Driscoll v. State Farm Mut. Auto. Ins. Co.
| Decision Date | 30 August 2002 |
| Docket Number | No. 02-71358,No. 02-71955,02-71358,02-71955 |
| Parties | Joan Marie DRISCOLL, John Driscoll, and all others similarly situated, Plaintiffs, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant. Lourece A. Farhat, and all others similarly situated, Plaintiffs, v. Allstate Insurance Company, Defendant. |
| Court | U.S. District Court — Eastern District of Michigan |
Kelly Nigohosian, Detroit, MI, Peter W. Macuga, II, David R. Dubin, Macuga & Liddle, Detroit, MI, for Plaintiffs.
James A. Smith, Diane L. Akers, Bodman, Longley, Detroit, MI, for Defendants.
These are two insurance disputes involving the same issue — whether or not the defendants' auto insurance policies compel payment of "diminished value" in addition to the cost of repair. Plaintiffs in both cases are insureds who purchased first party collision and comprehensive automobile insurance from either State Farm Mutual Automobile Insurance Company (State Farm) or Allstate Insurance Company (Allstate). Both plaintiffs' cars were involved in accidents where the insurance companies elected to repair the car. Plaintiffs' cars were repaired and plaintiffs do not claim that the repairs were inadequate. Plaintiffs do, however, claim that in addition to compensating plaintiffs for the cost of repair, State Farm and Allstate are also obligated to pay for the diminution of value to plaintiffs' car as a result of being in an accident/being repaired.
Both plaintiffs filed class action complaints seeking to represent Michigan consumers who have purchased automobile insurance policies from defendants. No class has been certified and no motions for class certification have been filed. Both defendants have filed dispositive motions, which the Court scheduled for hearing together.
The issue regarding the obligation to pay for diminished value has been raised in other jurisdictions, with conflicting results.1 Neither the Michigan courts nor any federal court in this district have interpreted the policy language at issue here or directly addressed whether diminution in value is a compensable loss.
After reviewing the conflicting authority and Michigan case law, the Court finds the better view is that the policy language, which limits coverage to the lesser of the costs of repair or replacement of the actual cash value of the car at the time of accident, does not include coverage for any diminished value to the car following a repair. Accordingly, State Farm's motion for summary judgment or, in the alternative, for judgment on the pleadings and Allstate's motion to dismiss will be granted. The reasons follow.
A.
In Driscoll v. State Farm, plaintiffs Joan Marie Driscoll and John Driscoll filed a complaint against State Farm Automobile Insurance Company (State Farm) claiming a breach of contract for State Farm's refusal to pay diminished value. In Farhat v. Allstate, Lourece A. Farhat, filed a similar complaint for breach of contract against Allstate. Both State Farm and Allstate removed the case to federal court on the basis of diversity jurisdiction. See 28 U.S.C. § 1332.
Both the Driscolls and Farhat argue that the policy language must be construed under Michigan law to include payment for diminished value. They also argue that the language is ambiguous that it, must be construed against defendants, and that the split of authority on the issue supports a finding that the language is ambiguous. They further argue that extrinsic evidence will support their position because such evidence will show that (1) defendants have interpreted their policies to include payment for diminished value and (2) other insurance companies, not defendants, have expressly excluded coverage for diminished value.
Both State Farm and Allstate argue that (1) the policy language is not ambiguous and expressly limits payment to either the actual cash value or the cost of repair or replacement, the latter of which does not include payment for any diminished value to the car; thus, there is no need to look to extrinsic evidence to create an ambiguity and they deny that they have interpreted their polices to pay for diminished value (2) accepting the plaintiffs' interpretation would render the policy language requiring State Farm and Allstate to pay the lower of the cost of repair or replacement mere surplusage. Under the plaintiffs' interpretation, State Farm has the option of paying either 1. the actual cash value, or 2. the cost of repair plus whatever sum it would take to equate actual cash value (diminution in value). This is no option at all: courts in other jurisdictions have rejected the interpretation that the plaintiffs argue for here, and (3) controlling Michigan Supreme Court authority, which provides that an insurer's liability must be determined in accordance with the contract, including the measure of damages, supports the finding that diminution in value is not a compensable loss.
The relevant portion of the State Farm policy reads:
Limits of Liability — Comprehensive and Collision Coverage
The limit of our 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.
Actual cash value is determined by the market value, age, and condition at the time the loss occurred. Any deductible amount that applies is then subtracted.
The cost of repair or replacement agreed upon by you and us;
1. the cost of repair or replacement agreed upon by you and us;
2. a competitive bid approved by us; 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 us. If you ask, we will indemnify some facilities that will perform the repairs at the prevailing competitive price. We will include in the estimate parts sufficient to restore the vehicle to its pre-loss condition. You agree with us 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 that applies is then subtracted.
The relevant portions of Allstate's policy reads:
Standard Collision Insurance
Allstate will pay for collision damage for your insured auto less the deductible. ...
....
Allstate may pay for the loss in money, or may repair or replace the damaged or stolen property.
....
Allstate's limit of liability is the actual cash value of the property or damages part of the property at the time of the loss. The actual cash value will be reduced by the deductible for each coverage as shown on the declarations page. However, our liability will not exceed what it would cost to repair or replace the property or part with other of the like kind and quality.... Actual cash value means there may be a deduction for depreciation
When analyzing a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6), the Court must take a plaintiff's well-pleaded allegations as true. Miree v. DeKalb County, 433 U.S. 25, 27 n. 1, 97 S.Ct. 2490, 53 L.Ed.2d 557 (1977). "[W]hen an allegation is capable of more than one inference, it must be construed in the plaintiff's favor." Sinay v. Lamson & Sessions Co., 948 F.2d 1037, 1039-40 (6th Cir.1991). "A court may dismiss a complaint only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations." Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d 59 (1984).
Varljen v. Cleveland Gear Co., 250 F.3d 426 (6th Cir.2001) (internal citations and quotations omitted) (emphasis added).
Fed.R.Civ.P. 12(c) provides that, "after the pleadings are closed but within such time as not to delay the trial, any party may move for judgment on the pleadings." Judgment may be granted under Rule 12(c) where the movants clearly establish that no material issue of fact remains to be resolved and that they are entitled to judgment as a matter of law. Beal v. Missouri, Pacific R.R., 312 U.S. 45, 61 S.Ct. 418, 85 L.Ed. 577 (1941); 5 C. Wright & A. Miller, Federal Practice and Procedure (hereinafter Wright & Miller) § 1368, p. 518. All well-pleaded material allegations of the pleadings of the opposing party must be taken as true, while all contravening assertions in the movants' pleadings are taken as false. Given this standard, the motion may be granted only if the moving party is nevertheless clearly entitled to judgment. Southern Ohio Bank v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 479 F.2d 478 (6th Cir.1973); 5 Wright & Miller, § 1368, p. 520.
The starting point is Michigan contract law. An indemnity contract (a policy of insurance) is construed in the same fashion as are contracts generally. Triple E Produce Corp. v. Mastronardi Produce, Ltd., 209 Mich.App. 165, 172, 530 N.W.2d 772 (1995). As stated in Klever v. Klever, 333 Mich. 179, 186, 52 N.W.2d 653 (1952), quoting McIntosh v. Groomes, 227 Mich. 215, 218, 198 N.W. 954 (1924):
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