Hickey v. State Farm Fire and Casualty Co.
Filing
118
MEMORANDUM OPINION AND ORDER: The outstanding cost disputes are resolved in State Farm's favor and Plaintiff Michael Hickey is entitled to no additional costs. Accordingly, it is ORDERED that judgment be entered in State Farm's favor and that Hickey's action be DISMISSED with prejudice. Signed by Magistrate Judge Katherine P. Nelson on 2/6/2024. (tgw)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
MICHAEL HICKEY,
Plaintiff,
v.
STATE FARM FIRE AND
CASUALTY COMPANY,
Defendant.
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)
)
) CIVIL ACTION NO. 1:22-00159-N
)
)
)
)
MEMORANDUM OPINION AND ORDER
This action comes before the Court with the consent of the parties (Docs. 98,
99), and in accordance with 28 U.S.C. § 636(c), Fed. R. Civ. P. 73 and S.D. Ala. GenLR
73, for resolution of cost disputes left outstanding after entry of partial summary
judgment in favor of Defendant State Farm Fire & Casualty Co. (“State Farm”) on
May 30, 2023 (Doc. 83), and for entry of judgment under Fed. R. Civ. P. 54. Having
reviewed the parties’ briefs, evidentiary submissions and responses (Docs. 103, 104,
105, 106, 110, 111), and with the benefit of oral argument (Doc. 117), the undersigned
concludes all cost disputes are to be resolved in State Farm’s favor and that Plaintiff
Michael Hickey (“Hickey”) is entitled to no additional costs. Accordingly, and for the
reasons stated herein, it is ORDERED that judgment be entered in State Farm’s
favor and that Hickey’s action be DISMISSED with prejudice.
I.
Factual Background and Procedural History
This action stems from an insurance dispute between Hickey and State Farm
regarding the former’s claims for damage to his residential property. The parties are
familiar with the relevant facts, and they have previously been set out by the Court
1
in the May 30, 2023 Order (“May 30 Order”) granting partial summary judgment to
State Farm. (Doc. 83, PageID.2081-99). The Court incorporates those facts here.
State Farm moved for summary judgment under Rule 56(a) on all of Plaintiff’s
claims (Docs. 50, 51), and Senior United States District Judge Callie V.S. Granade
granted State Farm summary judgment…
… on all but Hickey’s breach of contract claim regarding the items State
Farm agrees are covered but that Hickey believes are undervalued –
either because the cost of repair or to replace the item was
underestimated or because an inappropriate depreciation amount was
used to calculate the Actual Cost Value.
(Doc. 83, PageID.2127).1 The May 30 Order disposed of all coverage issues, leaving
only the cost disputes involving “the items State Farm agrees are covered but that
Hickey believes are undervalued.” (Id.). In closing, the May 30 Order noted “the
remaining claim could now be decided by an appraiser,” and directed the parties to
meet-and-confer regarding whether “they wish to resolve the claim through the
appraisal process or proceed with the claim in this Court.” (Id.).
The parties met to discuss appraisal and the total amount left in controversy
The May 30 Order also addressed State Farm’s motion to limit or exclude the testimony of Plaintiff’s
causation expert, Charles Howarth, pursuant to Fed. R. Evid. 702 for noncompliance with applicable
provisions of Fed. R. Civ. P. 26, which was granted in part and denied in part. (Doc. 83, PageID.210307, 2127). The Court found Howarth’s causation testimony was due to be excluded; however, Howarth
was “qualified to testify about the costs of repairing or replacing the damaged property… as an expert
regarding the costs of damages, including ACV… common practices of appraisers or adjusters and his
experience working with insurance companies… [and/or] as a lay or fact witness regarding his
observations and actions during the events at issue in this case.” (Id.).
1
With respect to Hickey’s breach of contract claim for failure to pay the damages claimed, the Court
determined that because Howarth’s causation testimony was excluded, “Hickey has presented no
evidence to support his claim that the items in Howarth’s estimate that were not included in State
Farm’s estimate were caused by a covered loss...” (Doc. 83, PageID.2120). Thus, “State Farm is entitled
to summary judgment on Hickey’s claim that the items in Howarth’s estimate that were not included
in State Farm’s estimate were caused by a covered loss. State Farm did not breach the policy by
denying coverage for those items.” (Doc. 83, PageID.2121).
