Brown v. State Farm Fire & Cas. Co.
| Docket Number | 2:23-cv-04002-MDH |
| Decision Date | 29 August 2023 |
| Parties | RICHARD BROWN, individually, and on behalf of all others similarly situated, Plaintiff, v. STATE FARM FIRE & CASUALTY COMPANY, Defendant. |
| Court | U.S. District Court — Western District of Missouri |
Defendant State Farm Fire and Casualty Company (” moves for dismissal of this case pursuant to Federal Rule of Civil Procedure 12(b)(6), to strike the classaction allegations, and for transfer of this case to the Eastern District of Missouri pursuant to 28 U.S.C. § 1404(a). (Docs. 13, 15, 17). For the reasons herein, State Farm's motions to dismiss, to strike the class-action allegations, and to transfer this case are denied. State Farm's motion to stay proceedings pending resolution of the motion to dismiss, Doc. 34, is denied as moot.
This case revolves around the interpretation of an insurance contract. Plaintiff Richard Brown (“Mr. Brown” or “Plaintiff”) suffered a property loss in 2013 to his home-a loss covered by a State Farm homeowner's insurance policy. State Farm was obligated to pay Mr. Brown for the “actual cash value” (“ACV”) of the property loss, and indeed State Farm made a payment to Mr. Brown under the policy. However, Mr. Brown alleges that State Farm's deduction of labordepreciation costs from the payment violated the parties' agreement.
The “Loss Settlement” provision in Plaintiff's Policy provides for “Replacement Cost” coverage that is, payment up to the “cost to repair or replace . . . the damaged part of the property,” in two stages. Ex. 1 at Page 28. The ACV payment typically is first, “until actual repair or replacement is completed,” but it is “not to exceed the cost to repair.” After repairs, State Farm pays any additional, reasonable costs actually incurred above the ACV payment as “replacement cost benefits.”
State Farm allegedly chose to calculate Mr. Brown's loss exclusively using a “replacement cost less depreciation” (“RCLD”) methodology, and told him so, and it withheld future labor repair costs, totaling $651.15, from his payment. See Doc. 32-2, p. 4 (“We determined the actual cash value by deducting depreciation from the estimated repair or replacement cost.”). According to Mr. Brown, State Farm's depreciation for labor was improper because State Farm's homeowners' policy does not define “actual cash value” or “depreciation” and does not address depreciating labor costs, and therefore, under Missouri law, labor depreciation should not have been a factor in calculation of the ACV. In other words, Mr. Brown alleges that, “[b]y withholding repair labor costs as depreciation, Defendant breached its obligations to Plaintiff and the putative class members under their respective policies.”
Mr. Brown asserts a claim for breach of contract and also seeks a declaratory judgment that the parties' agreement prohibits withholding costs for labor depreciation. He seeks to represent a putative class of Missouri property insurance policyholders for whom State Farm exclusively applied the RCLD methodology to calculate its ACV payment obligation, using Xactimate software, which allegedly permitted the inclusion or exclusion of labor-depreciation at the click of a computer mouse. Mr. Brown does not dispute the actual calculations or valuation conducted by any State Farm adjuster.
Mr. Brown's home was in Florissant, Missouri, which is in St. Louis County, within the Eastern District of Missouri. State Farm is an Illinois company with its principal place of business in Bloomington that sells homeowners' and commercial property insurance in Missouri, employs insurance agents in Cole County, Missouri to sell its insurance policies, and, as a foreign insurer, has as its registered agent the Director of the Missouri Department of Insurance, located in Jefferson City, Missouri.
To survive a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), a complaint “must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Zink v. Lombardi, 783 F.3d 1089, 1098 (8th Cir. 2015) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). The Court ordinarily will not consider materials outside of the pleadings, but “[i]n a case involving a contract, the court may examine the contract documents in deciding a motion to dismiss.” Zean v. Fairview Health Servs., 858 F.3d 520, 526 (8th Cir. 2017) (quotation marks and citation omitted).
In analyzing a motion to dismiss, the Court must “accept as true all factual allegations in the complaint and draw all reasonable inferences in favor of the nonmoving party, . . . but [is] not bound to accept as true threadbare recitals of the elements of a cause of action, supported by mere conclusory statements or legal conclusions couched as factual allegations.” McDonough v. Anoka Cnty., 799 F.3d 931, 945 (8th Cir. 2015) (quotation marks and citations omitted).
