Scott v. Safeco Insurance Company of America

IN THE UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF MISSOURI,

CENTRAL DIVISION

SHAUNDA E. SCOTT, )

)

Plaintiff, )

)

vs. ) Civil Action No. 2:23-cv-04008-MDH

)

SAFECO INSURANCE COMPANY )

OF AMERICA, )

)

Defendant. )

ORDER

Before the Court is Defendant’s (“Safeco”) Motion for Judgment on the Pleadings. For

reasons herein, Safeco’s Motion is DENIED.

BACKGROUND

This case generally concerns whether Missouri contract law allows insurers to depreciate

labor costs when calculating actual cash value (“ACV”),1 when the applicable policy does not

specifically allow for depreciation of such costs. In 2017, the Eighth Circuit found such

depreciation to be “reasonable.” In re State Farm Fire & Cas. Co., 872 F.3d 567, 576 (8th Cir.

2017) (“LaBrier”). Specifically, in LaBrier, the Eighth Circuit reasoned that “actual cash value”

is unambiguous under Missouri law and necessarily requires some degree of estimation. LaBrier

at 574. Because of this unambiguity and necessary estimation, the Court reasoned, it is lawful for

an insurer to depreciate labor costs when determining ACV, even if the policy does not explicitly

1 The definition of actual cash value may vary somewhat among policies. Generally, however,

under Missouri law it refers to “the difference in the fair market value of the damaged property

immediately before and after the loss.” In re State Farm Fire & Cas. Co., 872 F.3d 567, 574 (8th

Cir. 2017).

allow for such depreciation. Id. at 576. Significantly, the Eighth Circuit explicitly referenced a lack

of relevant caselaw from the Missouri Supreme Court and therefore based its holding in LaBrier

in part on a prediction of how the Missouri Supreme Court would handle the matter. Id. at 577. In

2022, however, the Missouri Court of Appeals found the opposite: “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.” Franklin v. Lexington Ins. Co., 652 S.W.3d 286, 303

(Mo. Ct. App. 2022). The Missouri Supreme Court denied transfer of the Court of Appeals’

Franklin opinion, indicating the Court of Appeals’ order is the final judgment on the matter. After

Franklin, several lawsuits, including the present case, were filed in this Court asserting, inter alia,

breach of contract against those insurers who allegedly depreciated labor costs from ACV in

policies that did not explicitly allow for such depreciation.

In Brown v. State Farm, this Court found that binding Eighth Circuit precedent required

this Court to look to Franklin as the best evidence of Missouri law on whether it was lawful for

insurers to depreciate labor when determining ACV when an insurance policy did not explicitly

allow for such depreciation. Brown v. State Farm Fire & Cas. Co., No. 2:23-CV-04002-MDH,

2023 WL 5599630, at *4 (W.D. Mo. Aug. 29, 2023); Holden Farms, Inc. v. Hog Slat, Inc., 347

F.3d 1055, 1066 (8th Cir. 2003) (Eighth Circuit courts “must follow [intermediate appellate state

courts] when they are the best evidence of what [state] law is”) (citations omitted). After denying

its Motion to Dismiss, State Farm sought intermediate appellate review under 28 U.S.C. § 1292(b)

of this Court’s denial, which the Eighth Circuit declined.2 In the present matter, Safeco

acknowledges the procedural posture and similarity of the Brown case, but seeks to distinguish

2 Safeco filed the present Motion prior to this Court’s ruling on the Motion to Dismiss in Brown. This matter was

stayed until this Court issued its ruling in Brown, at which point Plaintiff responded and Safeco replied to the present

Motion. This matter was also stayed pending the Eighth Circuit’s resolution of State Farm’s motion for intermediate

review. That stay was lifted when the Eighth Circuit declined intermediate review in Brown.

this matter because of the specific policy language at issue in the present case. Unlike the policies

at issue in Brown and Franklin, Safeco contends, the policy at issue here offers a specific definition

of ACV. Further, Safeco argues, unlike the Franklin policy, the ACV definition here specifically

lacks the word “depreciation”. Put differently, “given that Safeco’s Policy defines ACV and the

term ‘depreciation’ is not used in that definition, the very ‘ambiguity’ that led the Franklin court

to interpret that policy in favor of the insured is not relevant here.” (Doc. 42 at 2).3 The present

policy, however, does not explicitly include labor among those costs that may be depreciated when

determining ACV.

