I - CONDITIONS

. . .

3. Loss Settlement. Covered property losses are settled as follows:

. . .

b. Buildings under Coverage A or B at replacement cost without deduction for depreciation, subject to the following:

(1) If, at the time of loss, the amount of insurance in this policy on the damaged building is 80% or more of the full replacement cost of the building immediately before the loss, we will pay the cost to repair or replace, after application of deductible and without deduction for depreciation, but not more than the least of the following amounts:

. . .

(4) We will pay no more than the actual cash value of the damage until actual repair or replacement is complete. Once actual repair or replacement is complete, we will settle the loss according to the provisions of b.(1) and b.(2) above.

. . .

(5) You may disregard the replacement cost loss settlement provisions and make claim under this policy for loss or damage to buildings on an actual cash value basis. Youmay then make claim within 180 days after loss for any additional liability according to the provisions of this Condition 3. Loss Settlement.

[Doc. 51-3, p. 13-14 (Bond Policy)]. Most policyholders hold base policies supplemented by a variety of endorsements which provide expanded coverage beyond that which is provided in the base policy.

After the policyholder makes his or her claim, an adjustor goes to the location of the insured property to ascertain the damage. The adjustor then uses a program called "Xactimate" to put a dollar figure on the amount of the damage. The total amount of the loss is referred to as the "replacement cost." [Doc. 51-1, p. 6 (Summerlin Depo. p. 145)]. After the total amount of the loss is calculated, the adjustor inputs factors for depreciation, and the amount of depreciation is subtracted from the replacement cost to give the actual cash value of the loss. Id. at 6-7. Following this calculation, the policyholder is paid the ACV of the loss, minus the deductible.² No further payment on the claim is made unless the insured decides to repair or replace the damage to the property. The insured is not required to undertake this repair, but may take the ACV payment in satisfaction of their claim. Id. at 8-9. If the insured decides to repair or replace the damage and submits proof of the repairs to Liberty, the insured is entitled to recover the RCV. If the policyholder chooses to make a claim for the RCV, a separate check is written to the policyholder to compensate them for the cost the policyholder actually spent above the ACV to repair or replace their loss to account for the amount of depreciation withheld from the ACV.

B. The Bonds' Policy

The Bonds' policy is made up of the declarations, the base policy language, and the endorsements. The Bonds' insurance policy includes two relevant endorsements. First, itcontains a Home Protector Plus Endorsement, which has its own "loss settlement" provision that provides:

HOMEPROTECTOR PLUS ENDORSEMENT

. . .

B. REPLACEMENT COST PROVISION - DWELLING AND PERSONAL PROPERTY

You must meet the following additional Section I Condition for this provision to apply:

17. Additions or Changes to Dwelling - Notice to Company. You must inform us within 90 days of the start of any additions, alterations, or improvements to the dwelling that will increase the replacement cost of the dwelling by $5000 or more.

If you meet Condition 17, then Section I, Condition 3. Loss Settlement, is deleted and replaced by the following:

3. Loss Settlement. Covered property losses are settled as follows:

a. The applicable limit of liability for Buildings under Coverage A or B is the replacement cost, after application of deductible and without deduction for depreciation, subject to the following:

(1) We will pay the cost of repair or replacement, but not exceeding:

. . .

(3) We will pay no more than the actual cash value of the damage until actual repair or replacement is complete. Once actual repair or replacement is complete, we will settle the loss according to the provisions of a.(1) above.

. . .

d. You may disregard the replacement cost provision and make a claim for loss of or damage to property on an actual cash value basis and then make claim within 180 days after loss for additional liability under this endorsement.

[Doc. 51-3, p. 23]. Where it applies, this loss settlement provision replaces the loss settlement provision present in the base policy language.

The Bonds' policy also contains a Windstorm or Hail Deductible Endorsement, which states:

WINDSTORM OR HAIL DEDUCTIBLE - DWELLING

The following special Deductible is added to the policy:

For the premium charged, we will pay only that part of the total of covered direct physical loss to property covered under Section I of this policy caused by Windstorm or Hail that exceeds the Windstorm or Hail Deductible as shown on the Declarations as follows:

A. When this Windstorm or Hail Deductible Applies

This Deductible applies in the event of direct physical loss to property covered under this policy caused directly or indirectly by the perils of Windstorm or Hail.

If this policy includes a Hurricane Deductible endorsement that is applicable to a loss, this Windstorm or Hail Deductible endorsement will not apply to that loss.

B. How the Windstorm or Hail Deductible Amount is Determined

The Windstorm Deductible may be either a fixed dollar amount or percentage based, but not both. If percentage based, the amount of the applicable Windstorm or Hail Deductible shall be determined by multiplying the Coverage A limit of liability as shown in the Declarations by the Windstorm or Hail Deductible Percentage amount as shown on the Declarations.

. . .

If no Windstorm or Hail Deductible Percentage is shown on the Declarations, the amount of the applicable Windstorm or Hail Deductible shall be the dollar amount for the Windstorm or Hail Deductible as shown on the Declarations.

C. Other Deductibles

If the Windstorm or Hail Deductible amount under this endorsement is less than the base policy Section I Deductible as shown on the Declarations, the base policy Section I Deductible shall apply.

This endorsement does not provide additional insurance. All other provisions of this policy apply.

[Doc. 51-3, p. 42].

After the Bonds sustained hail damage to their home in 2014, they submitted a claim to Liberty under their policy. Liberty subsequently provided them with an ACV payment for their loss pursuant to the Wind/Hail Endorsement. Subtracted from the ACV payment was a $1,522 deductible for the claim. The amount of this deductible appeared on the declarations page of theBonds' policy. The Bonds never requested that Liberty supplement this ACV payment with an RCV payment, and to date have only retained compensation for the initial ACV payment.

C. The Proposed Class

The Bonds filed this suit on behalf of a class. Prior to filing the pending motion, the Bonds moved to bifurcate the class action into an initial Rule 23(b)(2) phase followed by a Rule 23(b)(3) phase. Liberty did not oppose the motion, which the Court granted, ordering:

A revised scheduling order will be entered limiting the existing deadlines to the proposed Rule 23(b)(2) class only. Discovery and motions relevant to the proposed Rule 23(b)(3) class will be determined in a separate phase of litigation.

[Doc. 36]. As this case is currently in the initial Rule 23(b)(2) phase, the Bonds assert that their proposed class qualifies under Rule 23(b)(2). The Bonds' theory is that by certifying a 23(b)(2) class, the Court can determine Liberty's liability under its insurance policies first, after which the Court can consider certifying a 23(b)(3) monetary damages class premised on its previous liability determination. The Bonds do not seek any monetary relief on behalf of their proposed 23(b)(2) class and argue certifying...