Thompson v. State Farm Fire & Casualty Co.
264 F. Supp. 3d 1302
| M.D. Ga. | 2017Background
- Plaintiffs (Thompsons and a certified Georgia class) allege State Farm failed to assess and pay "diminished value" after covered water damage to homes; suit filed Jan 22, 2014.
- Court certified a Rule 23(b)(3) class for Georgia homeowners who presented first-party water-damage claims within six years before the suit and to Jan 24, 2017, where diminished value was not paid, limited to claims for failure to assess.
- After Royal Capital (Ga. 2012), State Farm began using endorsement FE-5621 (effective for new policies issued on/after Nov. 1, 2013) that defines "loss" to exclude diminution in value; renewal notices including FE-5621 were sent beginning Jan. 1, 2014.
- Plaintiffs moved for partial summary judgment that (a) policies cover diminished value, (b) FE-5621 is ineffective for renewals (and generally), (c) State Farm had and breached a duty to assess, and (d) waiver of the one-year suit limitation; State Farm moved for summary judgment on coverage, absence of damage, and the limitations issue.
- Court held: policies issued before Nov. 1, 2013 (and renewals of those policies) cover diminished value and State Farm breached its duty to assess those claims; FE-5621 validly excludes diminished value for new policies issued with the endorsement; monetary damages to insureds are not awarded; genuine fact issues remain on waiver of the one-year suit limitation for pre-Jan. 22, 2013 losses.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether standard State Farm homeowners policies cover diminished value | Mabry/Royal Capital require that diminished value is an element of "loss," so policies cover it absent a different definition | Policy language limits payment to repair/replace costs and accidental "direct physical loss," so diminished value is an intangible economic loss not covered | Policies issued before Nov. 1, 2013 cover diminished value; insurer's repair/settlement language does not negate coverage (Mabry/Royal Capital control) |
| Validity/effect of FE-5621 endorsement (new policies vs. renewals) | FE-5621 is ineffective for all class members or at least for renewals because it merely modifies loss-settlement or notice was misleading; renewals must provide same coverage | FE-5621 properly redefines "loss" and thus excludes diminished value for policies issued with the endorsement | FE-5621 validly excludes diminished value for new policies issued with it; but applying FE-5621 to renewals reduced coverage and required nonrenewal notice, so renewals remain policies that cover diminished value |
| Duty to assess diminished value after a covered water loss | State Farm must assess diminished value as an element of loss even if insured does not request it (per Mabry) | No duty unless there is actual diminished value; in Thompsons’ case, no diminished value proved as matter of law | State Farm has an affirmative duty to assess diminished value for covered claims where policy provides such coverage; fact of diminished value is not required to trigger the duty; summary judgment denied to State Farm on absence-of-damage argument |
| Whether State Farm waived the one-year suit limitation for pre-Jan 22, 2013 losses | State Farm’s practice of accepting/adjusting claims, paying repairs, and not disclosing diminished-value rights lulled insureds and can constitute waiver | Silence about diminished value or failure to reserve rights does not automatically waive the contractual limitation; prior cases limit waiver doctrines | Genuine disputes of material fact exist as to whether State Farm waived the one-year limitation; cross-motions on waiver denied |
Key Cases Cited
- State Farm Mut. Auto. Ins. Co. v. Mabry, 274 Ga. 498, 556 S.E.2d 114 (2001) (Georgia Supreme Court holds diminution in value is an element of "loss" and insurer must assess it)
- Royal Capital Dev. LLC v. Maryland Cas. Co., 291 Ga. 262, 728 S.E.2d 234 (2012) (Mabry rule applies to real property insurance; measure of damages depends on contract language)
- Pennsylvania Millers Mut. Ins. Co. v. Dunlap, 153 Ga.App. 116, 264 S.E.2d 483 (1980) (endorsement reducing coverage on purported renewal requires written notice that policy is not being renewed as originally written)