ORDER
Dеfendant State Farm Fire and Casualty Company moves to dismiss the first amended petition for failure to state a claim. [Doc. 21.] The motion is denied.
I. Background
Plaintiff Amanda LaBrier’s house was damaged in a hail storm. The damage was a covered loss under LaBrier’s State Farm insurance policy, and LaBrier made a claim under the section of the policy that provided for payment to be made prior to repair or replacement.
A State Farm adjuster gave LaBrier an estimate of the total cost of repair, including costs for materials, labor, and sales tax on the materials. After subtracting $2,009.79 for depreciation, and $1,421.00 for the deductible, State Farm paid LaBrier the net amount of $4,657.28. The dispute in this case involves State Fаrm’s depreciation of certain labor costs. State Farm depreciated “mixed” costs, that is, costs representing both labor and materials, such as removing and replacing a gutter and downspout. [Id., p. 18, ¶ 16.] State Farm did not depreciate “pure” labor costs, such as the labor cost of removing, hauling, and disposing of roof shingles. [Doc. 1-1, p. 18, ¶ 17.] LaBrier alleges State Farm breached its obligations under the policy when it depreciated mixed costs, because in doing so, it improperly depreciated the cost of labor.
The Declarations portion of the policy provides in part:
SECTION I — LOSS SETTLEMENT
Only the Loss Settlement provisions shown in the Declarations apply. We will settle covered property losses according to the following.
COVERAGE A — DWELLING
1. Al — 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 the Declarations, the damaged part of the property covered under SECTION I — COVERAGES, COVERAGE A— DWELLING, except for wood fences, subject to the following:
(1) until actual repair or replacement is completed, we will pay 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 cоvered 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;
❖ * %
[Doc. 21-1, p. 29, Policy, Form FP- 7955, emphasis added.]
The policy contains no definitions of‘actual cash value or depreciation. The estimate form State Farm gave LaBrier referred to the “Net Actual Cash Value Payment (“ACVT and defined “ACV’-as “[t]he repair or replacement cost of the damaged part of the property less depredation and deductible.” [Doc. 1-1,. p.-..18, ¶ 11, emphasis in original.] The form also included a definition of “depreciation”: “[t]he decrease in the value of property over a period of time due to wear, tear, condition, and obsolescence. A- portion or all of this amount may be eligible for . replacement cost benefits.” [Id,, p. 18, ¶ 12.]
LaBrier seeks to-represent a class of insureds whose payments were reduced by State Farm through depreciation of some costs of labor, for the period from March 30, 2005 to the date of trial. [Id., p. 20, ¶ 26; p. 23, ¶ 38.]
II. Discussion
A. Count II, breach of contract
State Farm argues that LaBrier’s breach of contract claim fails because it does not allege facts to show the “actual cash value” of LaBrier’s insured loss. Effectively, State Farm contends that “actual cash value” means the fair market value of the property before and after the-insured loss. Therefore, according to State Farm, LaBrier’s complaint fails because it calculates “actual cash value”-based on replacement cost minus depreciation, a calculation that may or may not reflect the fair market value of the property before and after the insured loss.
State Farm also seeks dismissal because LaBrier’s complaint does not show whether LaBrier replaced the damaged property and received a replacemеnt value payment. State Farm suggests that such a payment could fully compensate LaBrier because it would normally repay her any amount previously withheld for depreciation, regardless of whether " the depreciation is based on materials or labor.
The interpretation of an insurance policy is a question of law to be determined by the Court. Mendota Ins. Co. v. Lawson,
If an ambiguity exists, the policy language will be construed against the insurance company. Gulf Ins. Co. v. Noble Broadcast,
Ambiguity -exists when the language is reasonably open, .to different constructions. Cowin v. Shelter Mut. Ins. Co., 460 S.W.Sd 76, 79 (Mo.Ct.App.2015); Grable v. Atlantic Cs. Ins. Co.,
1. Does Missouri have a common law definition of actual сash value?
The LaBrier policy does not define actual cash value, nor does-it provide a method for calculating an actual cash value payment, but State Farm argues that Missouri law-supplies the missing definition of actual cash value. For this- proposition, State Farm relies primarily on Wells v. Mo. Property Ins. Placement Facility,
The Court concludes that Missouri law does not supply the definition of actual cash value as - that term is used in the LaBrier policy. It is true that the Missouri Supreme Court in Wells held that for purposes of the insurance policy in dispute there, actual cash value meant the before and after fair market value of the insured loss.‘But in Wells the damage to the insured property was caused by fire and therefore involved an interpretation of Mo. Rev. Stat. § 379.140 and - § 379.150, two statutes that deal with damage caused by fire. Specifically the Missouri Supreme Court stated: '
There is no express indication of how ‘the damage done on the property5 is to be calculated, but [Missоuri] courts have long held that under that section [§ 379.140] and its predecessors[,] damages aré to be measured by the difference between the reasonable values of the property immediately before and immediately after the casualty.
