Brown v. State Farm Fire and Casualty Company

IN THE UNITED STATES DISTRICT COURT FOR THE

WESTERN DISTRICT OF MISSOURI

CENTRAL DIVISION

RICHARD BROWN, )

individually, and on behalf of all others )

similarly situated, )

)

Plaintiff, )

)

vs. ) Case No. 2:23-cv-04002-MDH

)

STATE FARM FIRE & )

CASUALTY COMPANY, )

)

Defendant. )

ORDER

Before the Court is Defendant’s Motion for Reconsideration and Certification Under 28

U.S.C. § 1292(b). For reasons herein, Defendant’s Motion for Reconsideration is GRANTED.

The Court has considered Defendant’s arguments and this Court’s prior order, but declines to

modify any prior finding or conclusion. Defendant’s Motion for Certification is GRANTED IN

PART AND DENIED IN PART. Defendant may seek appeal of this Court’s prior order on

Defendant’s Motion to Dismiss, but Defendant’s proposed phrasing of the issue for appeal proves

unripe. Certification is granted as to the alternative question of law as laid out in this order.

BACKGROUND

This case revolves around the interpretation of an insurance contract. Plaintiff Richard

Brown (“Mr. Brown” or “Plaintiff”) suffered a property loss in 2013 to his home—a loss covered

by a State Farm homeowner’s insurance policy. State Farm was obligated to pay Mr. Brown for

the “actual cash value” (“ACV”) of the property loss, and indeed State Farm made a payment to

Mr. Brown under the policy. However, Mr. Brown alleges that State Farm’s deduction of labor-

depreciation costs from the payment violated the parties’ agreement.

The “Loss Settlement” provision in Plaintiff’s Policy provides for “Replacement Cost”

coverage, that is, payment up to the “cost to repair or replace . . . the damaged part of the property,”

in two stages. (Doc. 14-1 at 28). The ACV payment typically is first, “until actual repair or

replacement is completed,” but it is “not to exceed the cost to repair.” (Doc. 14-1 at 28). After

repairs, State Farm pays any additional, reasonable costs actually incurred above the ACV payment

as replacement cost benefits.

State Farm allegedly chose to calculate Mr. Brown’s loss exclusively using a “replacement

cost less depreciation” (“RCLD”) methodology, and told him so, and it withheld future labor repair

costs, totaling $651.15, from his payment. (Doc. 32-2 at 4). (“We determined the actual cash value

by deducting depreciation from the estimated repair or replacement cost.”). According to Mr.

Brown, State Farm’s depreciation for labor was improper because State Farm’s homeowners’

policy does not define “actual cash value” or “depreciation” and does not address depreciating

labor costs, and therefore, under Missouri law, labor depreciation should not have been a factor in

calculation of the ACV. In other words, Mr. Brown alleges that, “[b]y withholding repair labor

costs as depreciation, Defendant breached its obligations to Plaintiff and the putative class

members under their respective policies.”

This Court previously denied Defendant’s Motion to Dismiss, wherein Plaintiff argued,

inter alia, that the Eighth Circuit’s holding in In re State Farm Fire & Cas. Co., 872 F.3d 567,

571 (8th Cir. 2017) (“LaBrier”) requires dismissal of the present matter. Like the present matter,

LaBrier dealt generally with the calculation of labor cost depreciation in actual cash value. In

LaBrier, the Eighth Circuit held that “State Farm’s method of determining estimated ‘actual cash

value’ d[id] not breach its replacement cost contract.” LaBrier, 872 F.3d at 573. More specifically,

the Eighth Circuit found that “depreciating what a contractor will charge to replace the partial loss

is a reasonable method of estimating ‘the difference in value of the property immediately before

and immediately after the loss.”’ In re State Farm Fire & Cas. Co., 872 F.3d 567, 576 (8th Cir.

2017) (quoting Wells v. Missouri Prop. Ins. Placement Facility, 653 S.W.2d 207, 214 (Mo. 1983)).

