Ngethpharat v. State Farm Mut. Auto. Ins. Co.
| Decision Date | 09 November 2020 |
| Docket Number | CASE NO. C20-652 MJP,CASE NO. C20-454 MJP |
| Citation | 499 F.Supp.3d 908 |
| Parties | Anysa NGETHPHARAT, James Kelley, individually and on behalf of all others similarly situated, Plaintiffs, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant. Faysal A. Jama, individually and on behalf of all others similarly situated, Plaintiff, v. State Farm Fire and Casualty Company, Defendant. |
| Court | U.S. District Court — Western District of Washington |
Daniel R. Whitmore, Law Office of Daniel Whitmore, Tukwila, WA, Duncan Calvert Turner, Mark A. Trivett, Badgley Mullins Turner PLLC, Seattle, WA, for Plaintiff.
Eric L. Robertson, Pro Hac Vice, Wheeler Trigg O'Donnell LLP, Denver, CO, Herbert Matthew Munson, Joseph D. Hampton, Betts Patterson & Mines, Seattle, WA, Peter W. Herzog, III, Pro Hac Vice, Wheeler Trigg O'Donnell LLP, St. Louis, MO, for Defendant.
ORDER ON MOTIONS TO DISMISS
This matter comes before the Court on Defendant State Farm Mutual Insurance Company's and State Farm Fire and Casualty's1 Motions to Dismiss in each of the above-captioned cases, which have been coordinated given the overlapping nature of the claims the Plaintiffs pursue. The Court has reviewed the following materials from Ngethpharat, C20-454: (1) Defendant's Motion to Dismiss (Dkt. No. 16): (2) Plaintiffs’ Opposition (Dkt. No. 18); (3) Defendant's Reply (Dkt. No. 24); (4) Plaintiffs’ Surreply (Dkt. No. 27); and (5) all supporting materials. The Court has also reviewed the following materials from Jama, C20-652: (1) Defendant's Motion to Dismiss (Dkt. No. 13); (2) Plaintiff's Opposition (Dkt. No. 15); (3) Defendant's Reply (Dkt. No. 16); and (4) all supporting materials. For the reasons set forth below the Court DENIES in part and GRANTS in part Defendant's Motion to Dismiss in both matters and GRANTS in part and DENIES in part Plaintiffs’ Motion to Strike in Ngethpharat, C20-454.
Plaintiffs Anysa Ngethpharat and James Kelley (collectively "Ngethpharat Plaintiffs") have sued their insurer, State Farm, alleging it improperly applied a "typical negotiation discount" to determine the cash settlement value for their damaged cars. Plaintiff Faysal Jama makes the same allegations and also contends that State Farm improperly applied a "condition adjustment" in determining the cash settlement value of his damaged car. The Ngethpharat Plaintiffs assert individual and class claims alleging that the "typical negotiation discount" violates Washington state insurance regulations and the Washington Consumer Protection Act. They also seek declaratory and injunctive relief. Plaintiff Jama brings these same individual and class claims, and also pursues claims directly under the state insurance regulations, as well as claims for common law bad faith and breach of the covenant of good faith and fair dealing.2
The Ngethpharat Plaintiffs had their vehicles badly damaged in separate accidents. Their insurer, State Farm, declared both cars total losses and made a cash payment to settle each claim. But Plaintiffs allege that State Farm violated state insurance regulations by applying a "typical negotiation discount" to reduce amount it paid for the loss. This deduction was used to lower the actual cash value of comparable vehicles State Farm used to determine the settlement amount.
Plaintiff Ngethpharat owned a 2014 Subaru Forrester insured through State Farm. (First Amended Complaint ("FAC") ¶ 1.7 (Dkt. No. 5).) After the car was badly damaged in late 2019, Ngethpharat presented her claim to State Farm, which determined the vehicle a total loss. (Id. ) State Farm then offered Ngethpharat $13,378 as the value of her totaled car and provided her a valuation reflecting this amount. (FAC ¶ 1.8.) But State Farm did not supply the "underlying support for that offer." (Id. ) After repeated requests from Ngethpharat, State Farm provided a report that it claimed supported the valuation. (Id. ) The report was prepared by Autosource, which Plaintiffs allege included "an unverifiable and unclear deduction for ‘typical negotiation’ off the verifiable price for each of the four comparable vehicles (‘comps’), resulting in the base price (what the average of the four comps show as the value) for Plaintiff's vehicle being $919.75 lower than had a ‘typical negotiation’ discount not been taken." (Id. (emphasis omitted).) The Autosource reports applied different discount rates to the price of the four comparable vehicles—two were reduced by 7% and the two more expensive comparable cars were reduced by 6%. (Id. ¶ 1.16.)