Id. at 210 (citing Tinsley v. Aetna Ins. Co. of Hartford, Conn.,
Therefore, the only on point guidance the Court has is the Eighth Circuit Court of Appeals’ decision in Cincinnati Ins. Co. v. Bluewood,
Because neither § 379.140 nor § '379150 is applicable here, and because Wells and its progeny relied on those statutes to define actual cash value, the Court concludes there is no common law definition of actual cash value applicable to losses Pot cause by fire. Indeed, if such a common law definition existed, there would be¡no reason to adopt § 379.140 and § 379.150 and limit them to only fire losses. In addition, one would expect that Welts, Port’er, and Bluewood would have discussed actual cash value as a common law definition, rather than relying on the language of § 379.140 and § 379.150, if such a common law definition existed.
State Farm also cites Hannan v. Auto-Owners Ins. Co.,
Hannan is not persuasive to the extent it contradicts the Eighth Circuit ruling in Bluewood. Moreover, while the district court in Hannan suggested that proof of replacement cost might be insufficient to prove actual cash value, it did not so rule. In fact it found that the insurance company had opted to pay replacement value to settle the claim and therefore evidence of replacement cost was admissible to show actual cash value even though the replacе
2. Ambiguity of “actual cash value”
Having rejected State Farm’s argument that. Missouri law always defines actual cash value as the before and after fair market value of the insured loss, the Court finds that the term “actual cash value,” absent a definition in the policy, is inherently ambiguous.
Policy language is ambiguous when there is indistinctness or uncertainty in the meaning of words used, or the language is reasonably open to different constructions. E.g., Krombach,
Several courts in other jurisdictions have concluded that the phrase “actual cash value,” as used in similar insurance policies, is ambiguous when left undefined. In Evanston Ins. Co. v. Cogswell Properties, LLC,
In Adams v. Cameron Mut. Ins.,
Because the. LaBrier policy does not define actual cash value, it is ambiguous and therefore must be construed in favor of the insured. The LaBrier’s interpretation of actual cash value as repair or replacement cost minus depreciation is one of a variety of reasonable definitions used in the context of partial lost. Therefore, the Court finds actual cash value means replacement cost minus depreciation.
. Here, a State Farm adjuster estimated a total cost of $8,088.07 for repair .of damage to LaBrier’s home, including costs for materials, labor, and sales tax on the materials, State Farm gave LaBrier an-estimate form that expressly referred to the “Net Actual Cash Value Payment” and defined actual cash value as “[t]he repair or replacement cost of the damaged part of the property less depreciation and deductible.” [Doc. 1-1, p. 18, ¶ 11, emphasis in original.] State Farm used that definition in calculating the actual cash value payment’it made. LaBrier agrees that this is the proper definition of actual cash value and disagrees only with what is properly depreciаted. This conduct of the parties is some evidence of what they intended when they formed the contract
In summary, the Court finds that actual cash value for purposes of LaBrier’s- insured loss means replacement cost minus depreciation.
3. Has LaBrier adequately pleaded injury?
State Farm also argues LaBrier failed to allege sufficient facts to demonstrate injury. Its argument rests in part upon State Farm’s position that Wells establishes the measure of damages, which the Court has rejected. But State Farm argues that even under LaBrier’s interpretation of actual cash value, she fails to allege whether she repaired or replaced the property, whether she received any additional payment from State Farm as a result of any repair or replacement of the property, and whether that payment exceeded the actual cash value payment she did receive. Effectively State Farm is arguing that LaBrier’s actual cash value calculation could exceed the replacement cost and therefore is in excess of what she is entitled to receive under the terms of the policy.
The provision of the policy limiting State Farm’s liability tо actual repair or replacement costs is a subordinate provision of the policy, inserted for the benefit of State Farm. Such a provision must be pleaded by the insurer, as an affirmative defense, if the provision “would diminish or limit the'amount, of recovery[.]” Mechanics’ Ins. Co. of Philadelphia v. C.A. Hoover Distilling Co.,
Further, payment for a liability is generally an affirmative defense. Fed. R. Civ. Pro. 8(c)(1). While LaBrier clearly has the burden to prove that State Farm made an actual cash value payment that caused her a loss, it is likely that State Farm has the burden to plead it paid LaBrier for the labor it previously depreciated and therefore extinguished any liability it had.
