Papurello v. State Farm Fire & Cas. Co.
144 F. Supp. 3d 746
W.D. Pa.2015Background
- Plaintiffs Vincent and Linda Papurello, Pennsylvania homeowners, sued State Farm alleging it underpaid partial-damage replacement-cost claims by making an initial two‑step payment equal to estimated replacement cost minus depreciation (and taxes/labor), then promising recoverable depreciation upon repair.
- Plaintiffs filed a putative class action in Pennsylvania state court; State Farm removed under diversity and CAFA. Plaintiffs moved to remand; the court denied remand and found federal jurisdiction (diversity, supplemental jurisdiction, and CAFA satisfied).
- The Policy at issue uses a two‑step Replacement Cost Loss Settlement: (1) pay actual cash value at time of loss until repair/replacement is completed; (2) pay additional covered amount actually and necessarily spent when repair/replacement is completed.
- Plaintiffs alleged individual and class claims for breach of contract, statutory bad faith (42 Pa. Cons. Stat. § 8371), and violations of Pennsylvania’s Consumer Protection Law, asserting (a) step‑one depreciation deductions violated the “actual cash value” promise and (b) depreciation was improperly applied to taxes and labor.
- The court accepted plaintiffs’ pleaded facts for purposes of the motion to dismiss but reviewed the Policy and the insurer’s estimate (both attached) and applied Pennsylvania law to decide which class and individual claims survive.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether federal court has jurisdiction / removal proper | Papurello: issues are local; remand/abstention appropriate | State Farm: diversity and CAFA jurisdiction exist; removal proper | Denied remand; federal jurisdiction found (complete diversity, amount‑in‑controversy, CAFA satisfied) |
| Whether step‑one payment may deduct depreciation from replacement cost | Papurello: “actual cash value” requires full replacement cost upfront (no depreciation) | State Farm: Policy’s two‑step scheme permits depreciation at step one; full replacement cost is paid at step two upon repair | Court: Dismissed class claim — depreciation allowed at step one under Policy as a matter of Pennsylvania law (Kane rationale adopted) |
| Whether taxes and labor can be included in replacement‑cost estimate from which depreciation is deducted | Papurello: taxes and labor are non‑depreciable and cannot be used as basis then depreciated | State Farm: “Property” value includes finished product (materials + labor + taxes); depreciation on that value is permissible at step one | Court: Dismissed class claim — including taxes and labor in replacement‑cost estimate (and depreciating the resulting value at step one) is permissible under the Policy and Pennsylvania law |
| Violation of implied duty of good faith and statutory bad faith (§ 8371) on class basis | Papurello: insurer’s practices intentionally frustrate insureds’ reasonable expectations and are bad faith | State Farm: Policy is clear; insurer followed contract terms; no bad faith as to class | Court: Class‑wide bad‑faith (§ 8371) dismissed (contingent on breach of contract claim); individual § 8371 claim survives for named plaintiffs |
| CPL claims (individual and class) | Papurello: State Farm’s representations about replacement cost were deceptive/misleading | State Farm: Policy language is clear and insurer adhered to it; not deceptive to follow unambiguous terms | Court: CPL claims dismissed for failure to plead deceptive conduct and justifiable reliance; individual CPL claim dismissed with prejudice |
Key Cases Cited
- Fedas v. Ins. Co. of State of Pa., 300 Pa. 555, 151 A. 285 (Pa. 1930) (holding a single‑payment promise of “actual cash value” entitles insured to replacement value without depreciation)
- Farber v. Perkiomen Mut. Ins. Co., 370 Pa. 480, 88 A.2d 776 (Pa. 1952) (clarifying that insurers can avoid Fedas by clear contractual language)
- London v. Ins. Placement Facility of Pa., 703 A.2d 45 (Pa. Super. 1997) (holding explicit policy language can define “actual cash value” to include depreciation)
- Kane v. State Farm Fire & Cas. Co., 841 A.2d 1038 (Pa. Super. 2003) (interpreting identical two‑step State Farm policy; permitting depreciation at step one because full replacement cost is available at step two)
- Burton v. Republic Ins. Co., 845 A.2d 889 (Pa. Super. 2004) (holding two‑step replacement provision unambiguous and not violative of implied‑good‑faith duties)
- Twombly v. Bell Atlantic Corp., 550 U.S. 544 (2007) (pleading must state a plausible claim)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (legal conclusions insufficient; factual plausibility required)
- Gibbs v. United Mine Workers of Am., 383 U.S. 715 (1966) (supplemental jurisdiction for state claims forming same case or controversy)
- Hertz Corp. v. Friend, 559 U.S. 77 (2010) (corporate citizenship determined by principal place of business/nerve center)