2
shortly after entry of the May 30 Order, and it became apparent each side interpreted
the order differently. (See Doc. 87). So, they filed a joint motion for clarification on
June 13, 2023, wherein each side explained their respective positions as to what was
left remaining at issue. (Id.). In response, the Court entered a clarification order
dated June 14, 2023 (“June 14 Order”), stating in full:
This matter is before the Court on the parties’ joint motion for
clarification. (Doc. 87). The parties disagree as to the meaning of this
Court’s Order of May 30, 2023 (Doc. 83), which granted summary
judgment in part in favor of State Farm. Specifically, the parties dispute
what remains of Hickey’s breach of contract claim for failure to pay.
Hickey apparently still wants to assert coverage under the policy for
damage that State Farm did not agree is covered.
In the summary judgment order this Court excluded the opinion
testimony of Hickey’s only expert, Charles Howarth, as to causation.
After discussing the need for expert testimony to show causation, the
Court concluded that Hickey had provided no admissible evidence to
show coverage for the items in his estimate that State Farm contended
were not covered. The Court found “that summary judgment is due to be
granted in favor of State Farm on all but Hickey’s breach of contract
claim regarding the items State Farm agrees are covered but that
Hickey believes are undervalued – either because the cost of repair or to
replace the item was underestimated or because an inappropriate
depreciation amount was used to calculate the Actual Cost Value.” (Doc.
83 PageID.2127). The summary judgment Order completely disposed of
the coverage dispute between the parties and left only the cost disputes
as to items that State Farm had agreed are covered. The Order found
that any item of damage not included in State Farm’s estimate was not
covered. The Order then concluded that “[s]ince the coverage issues have
now been determined” by the Order “the remaining claim could now be
decided by an appraiser.” (Doc. 83, PageID.2127). Thus, the Court finds
State Farm’s assessment of the remaining claim is correct because
Hickey cannot assert coverage for damage for which State Farm
disputed coverage. To the extent this clarifies the Order of May 30, 2023,
the parties’ motion (Doc. 87), is GRANTED.
(Doc. 89). Subsequently, the parties consented to the undersigned Magistrate Judge’s
exercise of jurisdiction. (Docs. 98, 99). The parties came before the Court on August
3
11, 2023, for a status conference, where both sides agreed the outstanding cost
disputes would be resolved on the briefs. (See Docs. 101, 102). Principal briefs were
simultaneously filed (Docs. 103-06), each side was given an opportunity to respond
(Docs. 110, 111) and all came before the Court for oral argument on October 31, 2023.
(Doc. 117).
II.
Analysis
In both briefing and oral argument, Hickey contends he is entitled to costs
beyond the 277 line-items 2 included on State Farm’s estimate 3 for one reason or
another. (See Docs. 104, 117). However, both the May 30 Order and June 14 Order
make clear that anything beyond the items contained in this estimate are no longer
at issue because Hickey has no admissible evidence to support that any other items
of damage claimed by him were caused by a covered loss. See n.1. (Doc. 83,
PageID.2121). Specifically, the May 30 Order granted summary judgment “on all but
Hickey’s breach of contract claim regarding the items State Farm agrees are
covered but that Hickey believes are undervalued,” and the June 14 Order expressly
states, “any item of damage not included in State Farm’s estimate was not
covered.” (Doc. 83, PageID.2127; Doc. 89). Try as he may, the Court views Hickey’s
argument as an attempt to relitigate issues already determined by the May 30 Order
which are for current purposes established under the law of the case doctrine.
The final numerical line-item included on this estimate is 301. (Doc. 103-2, PageID.2324). However,
there are not 301 entries on the estimate when viewed in sequence, because there are no line-items
(or numeric entries) for 249-65, 267, 272-74, 284, or 296-97. (See Doc. 103-2).
2
State Farm’s operative estimate for current purposes is the revised estimate dated February 23, 2021
(Doc. 103-2). (See Doc. 117). To avoid confusion moving forward, any references to State Farm’s
“estimate” is a reference to this revised estimate.
