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Mitchell v. State Farm Fire and Casualty Co.

United States District Court, N.D. Mississippi, Oxford Division

September 24, 2018

LORINE MITCHELL PLAINTIFF
v.
STATE FARM FIRE AND CASUALTY COMPANY DEFENDANT

          MEMORANDUM OPINION AND ORDER

          MICHAEL P. MILLS UNITED STATES DISTRICT JUDGE

         This matter comes before the Court on Plaintiff's Motion to Certify Class of a Monetary Damages Class, or in the Alternative, An Issues Class [115] and Defendant's Motion to Strike Declaration of T. Joseph Snodgrass [126]. The court has reviewed the parties' submissions, along with relevant case law and evidence, and is now prepared to rule.

         BACKGROUND

         Plaintiff and proposed class representative, Lorine Mitchell, maintains a residence in Waterford, Mississippi. Plaintiff insured the dwelling under a Homeowners Policy provided by Defendant, State Farm Fire and Casualty Company, and paid the requisite annual premiums for the coverage. The policy provides the following provisions for structural damages claims:

         COVERAGE A - DWELLING

         1. A1 - Replacement Cost Loss Settlement - Similar Construction.

a. We will pay the cost to repair or replace with similar construction and for the same use on the premises shown in Declarations, the damaged part of the property covered under SECTION 1 - COVERAGES, COVERAGE A - DWELLING, except for wood fences, subject to the following:
(1) until actual repair or replacement is completed, we will pay out only the actual cash value at the time of the loss of the damaged part of the property, up to the applicable limit of liability shown in the Declarations, not to exceed the cost to repair or replace the damaged part of the property;
(2) when the repair or replacement is actually completed, we will pay the covered additional amount you actually and necessarily spend to repair or replace the damaged part of the property, or an amount up to the applicable limit of liability shown in the Declarations, whichever is less;
(3) to receive any additional payments on a replacement cost basis, you must complete the actual repair or replacement of the damaged part of the property within two years after the date of loss, and notify us within 30 days after the work has been completed . . ..

         In Spring 2017, while insured under the policy, Plaintiff's dwelling suffered storm damage. On or about May 13, 2017, Plaintiff notified Defendant of the loss and made a claim under the policy. On May 24, 2017, Defendant notified Plaintiff that the payment she was receiving was the actual cash value (ACV) as calculated by Defendant. ACV, defined in the Building Estimate Summary Guide provided to Plaintiff after a claim, is the “repair or replacement cost of the damaged part of the property less depreciation and deductible.” In calculating ACV, the Defendant deducted depreciation from the replacement cost value (RCV). RCV and depreciation are also defined in the Building Estimate Summary Guide. RCV is the “[e]stimated cost to repair or replace damaged property.” Depreciation is “[t]he decrease in the value of property over a period of time due to wear, tear, condition, and obsolescence.” Defendant's initial repair cost estimate listed the ACV for Plaintiff's claim as $646.19. This number was derived by taking the RCV, $3, 246.42, and subtracting both the estimated depreciation of $1, 600.23 and the $1, 000 deductible. The estimate lists the inspected areas separately and includes a line item for the estimated RCV; the applied tax; the age, life, and condition of the property; the percentage applied for depreciation; and the ACV.

         To calculate these values, Defendant relied on its Xactimate system. Xactimate allows an adjuster to insert various information for a claim. Xactimate provides the adjuster the option to select or de-select various boxes regarding depreciation-of importance to this case is the “depreciate non-material” and the “depreciate removal” options. Once all information is inserted, the system then generates RCV, ACV, and depreciation amounts.

         Plaintiff alleges that Defendant's method of calculating the ACV resulted in payment significantly lower than the amount Plaintiff should have received under the Policy-$738 lower. Plaintiff argues that Defendant, in calculating the ACV, depreciated costs associated with labor when labor is not susceptible to aging, wearing, or tearing. Specifically, certain line items, such as line item 2 (composition shingle roofing), accounted for both labor and materials and then the estimated depreciation percentage was applied to the entire line item. However, other line items that listed pure labor, such as line item 1 (remove shingle roofing), were not subjected to labor cost depreciation. Based on Defendant's practice to depreciate labor costs, Plaintiff contends that her ACV payment was less than the amount she was entitled to receive under the policy.

         Proposed Class Definition

         Plaintiff Mitchell seeks certification of the following class of individuals pursuant to Rule 23 of the Federal Rules of Civil Procedure:

All State Farm policyholders who made a structural damage claim for property located in the State of Mississippi which resulted in an actual cash value payment during the class period from which “non-material depreciation” is still being withheld from the policyholder (i.e., has not been paid back as replacement cost benefits). The class includes policyholders that did not receive an actual cash value payment solely because the withholding caused the loss to drop below the applicable deductible. The class period only includes policyholders that received their first claim payment (or would have received their first claim payment) on or after June 23, 2014 (three years before the filing of the complaint). The class excludes all claims arising under policies with State Farm endorsement Form FE3650 or any other policy form expressly permitting the “depreciation” of “labor” within the text of the policy form. The class also excludes any claims for which the applicable limits of insurance have been exhausted.

         Plaintiff's Reliance on Declaration of T. Joseph Snodgrass

         On July 20, 2018, along with her Motion to Certify Class [115], Plaintiff submitted a Declaration by attorney T. Joseph Snodgrass. In his Declaration, Mr. Snodgrass explained that he “instructed staff from Plaintiff's counsel to perform . . . data sorting exercises” within the Excel spreadsheet (the Data Report) containing numerous insurance claims produced by State Farm. Mr. Snodgrass explained the method by which his staff sorted the Data Report and provided the total number of possible class members that resulted from each conducted sort, the approximate cash value payment for all claims, as well as the approximate percentage of potential class members who hold a homeowner's policy from State Farm.

         CLASS CERTIFICATION STANDARD

         Pursuant to Rule 23 of the Federal Rules of Civil Procedure, class certification requires a two-part analysis. First, Rule 23(a) requires that (1) the class be so numerous that joinder of all members is impracticable; (2) questions of law or fact are common to the class; (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and (4) the representative party will fairly and adequately protect the interests of the class. Fed.R.Civ.P. 23(a). Second, the proposed class must satisfy at least one of the provisions of Rule 23(b). Plaintiff seeks class certification pursuant to Rule 23(b)(3), or, in the alternative, certification of an issues class pursuant to Rule 24(c)(4). Plaintiff also seeks certification pursuant to Rule 23(b)(1).

         Because this court finds class certification proper under Rule 23(b)(3) this court will not consider Plaintiff's alternative request for Rule 23(c)(4) certification of an issues class.

         DISCUSSION

         A. Standing

         “[P]laintiffs who represent a class must allege and show that they personally have been injured, not that injury has been suffered by other, unidentified members of the class to which they belong.” Spokeo, Inc. v. Robins, 136 S.Ct. 1540, 1547 n.6 (2016). In this case, Plaintiff has established her injury. Plaintiff's home suffered damages, and upon calculating her actual cash value payment-defined in her insurance policy as the repair or replacement cost of the damaged part of the property less depreciation and deductible-State Farm depreciated non-material items (particularly labor). Plaintiff contends that such conduct-depreciating ...


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