Plaintiff James Kelley owned a 2020 Ford Explorer that State Farm insured. (FAC ¶ 1.9.) After his car was badly damaged in January 2020, State Farm determine the car a total loss and offered Kelley $54,056 as the value of his car. (Id. ¶ 1.10.) State Farm did not provide any supporting materials with this valuation. (Id. ) Upon request, State Farm then provided an Autosource report showing "an unverifiable and unclear deduction for ‘typical negotiation’ off the verifiable price of the comparable vehicle identified in the report, resulting in the base price for Plaintiff KELLEY's vehicle being $2,929.00 lower (5% less) than had a ‘typical negotiation’ discount not been taken." (Id. )
The Ngethpharat Plaintiffs allege that the "typical negotiation discount" is "hidden in the fine print" of the Autosource reports. (FAC ¶ 1.11.) They allege that the price listed for the comparable vehicle is not the advertised price but is instead the advertised price "adjusted to account for typical negotiation." (Id. ) The report itself only discloses the existence of this deduction in fine print in a footnote and does not provide any further detail as to how this deduction was calculated or determined.
(See id. ) The result, Plaintiffs allege, is that the base price used for comparable vehicles is less than the verifiable prices for comparable vehicles. (See Id. ¶ 1.12.) Plaintiffs also allege that the "typical negotiation" discount is not consistently applied to vehicles being held as comparable to the loss vehicle. (Id. ¶ 1.16.) For example, the Autosource report provided to Plaintiff Ngethpharat discounted two comparable vehicles’ advertised price by 7% while discounting two others’ advertised price by 6%. (Id. ) And for Plaintiff Kelley, the "typical negotiation" discount was 5% off the advertised price of the comparable vehicle. (Id. ¶¶ 1.10-1.11.)
Plaintiff Jama owned a 2009 Honda Civic Hybrid sedan that State Farm insured. (Complaint ¶ 5.14 (Dkt. No. 1-3).) The car was damaged in May 2019, and after he presented his claim to State Farm it deemed the car a total loss. (Id. ¶¶ 5.15, 5.19.) State Farm determined the actual cash value to be $6,939 and sent to Jama its valuation determination and the Autosource report that included comparable vehicle values on which it was based the valuation. (Id. ¶ 5.21.) The Autosource report set the "base" price for the comparable vehicles by reducing their advertised prices by 9 percent through a purported "typical negotiation discount." (Id. ¶ 5.24.) The Autosource report also deducted $155 from the actual cash value of Jama's car based on the "perceived condition" of Jama's car. (Id. ¶ 5.27.) But as alleged, neither Autosource nor State Farm inspected Jama's car. (Id. ¶ 2.28.)
Plaintiffs’ claims turn on the allegations that State Farm violated Washington insurance regulations applicable to total loss settlements: WAC 284-30-391 ("Section 391"). Section 391 establishes the methods by which an insurer "must adjust and settle vehicle total losses" and the standards of practice for the settlement of total loss vehicle claims. These two standards work in tandem and impose intertwined, but independent requirements on the insurer.
Section 391 states: "unless an agreed value is reached, the insurer must adjust and settle vehicle total losses using the methods set forth in subsections (1) through (3) of this section." WAC 284-30-391 (emphasis added). But the insurer need follow just one of these three methods.
At issue in this case is Section 391's "cash settlement" methodology. This provision permits the insurer to "settle a total loss claim by offering a cash settlement based on the actual cash value of a comparable motor vehicle, less any applicable deductible provided for in the policy." WAC 284-30-391(2). Section 391(2) includes two key provisions to determine actual cash value of a comparable motor vehicle. First, to determine the actual cash value, "only a vehicle identified as a comparable motor vehicle may be used." WAC 284-30-391(2)(a). Second, the insurer must "determine the actual cash value of the loss vehicle by using any one or more of the following methods": (1) comparable motor vehicle; (2) licensed dealer quotes; (3) advertised data comparison; or (4) computerized sources. WAC 284-30-391(2)(b)(i)-(iv).
The insurance regulations include two general definitions relevant to this dispute. First, the regulations define the term "actual cash value" to mean "the fair market value of the loss vehicle immediately prior to the loss." WAC 284-30-320(1). And the regulations define "comparable motor vehicle" as "a vehicle that is the same make and model, of the same or newer model year, similar body style, with similar options and mileage as the loss vehicle and in similar overall condition, as established by current data." WAC 284-30-320(3). This definition also states that "[t]o achieve comparability, deductions or additions for options, mileage or condition may be made if they are itemized and appropriate in dollar amount." Id.
Section 391 also "establish[es] standards of practice for the settlement of total loss vehicle claims" which the "insurer must" follow. WAC...
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Clippinger v. State Farm Mut. Auto. Ins. Co.
...considering similar issues also offer guidance. The facts here are like those in Ngethpharat v. State Farm Automobile Insurance Co. 499 F.Supp.3d 908 (W.D. Wash. 2020). Like Plaintiff here, the plaintiffs in Ngethpharat alleged that State Farm applied a typical negotiation adjustment when d......