3
4
As a general matter, “when a court decides upon a rule of law, that decision
should continue to govern the same issues in subsequent stages of the same case.”
Christianson v. Colt Indus. Operating Corp., 486 U.S. 800, 816 (1988). This rule, and
the law of the case doctrine writ large, “promotes the finality and efficiency of the
judicial process by ‘protecting against the agitation of settled issues.’” Id. (citation
omitted). No doubt this doctrine is a flexible one, as a district court is always free to
reconsider previous rulings entered in the context of a live case before it. Id. at 817
(citation omitted) (explaining the doctrine is not a limit on the Court’s power, but an
expression of “the practice of courts generally to refuse to reopen what has been
decided.”). See 18 Moore's Federal Practice - Civil § 134.22, 1(c) (2023) (“After some
issues in a litigation have been decided, the case may be transferred to another judge
in the same court. The law of the case doctrine applies to the decision of a coordinate
court in the same way as it applies to a court’s own decisions… [a] judge may review
the decision made earlier by another judge in the same way as a judge may review
his or her own decision.”).Yet, while “[a] court has the power to revisit prior decisions
of its own or of a coordinate court in any circumstance, (sic.) as a rule courts should
be loathe to do so in the absence of extraordinary circumstances such as where the
initial decision was ‘clearly erroneous and would work a manifest injustice.’”
Christianson, 486 U.S. at 817 (citations omitted).
Where, as here, a motion for summary judgment or partial summary judgment
has been entered in a case, that ruling “is the law of the case on the issues decided”
moving forward, unless there is some basis for reconsideration. United States v.
5
Horton, 622 F.2d 144, 148 (5th Cir. 1980).4 Hickey has not moved for reconsideration
of the May 30 Order, argued that it was clearly erroneous or made the point that it
would result in manifest injustice. While he has not hidden that he plans to appeal it
(see e.g., Doc. 94), disagreement with a ruling’s outcome is not grounds enough for the
Court to take up reconsideration sua sponte, especially considering the above-noted
law of the case principles applicable here. Even if the Court were inclined to do so,
the undersigned sees no plain error in the well-reasoned conclusions reached by the
May 30 Order, or the subsequent directives in both that order and the June 14 Order
with regard to what remains unsettled in this action.
As such, the analysis moving forward is limited to the proper valuation of the
items contained on State Farm’s estimate, and nothing beyond the 277 line-items
listed on that estimate are before the Court at this time. With respect to these 277
line-items, the Court’s inquiry is two-fold: (1) whether the cost of repair or
replacement was underestimated by State Farm or (2) whether State Farm used an
inappropriate depreciation percentage to calculate actual cash value.
Before addressing these inquiries, the Court addresses the methodology for
calculating replacement cost value (“RCV”) and actual cost value (“ACV”) under the
policy. The May 30 Order explains:
While the parties agree that the policy at issue is a replacement value
policy, the policy provides that “only the actual cash value of the damage
property” will be paid “until repair or replacement is completed.” (Doc.
Although Horton’s reliance on the law of the case doctrine was later questioned in United States v.
Williams, 728 F.2d 1402, 1406 (11th Cir. 1984), the Supreme Court’s decision in Christianson, put to
rest any concerns the Williams Court may have raised with respect to the doctrine’s applicability
among coordinate courts and within the context of the same court’s own decisions. 486 U.S. at 816. See
18 Moore’s Federal Practice Civil § 134.22 (2023).
4
6
51-2, PageID.914). The Court notes that “if property is not repaired or
replaced within two years after the date of the loss” the policy states
that State Farm “will pay only the actual cash value.” (Doc. 51-[2],
PageID.914).