The LaBrier complaint pleads how much she received for actual cash value, that the actual cash value was improperly calculated, how it was improperly calculated, and that she suffered a loss as a result. This is sufficient under notice pleading standards, as interpreted in Bell Atlantic Corp. v. Twombly,
4. Can labor be depreciated?
State Farm contends that even if actual cash value is calculated as replacement cost minus depreciation, LaBrier’s claim fails on the merits because labor is properly depreciated for purposes of that calculation. State Farm argues that under Missouri law and by the terms of the LaBrier policy, she was hot entitled to replacement value until the damaged property was replaced or repaired. State Farm further argues that to permit - LaBrier to recover undepreciated labor would violate basic principles of indemnity by permitting her to get replacement value for the labor even though she never replaced the roof. State Farm relies in part on Dollard v. Depositors Ins. Co.,
[Plaintiff] insured a roof surface, not two components, material and labor. He did not pay for a hybrid policy of actual cash value for roofing materials and replacement costs for -labor. To construe the policy in such a manner would unjustly enrich the policy holder.
Id. at 1021.
LaBrier’ cites to out-of-state cases that hold that labor should not be depreciated even when the insured has a replacement policy and has not yet replaced the roof. In Adams v. Cameron Mut. Ins.,
In Bailey v. State Farm Fire and Cas. Co.,
In a separate dissent filed in Redcom, Justice Summers observed, “Before the damage the insured had on his house a roof with sixteen-year-old shingles. After the damage the insured is contractually entitled to have on his house sixteen-year-old shingles, or their valúe in money. He should not bear any of the cost of installing them, because that would deprive him of that for which he contracted — being made whole as if the damage had not occurred.”
The word depreciation has various meanings, some of which focus on material condition. See Hoover v. Pa. Electrical Contractors,
State Farm argues that LaBrier’s interpretation is unreasonable because it gives her replacement value for the labor component of the roof even though she has not replaced it. It also contends that including undepreciated labor costs in an actual cash value payment, would permit the insured to get thousands of dollars in current labor costs for a roof with a 30-year life that was already 30 years old at the time of the casualty. This would result in a windfall for the insured, according to State Farm.
State Farm’s policy says it will pay claims as follows:
SECTION I — LOSS SETTLEMENT
Only the Loss Settlement provisions shown in the Declarations apply. We will settle covered property losses according to the following.
COVERAGE A — DWELLING
1. Al — 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 the Declarations, the damaged part of the property covered under SECTION I — COVERAGES, COVERAGE A— DWELLING, except for wood fences, subject to the following:
(1) until actual repair or replacement is completed, we will pay only the actual cash value at the time of the loss of the damаged 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; ....
[Doc. 21-1, p. 2.]
State Farm’s policy does not define actual cash value; it merely says actual cash value won’t exceed the policy’s limit of liability or the cost to repair or replace the property. Would an ordinary lay person reading this language reasonably understand that both labor and materials would be depreciated to calculate actual cash value? It does say that after repairs are made, any “covered additional” amounts necessarily spent will then be paid up to the policy limits. But would a lay person know that “covered additional” amounts necessarily spent refers to both labor and materials? It would be reasonable to assume that whatever was deducted at the first step would be repaid at the second step, but this doesn’t tell the ordinary lay person what is being deducted at the first step. Would the ordinary lay person think she was going to get paid the cost of labor twice? That would be unreasonable. But an ordinary lay person could reasonably expect that any actual cash value payment would be in an amount that would put her back where she was before the casualty— not better off, but at least as well off. Then, once she made repairs, she would get “additional” covered amounts necessarily incurred — not expenses already covered by the. actual cash value payment, but the “additional” expenses incurred.
While the Court might find the interpretation suggested by State Farm more reasonable, it cannot say that LaBrier’s interpretation is unreasonable, given the рrism through which the language is to,be evaluated. Finally, and of significant importance, State Farm controlled the language of the policy; LaBrier did not.
There are a variety of ways to calculate the present value of a roof and all necessarily rely on approximation. The value of the old shingles, plus the cost of installing them — the method LaBrier urges — is one approximation. The present-day cost of replacing the roof, minus depreciation for labor and materials — the method State Farm used in calculating actual cash value — is another. Still another way is fair market value. And whatever method is used, all are designed to calculate what represents the insured’s pre-loss position as the owner of an old roof.