State Farm argues that, in all material respects, this case is identical to LaBrier v. State Farm Fire and Casualty Co., 315 F.R.D. 503 (W.D. Mo. 2016), in which the Eighth Circuit ordered dismissal of the plaintiff's claims, and therefore, like LaBrier, this case should be dismissed. The policy forms in LaBrier and this case both provide for the same two-step loss settlement process: 1) calculating and paying ACV, and 2) subsequently paying reasonable costs actually incurred above the ACV payment. The plaintiffs in both cases alleged that State Farm calculated the ACV payment by depreciating the labor required for the repair, and that that depreciation breached the parties' agreement. In both cases, policies defined neither ACV nor depreciation to include labor costs. In LaBrier, the Eighth Circuit held that “State Farm's method of determining estimated ‘actual cash value' d[id] not breach its replacement cost contract.” LaBrier, 872 F.3d at 573. More specifically, the Eighth Circuit found that “depreciating what a contractor will charge to replace the partial loss is a reasonable method of estimating ‘the difference in value of the property immediately before and immediately after the loss.”' In re State Farm Fire & Cas. Co., 872 F.3d 567, 576 (8th Cir. 2017) (quoting Wells v. Missouri Prop. Ins. Placement Facility, 653 S.W.2d 207, 214 (Mo. 1983)). State Farm argues that, given the aforementioned similarities, the same result should follow here.
Plaintiff, on the other hand, points to differences between LaBrier and this case that, he argues, warrant a different outcome in this case, particularly in light of new Missouri appellate court decision, Franklin v. Lexington Ins. Co., 652 S.W.3d 286, 297, 303 (Mo.Ct.App. 2022). In contrast to LaBrier, Plaintiff argues, the present matter takes issue with depreciation of future labor costs, rather than embedded labor costs. Future labor costs, according to Plaintiff, are those costs associated with hypothetical labor to be performed only once the insured elects to make repairs. In other words, when calculating ACV by subtracting depreciation from fair market value, future labor refers to non-material costs associated with completing repairs after damages have been incurred. Embedded labor costs, on the other hand, are those labor costs associated with work previously completed on the property as part of the overall original cost. Insurers appear to variously rely on one method or another when completing repairs. While LaBrier references “embedded-labor-cost depreciation” when quoting a Minnesota Supreme Court opinion, it is not entirely clear that the depreciation calculation at issue in LaBrier was in fact based on embedded rather than future labor costs, as described by Plaintiff. LaBrier lacks significant discussion distinguishing “future” and “embedded” labor costs. The opinion did note, however, that “determining actual cash value by depreciating replacement cost-the method employed by State Farm in this case and apparently by most property insurers nationwide-is an eminently practical and reasonable method for making an initial estimate of actual cash value at the time of loss.” LaBrier at 576. This would seem to indicate the type of depreciation at issue in LaBrier is arguably most appropriately described as “future labor,” contrary to Plaintiff's allegations. Further, even assuming, arguendo, the LaBrier insurer depreciated based on embedded rather than future labor, Plaintiff's Amended Complaint fails to adequately identify the significance of this distinction. Regardless, allegations within Plaintiff's Amended Complaint sufficiently distinguish the specific type of labor costs at issue in the present matter from those at issue in LaBrier for purposes of surviving a 12(b)(6) Motion to Dismiss.
A second and perhaps more significant departure from LaBrier alleged by Plaintiff involves a possible waiver on the part of State Farm. Plaintiff contends that, unlike in LaBrier State Farm “unequivocally adopted the RCLD method as the exclusive method for calculating Plaintiff's ACV payment” and thereby “waived its right to recalculate ACV by a different methodology.” (Doc. 37 at 14), This unequivocal adoption occurred, Plaintiff argues, when State Farm provided Plaintiff with a written Xactimate estimate along with Plaintiff's ACV payment. This written notice, like the policy, fails to define ACV and depreciation to include any labor depreciation. To be clear, Plaintiff does not appear to argue the policy language varies between the present matter and LaBrier, but rather that the written notice of the Xactimate estimate in effect bound Plaintiff to a...
To continue reading
Request your trial