(Doc. 83, PageID.2122). Here, the date of the loss was September 16, 2020. (Doc. 1032, PageID.2288). So, for any of the 277 line-items not repaired or replaced by
September 16, 2022, Hickey is only entitled to ACV. The record indicates repairs and
replacement have largely not been completed to date, and therefore not completed
within the two-year window under the policy. (See Doc. 73, PageID.1463 (stating in
response to State Farm’s summary judgment motion that, “the residence, still
uninhabitable, has not been repaired.”)). (See also, Doc. 117). The only exception
appears to be some parts of the roof.5
Under the policy, the ACV of the items at issue can only be determined after
RCV is determined because it is a replacement value policy. (See Docs. 51-2, 83). ACV
is “the value of the damaged part of the property at the time of the loss, calculated as
the estimated cost to repair or replace such property, less a deduction to account for
pre-loss depreciation.” (Doc. 51-2, PageID.896).6 The “value of the damaged part of
the property at the time of the loss” is the RCV – i.e., “the estimated cost to repair or
replace such property.” (Id.). (See Doc. 103-2, PageID.2285) (“Replacement Cost Value
The record indicates at least some repairs to the roof were made or begun within the two-year repair
and replacement period. (Doc. 73, PageID.1463 (noting “part of the roof has been replaced”); Doc. 73,
PageID.1468 (explaining Hickey “tarped the roof to prevent further damage…”); Doc. 65, PageID.1330
(noting State Farm’s expert Joel Wehrman inspected the home “twenty-five months later… and the
complete roof had been replaced…”)). If such repairs were in fact completed by September 16, 2022, it
is possible Hickey could be entitled to RCV on those items under the policy. However, Hickey does not
state what, if any, repairs were completed within the two-year window, does not argue that he should
be entitled to RCV for roof-specific items, nor even identify what those items would be.
5
6
“ACV = Actual Cash Value, or RCV at the time of loss minus depreciation.” (Doc. 51-2, PageID.884).
7
(RCV) – Estimated cost to repair or replace damaged property”)). 7 Once RCV is
determined, it is used to calculate ACV, which is “[t]he repair or replacement cost of
the damaged part of the property less depreciation and deductible” or “RCV at the
time of the loss minus depreciation.” (Doc. 51-2, PageID.884; Doc. 103-2,
PageID.2285). The policy itself specifies:
For this calculation, all components of this estimated cost including, but
not limited to:
a. materials, including any tax;
b. labor, including any tax; and
c. overhead and profit;
are subject to depreciation.
The depreciation deduction may include such considerations as:
a.
b.
c.
d.
e.
age;
condition;
reduction in useful life;
obsolescence; and
any pre-loss damage including wear, tear, or deterioration;
of the damaged party of the property.
(Doc. 51-2, PageID.896).
Having set out the methodology for reaching ACV, the undersigned turns again
to State Farm’s estimate. (Doc. 103-2, PageID.2284-2330). For the 277 line-items at
issue, State Farm calculated a total RCV of $81,885.65. (Doc. 103-2, PageID.2330).
This total, however, includes 25 line-items associated with ServPro’s water extraction
and remediation services, totaling $3,681.96, which State Farm paid directly to
“RCV = Replacement Cost Value, or the cost to repair or replace your home, other structures or
contents with like kind and quality.” (Doc. 51-2, PageID.884).
7
8
ServPro on February 24, 2021. (Doc. 51-1, PageID.778; Doc. 83, PageID.2090).
Because payment for these 25 line-items has already been made, the starting point
for current purposes is an RCV of $78,203.69 among 252 line-items. (Doc. 103-2,
PageID.2286). Using this figure, State Farm subtracted depreciation, including taxes
($30,263.50), General Contractor Overhead & Profit ($6,053.16) and a deductible
($17,135.00) to reach an ACV of $24,752.03 (Doc. 103-2, PageID.2286). State Farm
has already paid Hickey this ACV amount in two installments of $22,885.44 (on
October 23, 2020) and $1,866.59 (on February 23, 2021), respectively. (Doc. 51-1,
PageID.778).
A. The Cost of Repair and Replacement was Not Underestimated
Hickey raises three sub-points in arguing that State Farm underestimated the
cost of repair and/or replacement: (1) State Farm did not use the appropriate price
list, (2) State Farm did not reevaluate the price list “based on the contractor’s
estimate as well as the reason for any delay in beginning the work,” (Doc. 111,
PageID.2769 (citing Doc. 103-2, PageID.2278)), and (3) State Farm did not use like
kind and quality materials in compiling its estimate. Each point is unpersuasive and
addressed in turn.
