Thank You For Submiting Feedback!
United States Court of Appeals for the Sixth Circuit
July 10, 2020, Decided; July 10, 2020, Filed
File Name: 20a0209p.06
[*455] [***2] JANE B. STRANCH, Circuit Judge. Defendant State Farm Fire and Casualty Company appeals the district court's ruling certifying a class of Kentucky homeowners [**2] who allege that State Farm improperly withheld labor depreciation from payments due to them under their insurance policies. Because the district court did not abuse its discretion in certifying the class, we AFFIRM the class certification order and REMAND for further proceedings.
State Farm and named Plaintiffs Susan Hicks and Don Williams entered into replacement-cost homeowner insurance contracts. State Farm's standard-form policy provides a two-step settlement process, obligating the insurer to pay for property damage. First, before the insured makes any repairs, State Farm must pay the "actual cash value at the time of the loss of the damaged part of the property," up to the policy's liability limit, "not to exceed the cost to repair or replace the damaged part of the property." The "actual cash value" (ACV) is calculated under the policy by estimating the amount it will cost to repair or replace damaged property and subtracting depreciation and the deductible. Hicks v. State Farm Fire & Cas. Co., 751 F. App'x 703, 707-08 (6th Cir. 2018) (noting the parties' agreement that "the policies incorporate the definition provided in Kentucky's ACV regulation, § 9(2)" and interpreting the regulation as defining "ACV using the replacement cost minus depreciation [**3] formula"). If a policyholder owned a house with a ten-year-old roof that was destroyed by hail, "it is not feasible" for the insurer "to buy a ten-year-old roof (or ten-year-old roofing materials) to install on an existing building," id. at 709; thus, insurers subtract depreciation to arrive at ACV estimates.
During the class period, State Farm determined the ACV first by sending an adjuster to inspect the damage and estimate the reconstruction cost. Id. at 704. Using Xactimate, software State Farm has exclusively used since 1990, State Farm then input the adjuster's reconstruction cost estimate—the "replacement cost value" or RCV—and depreciated costs for both materials and labor. Id. Xactimate produced an ACV calculation (RCV minus material and labor cost [***3] depreciation), subtracted the insured's deductible, and then State Farm paid that Xactimate estimate to the insured.
Full case includes Shepard's, Headnotes, Legal Analytics from Lex Machina, and more.
965 F.3d 452 *; 2020 U.S. App. LEXIS 21446 **; 2020 FED App. 0209P (6th Cir.) ***; 107 Fed. R. Serv. 3d (Callaghan) 157; 2020 WL 3888156
SUSAN HICKS; DON WILLIAMS, Plaintiffs-Appellees, v. STATE FARM FIRE AND CASUALTY COMPANY, Defendant-Appellant.
Subsequent History: Rehearing denied by, En banc Hicks v. State Farm Fire & Cas. Co., 2020 U.S. App. LEXIS 27283 (6th Cir., Aug. 26, 2020)
Prior History: [**1] Appeal from the United States District Court for the Eastern District of Kentucky at Ashland. No. 0:14-cv-00053-Henry R. Wilhoit, Jr., District Judge.
Hicks v. State Farm Fire & Cas. Co., 2019 U.S. Dist. LEXIS 27584 (E.D. Ky., Feb. 21, 2019)
depreciation, insureds, estimate, damages, repair, district court, Plaintiffs', predominate, actual cash value, replace, class certification, formula, refund, deductible, labor cost, part of the property, class member, costs, calculate, replacement cost, common question, commonality, merits, class action, individualized, overestimation, subtracted, individualized proof, common issue, classwide
Insurance Law, Policy Interpretation, Ambiguous Terms, Construction Against Insurers, Civil Procedure, Special Proceedings, Class Actions, Appellate Review, Certification of Classes, Prerequisites for Class Action, Adequacy of Representation, Commonality, Numerosity, Typicality, Predominance, Class Actions, Constitutional Law, The Judiciary, Case or Controversy, Standing, Superiority, Prerequisites for Class Action