In Re State Farm Fire & Casualty Co.
2017 U.S. App. LEXIS 18457
| 8th Cir. | 2017Background
- Hail damaged Amanda LaBrier’s roof, siding, and gutters; she submitted a claim to State Farm under a replacement-cost homeowners policy that pays only actual cash value (ACV) until repairs are completed.
- State Farm estimated replacement cost with Xactimate at $8,088.07, applied $2,009.79 depreciation (including depreciation on embedded labor), subtracted a deductible, and paid LaBrier $4,657.28 as ACV while listing $2,009.79 as recoverable depreciation.
- LaBrier paid a friend to repair her home and sued (putative class action), alleging State Farm breached the policy by deducting labor depreciation when calculating ACV; she did not pursue appraisal or seek replacement-cost benefits under the policy.
- The district court denied State Farm’s motion to dismiss, found “actual cash value” and “depreciation” ambiguous under Missouri law, held State Farm breached by depreciating labor, and certified a class of Missouri insureds whose ACV payments were reduced by labor depreciation.
- State Farm appealed class certification and petitioned for mandamus; the Eighth Circuit consolidated the appeals and reviewed whether common issues predominated and whether State Farm’s estimating method breached the replacement-cost contract.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether "actual cash value" and "depreciation" are ambiguous under Missouri law | LaBrier: terms ambiguous; construe in insureds' favor to bar labor depreciation | State Farm: Missouri law unambiguously defines ACV as difference in value before/after loss; method of estimating depreciation is factual | Court: ACV has an unambiguous Missouri meaning (difference in value before/after loss); method of estimating depreciation is a factual/methodological question, not an ambiguity of terms |
| Whether deducting embedded labor from replacement-cost estimates breaches the replacement-cost policy | LaBrier: deducting labor depreciation from ACV payments breaches the contract for all class members | State Farm: deducting embedded labor from a replacement-cost-based depreciation is a reasonable, practical method to estimate ACV; whether it produces an unreasonable estimate is factual | Court: Deducting embedded labor may be a permissible factor; reasonableness depends on particular loss facts — not a per-se contractual breach; no common proof predominates |
| Whether common issues predominate for class certification under Rule 23(b)(3) | LaBrier: common practice (withholding labor depreciation) and the court’s prior ambiguity ruling create predominance | State Farm: individualized factual inquiries about valuation and reasonableness defeat predominance | Court: Individualized, fact-specific valuation issues dominate; common issues do not predominate — class certification reversed |
| Whether district court’s classwide discovery orders should stand | LaBrier: broad class discovery justified by certification and relevance | State Farm: discovery orders are overly burdensome given lack of predominance | Court: Because class certification is reversed, the classwide discovery orders are vacated and burdensome discovery is unwarranted |
Key Cases Cited
- Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013) (plaintiff must affirmatively demonstrate Rule 23 requirements)
- Tyson Foods, Inc. v. Bouaphakeo, 136 S. Ct. 1036 (2016) (distinguishes common vs. individual proof at certification)
- Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011) (class certification requires common answers to drive resolution)
- Avritt v. Reliastar Life Ins. Co., 615 F.3d 1023 (8th Cir. 2010) (rigorous predominance analysis may overlap merits)
- Bluewood v. Cincinnati Ins. Co., 560 F.3d 798 (8th Cir. 2009) (policy definitions of ACV/depreciation can be unambiguous)
- Wells v. Mo. Prop. Ins. Placement Facility, 653 S.W.2d 207 (Mo. 1983) (ACV measured by difference in property value immediately before and after loss)
- Wilcox v. State Farm Fire & Cas. Co., 874 N.W.2d 780 (Minn. 2016) (embedded-labor depreciation is a factual consideration for trier of fact, not per se invalid)