Some similarities exist between LaBrier and the present matter. The policy forms in

LaBrier and this case both provide for the same two-step loss settlement process: 1) calculating

and paying ACV, and 2) subsequently paying reasonable costs actually incurred above the ACV

payment. The plaintiffs in both cases alleged that State Farm calculated the ACV payment by

depreciating the labor required for the repair, and that that depreciation breached the parties’

agreement. In both cases, policies defined neither ACV nor depreciation to include labor costs.

The Eighth Circuit’s opinion in LaBrier acknowledged a lack of relevant Missouri law,

predicting that the Missouri Supreme Court, which does not accept certified questions of law from

federal courts, would agree with the Eight Circuit’s holding. LaBrier at 577. In 2022, however, the

Missouri Court of Appeals expressly held that “labor may not be depreciated under an insurance

policy that does not define ACV or depreciation to expressly include labor depreciation.” Franklin

v. Lexington Ins. Co., 652 S.W.3d 286, 303 (Mo. Ct. App. 2022), reh'g and/or transfer denied

(July 26, 2022), transfer denied (Oct. 4, 2022). The Missouri Supreme Court did not review the

intermediate appellate Court’s Franklin decision.

In denying Defendant’s Motion to Dismiss in the present matter, this Court found Franklin

controlled, rather than LaBrier. This Court’s opinion acknowledged differences in the facts of

LaBrier and those alleged in the present matter. This Court’s prior opinion also relied on Eighth

Circuit precedent that expressly provides Eighth Circuit courts “must follow” intermediate

appellate state courts “when they are the best evidence of what state law is.” Holden Farms, Inc.

v. Hog Slat, Inc., 347 F.3d 1055, 1066 (8th Cir. 2003).

DISCUSSION

I. Motion for Reconsideration

In its present motion, Defendant asks this Court to reconsider its prior ruling on

Defendant’s Motion to Dismiss. Defendant argues reconsideration is warranted with respect to at

least four “conclusions” in this Court’s prior ruling on Defendant’s Motion to Dismiss, all of which

constitute error: “(1) Plaintiff’s policy is effectively (rather than explicitly) different than the policy

at issue in LaBrier; (2) Plaintiff has alleged depreciation of a different type of labor cost than was

allegedly depreciated in LaBrier; (3) unlike the plaintiff in LaBrier, Plaintiff here does not dispute

certain “valuations” made by State Farm’s claim representatives; and (4) unlike in LaBrier, Plaintiff’s

putative class is limited to persons whose ACV payments were estimated using identified depreciation

option settings in the relevant estimating software.” (Doc. 57 at 2-3).

This Court has considered the merits of Defendant’s argument and reaffirms the findings and

conclusions within its prior order. Arguments within Defendant’s present Motion are largely, as

Plaintiff contends, repetitions of Defendant’s arguments in the underlying Motion to Dismiss. Further,

as all parties are aware, at the 12(b)(6) stage, this Court must “accept as true all factual allegations

in the complaint and draw all reasonable inferences in favor of the nonmoving party.” McDonough

v. Anoka Cnty., 799 F.3d 931, 945 (8th Cir. 2015) (internal citations omitted). The Court must also

look to whether Plaintiff has stated, simply, ‘“a claim to relief that is plausible on its face.’” Zink

v. Lombardi, 783 F.3d 1089, 1098 (8th Cir. 2015) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678

(2009)). Given this deferential standard, Defendant’s present Motion affords this Court no

opportunity to reverse any part of its prior order.

II. Motion for Certification

As to the issue of certification under § 1292(b), this Court agrees with Defendant that the

issue, broadly stated, of whether LaBrier or Franklin controls the present matter meets the criteria

identified by statute. Specifically, this Court’s prior order on Defendant’s Motion to Dismiss,

“involves a controlling question of law as to which there is substantial ground for difference of

opinion and that an immediate appeal from the order may materially advance the ultimate

termination of the litigation.” 28 U.S.C. § 1292(b). Defendant submits the following as the relevant

controlling question of law requiring immediate resolution from the Eighth Circuit.