In view of the foregoing, State Farm’s motion to dismiss Count II is denied. ..
B. Count I, Declaratory judgment
In Count I, LaBrier requests a declaration that State Farm’s depreciation of labor costs is contrary to the insurance policy it issued, and asks for damages in the amount of depreciated labor costs plus interest. [Doc. 1-1, p,-22.] •
The availability of declaratory relief is a matter of federal law, governed by’the Declaratory Judgment Act. See G.S. Robins & Co. v. Alexander Chem. Corp.,
Declaratory relief does not serve a useful purpose where “the declaratory judgment plaintiff has another, more appropriate remedy.” Glover v. State Farm Fire & Cas. Co.,
In her declaratory relief count, LaBrier alleges breach of obligations under the terms of the insuranсe contract and asks for a declaration that the terms have been breached, as well as damages for the breach. The declaratory relief count essentially" duplicates the breach of contract count, in which LaBrier alleges State Farm breached the contract in' the same way and requests damages for the alleged breach.
However, LaBrier also seeks class certification and the Court cannot say at this stage of the litigation whether there will be class certification or if there is, whether a declaratory judgment would serve a useful purpose. Therefore, the Court denies State Farm’s motion as to Count I, without prejudice.
C. Request for attorney fees and prejudgment interest
Finally, State Farm seeks dismissal of LaBrier’s request for аttorney fees and pre-judgment interest under Rule 23 and Mo. Rev. Stat. § 408.020, respectively.
As for LaBrier’s request for prejudgment interest, § 408.020 provides in relevant part:
Creditors shall be allowed to receive interest at the rate of nine percent per annum, when no other rate is agreed upon, for all moneys after they become due and payable, on written contracts, and on accounts after they become due and demand of payment is made....
The statute applies to insurance contracts. Ins. Co. of N.A. v. Skyway Aviation, Inc.,
In Midwest Division-OPRMC, the Missouri Court of Appeals held the plaintiff hospitals were entitled to prejudgment interest. Their damages were simply calculated under the challenged regulations establishing their per diem reimbursement rate. The court concluded that the hospitals’ damages were “readily ascertainable by computation or a recognized standard,” and thus were liquidated. Id. The hospitals were therefore entitled to prejudgment interest'.
Likewise here, the plaintiff’s damages are readily ascertainable by computation or a recognized standard. LaBrier pleads State Farm reduced her actual cash value payment by depreciating the labor component of mixed-cost items, an amount State Farm calculated itself using its “Xact-ware/Xactimate’s estimating software.” [Doc. 1-1, p. 19, ¶ 19.] LaBrier pleads, when her loss occurred, and that she seeks to
III. Conclusion
Defendant State Farm Fire and Casualty Company’s motion to dismiss [Doc. 21] is denied.
Notes
. The facts are taken from the First Amended Petition. [Doc. 1-1.] For purposes of ruling on the motion to dismiss, the allegations are accepted as true, and construed liberally, in the light most favorable to the plaintiff. Eckert v. Titan Tire Corp.
. The insurance policy was not attached to LaBrier's pleading, but is necessarily incorporated by the pleading, and so may be considered at the motion to dismiss stage. Gorog v. Best Buy Co., Inc.,
. The Eighth Circuit in Bluewood noted that the parties had identified “four, decisions in which the Missouri Court. of -Appeals. mentioned that section 379.150 might extend to losses caused by risks other than fire.”
. See also Beard v. Allstate Indem. Co.,
. There is no dispute that a deductible is also to be subtracted from the actual cash value payment.
. Fоr purposes of an actual cash value payment, LaBrier is only entitled to receive the actual cash value of her loss,' or .the'actual cost to repair or replace-the damaged property, whichever is less.-
. This language is similar to the language contained in the policy at issue in Riggins v. Am. Fam. Ins. Co. no. 14:-cv-04171-SRB (W.D. Mo.). In that case, the district court found that the policy language, which referred to property of like kind and quality less depreciation for physical deterioration and obsolescence, was evidence that there was no depreciation for labor because the focus .was on physical depreciation.
. The Complaint did not cite the provisions under which LaBrier sought fees and prejudgment interest, but LaBrier clarified in her suggestions in opposition that she sought them under the above-cited rule and statute. [Doc. 28, p. 19.]