STANDARD

The standard under for a motion for judgment on the pleadings under Federal Rule of Civil

Procedure 12(c) is similar to the standard for a motion to dismiss under Rule 12(b). Ashley Cnty.,

Ark. v. Pfizer, Inc., 552 F.3d 659, 665 (8th Cir. 2009). A complaint must contain factual allegations

that, when accepted as true, are sufficient to state a claim of relief that is plausible on its face. Zutz

v. Nelson, 601 F.3d 842, 848 (8th Cir. 2010) (citing Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)).

The Court “must accept the allegations contained in the complaint as true and draw all reasonable

inferences in favor of the nonmoving party.” Coons v. Mineta, 410 F.3d 1036, 1039 (8th Cir. 2005)

(internal citations omitted). The complaint’s factual allegations must be sufficient to “raise a right

to relief above the speculative level,” and the motion to dismiss must be granted if the complaint

does not contain “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp

v. Twombly, 550 U.S. 544, 545 (2007). Further, “the tenet that a court must accept as true all of

the allegations contained in a complaint is inapplicable to legal conclusions. Threadbare recitals

3 While the relevant policy language technically lacks the word “depreciation,” it refers several times to “reasonable

deduction for wear and tear,” which is, of course, sufficiently similar. (Doc. 42 at 2).

of the elements of a cause of action, supported by mere conclusory statements, do not suffice.

Ashcroft, 556 U.S. at 678 (citing Twombly, 550 U.S. at 555).

DISCUSSION

Ultimately, this case is about the scope of the Missouri Court of Appeals’ Franklin opinion.

True, the Franklin Court took care to limit the scope of its opinion. See Franklin at n. 19 (“This

opinion should not be read to suggest that ACV should be determined by [replacement cost less

depreciation (“RCLD”)] in all cases where “actual cash value” is undefined in a first-party property

insurance policy”); Sullivan v. State Farm Mut. Auto. Ins. Co., No. 23-00169-CV-W-GAF, 2023

WL 9381439, at *3 (W.D. Mo. Nov. 17, 2023) (interpreting Franklin to preempt argument that

“when an insurance policy does not define [ACV] the method used to calculate the value that

favors the insured must be utilized”). These limitations, however, do not bear on the Franklin

Court’s rather straightforward finding 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.” Franklin at 303. Franklin’s limitations, as this Court understands them,

coexist comfortably with its breadth as to the unlawfulness of depreciating labor without a policy

that explicitly allows for such depreciation. No authority of which this Court is aware dictates that

an insurer’s deployment of the RCLD method of determining ACV, which is lawful, requires

depreciation of labor costs, which, under Franklin, is unlawful in the absence of a policy explicitly

allowing for depreciation. Rather, quite the opposite appears to be true, an insight which underlies

the Franklin reasoning. In the present case, regardless of whether the policy at issue defines ACV

and lacks the word depreciation, there appears to be no allegation or suggestion that the policy

language at issue defines ACV to allow for depreciation of labor costs. Therefore, Safeco’s Motion

for Judgment on the Pleadings is DISMISSED.4

IT IS SO ORDERED.

DATED: June 3, 2024 /s/ Douglas Harpool

DOUGLAS HARPOOL

UNITED STATES DISTRICT JUDGE

4 Safeco relies heavily on Cincinnati Ins. Co. v. Bluewood, in which Safeco contends the Eighth Circuit found

unambiguous a policy that defines ACV in a manner similar to how the current policy defines ACV. Cincinnati Ins.

Co. v. Bluewood, Inc., 560 F.3d 798, 799 (8th Cir. 2009). Bluewood, however, is not especially probative as to the

instant matter. Bluewood deals in no way with the depreciation of labor costs in calculation of ACV, the issue at play

presently. Franklin makes clear that the relevant ambiguity relates to the narrow issue of “whether [the policy] allowed

[the insurer] to depreciate labor when making an ACV payment to [the plaintiff].” Franklin at 301 (cleaned up). Had

the Eighth Circuit in Bluewood considered whether the policy was ambiguous as to depreciation of labor in ACV, the

Eighth Circuit may very well have reached a different conclusion. If, hypothetically, the Eighth Circuit considered the

labor depreciation issue in Bluewood and still found unambiguity, then Bluewood would be in a similar position to

LaBrier, having been based on an incorrect (albeit understandably) prediction of an issue novel to Missouri law.