Does the Eighth Circuit’s holding in In re State Farm Fire and Casualty Company, 872

F.3d 567 (8th Cir. 2017) (“LaBrier”)—namely, that State Farm’s methodology for

calculating actual cash value payments “does not breach” the language in its insurance

policy under Missouri law—require dismissal of claims challenging the same

methodology under the same policy, where an intervening Missouri Court of Appeals

decision adopted the Eighth Circuit’s analysis of Missouri law in LaBrier but reached

a different conclusion as to the alleged breach there after distinguishing the policy

language at issue in the two cases?

This Court disagrees that this is the correct phrasing of the relevant dispositive legal question.

Defendant’s proposed question, particularly its imbedded claim regarding the similarity of policy

language and methodology between the present case and LaBrier, includes factual issues that remain

insufficiently resolved at this stage of litigation. See Paschall v. Kansas City Star Co., 605 F.2d 403,

406 (8th Cir. 1979) (“The purpose of section 1292(b) is not to offer advisory opinions rendered on

hypotheses which (evaporate) in the light of full factual development. Consideration of the factual

basis must be such that a sound premise exists upon which the legal issues can be determined with

precision.”) (internal citations omitted). This is especially true in light of this Court’s ruling on

Defendant’s Motion for Reconsideration. A more accurate phrasing of the relevant dispositive legal

issue that proves ripe is as follows.

Under Missouri contract law, may an insurer depreciate labor costs when

determining actual cash value, as the Eighth Circuit previously found in In re State

Farm Fire and Casualty Company, 872 F.3d 567 (8th Cir. 2017) (“LaBrier”), in light

of: 1) the Eighth Circuit’s holding in Holden Farms, Inc. v. Hog Slat, Inc., 347 F.3d

1055, 1066 (8th Cir. 2003) that the Eighth Circuit “must follow” intermediate

appellate state courts “when they are the best evidence of what state law is;” and 2)

the Missouri Court of Appeals’ conclusion in Franklin v. Lexington Ins. Co., 652

S.W.3d 286, 303 (Mo. Ct. App. 2022) that “in the absence of an express policy

provision that allows for it, labor does not fall within that which can be depreciated

when an insured is entitled to an ACV payment.”

At the core of both the present matter and LaBrier is a rather straightforward question of whether

Missouri law permits insurance companies to depreciate labor from actual cost value absent a policy

term that expressly allows such a determination. If yes, then this Court’s prior order on Defendant’s

Motion to Dismiss is due for reversal. If no, then the prior order stands. This would appear to be so as

a matter of law regardless of any alleged factual departures between the present matter and LaBrier.

The source of confusion in the present matter is not factual, but instead a legal question of the interplay

between the Missouri Court of Appeals’ holding in Franklin and the Eighth Circuit’s holdings in

Holden Farms and LaBrier. As this Court sees it, the Eighth Circuit is well positioned to make a

determination of that legal issue, thereby avoiding possibly unnecessary and doubtlessly costly class-

action discovery.

CONCLUSION

For foregoing reasons, Defendant’s Motion for Reconsideration is GRANTED. The Court

has considered Defendant’s arguments and this Court’s prior order, but declines to modify any

prior finding or conclusion. Defendant’s Motion for Certification is GRANTED IN PART AND

DENIED IN PART. Defendant may seek appeal of this Court’s prior order on Defendant’s

Motion to Dismiss, but Defendant’s proposed phrasing of the issue for appeal proves unripe.

Certification is granted as to the alternative question of law as laid out in this order.

IT IS SO ORDERED.

Dated: January 31, 2024 /s/ Douglas Harpool______

DOUGLAS HARPOOL

United States District Judge