1. State Farm used the appropriate price list
State Farm used a price list from September 2020 (“ALMB28_SEP20”), while
Howarth used a price list from April 2021 (“ALMB8X_APR21”). (Doc. 103-2,
PageID.2286; Doc. 105-1, PageID.2425). Under the policy, the “estimated cost to
repair or replace such property,” or RCV, is reached by looking to “the damaged part
9
of the property at the time of the loss.” (Doc. 51-2, PageID.884, 896). State Farm used
a price list from September 2020, and the loss occurred in this same month. (Doc.
103-2, PageID.2288, 2333). Therefore, the undersigned finds that State Farm has
utilized the correct price list.
2. State Farm was not obligated to reevaluate the price list
Hickey further attacks State Farm’s use of the September 2020 price list by
pointing to the declaration of State Farm’s expert B.J. Sumner – particularly, his
statement that “[o]nce Mr. Hickey began work, the price list can be reevaluated based
on his contractor’s estimate as well as the reason for any delay in beginning work.”
(Doc. 111, PageID.2769-70 (citing Doc. 103-2, PageID.2278)). State Farm’s other
expert, Eric Thibault, similarly stated in his declaration: “Once repairs were started,
the price list could be reevaluated based on his contractor’s estimate as well as the
reason for any delay in beginning work.” (Doc. 103-4, PageID.2433). Hickey opines
that State Farm “has not done what its own expert recommended” by failing to
reevaluate the price list. This argument is unpersuasive for several reasons.
First, Hickey’s criticism on State Farm’s failure to do so is not based on a
failure to comply with the policy itself, as there is no express provision therein
relating to reevaluation of a price list based on a contractor’s estimate and any
reason(s) for delay. (See Doc. 51-2). Instead, it stems from “guidance” set out in State
Farm’s Operations Guide. (See Doc. 73, PageID.1466; Doc. 73-5, PageID.1580; Doc.
66-5, PageID.1437-39). The Operations Guide explains on this point:
Claim handlers have flexibility to permit exceptions that would allow a
full replacement cost payment before restoration is complete. These
10
exceptions generally present themselves in cases where repairs are
substantially underway, or a contract for repairs has been entered into
between the insured and repair firm that is acceptable to us. Completion
of debris removal, demotion and/or tear out of damaged property is not
considered substantial repairs. We encourage the claim handler to
exercise sound judgment on each claim.
(Doc. 66-5, PageID.1439). Thus, the statements made by Sumner and Thibault
represent the exception, not the rule. Second, the record does not show repairs were
“substantially underway” at any point in such a manner that could trigger the claim
handler’s flexibility to invoke this exception.8 Third, both declarations indicate the
reevaluation “could” or “can” occur after repairs began, not that State Farm was
required to do so. (Docs. 103-2, 103-4). And fourth, assuming arguendo that State
Farm should have used a different price list for certain items due to substantially
underway repairs, Hickey does not offer an alternative beyond his carte blanche
assertion that Howarth’s use of the April 2021 price list was appropriate. In sum,
State Farm was not obligated to reevaluate the price list and has not underestimated
the cost of repair or replacement by opting not to.
3. The kind and quality of replacements was appropriate
Hickey argues some of the items on State Farm’s estimate – specifically those
relating to the plaster walls and insulation – are not of “like kind and quality” and
that State Farm has “substituted cheaper items than what is actually there.” (Docs.
Based on the record’s indications that repairs to the roof were completed 25 months after the loss,
see n.5, it is possible these damages could have been reevaluated within the exception to the Operations
Guide’s guidance; however, Hickey does not argue State Farm should have done so – nor does he argue
such a position was ever articulated to State Farm during correspondence relating to the underlying
claim. Moreover, roof-specific repairs are not raised in Hickey’s brief or opposition response to State
Farm’s brief. (Docs. 104, 111).
8
11
104, 111). There is no dispute that the policy calls for like kind and quality
replacements in calculating RCV (Doc. 51-2), and Sumner agreed Hickey is entitled
to like kind and quality replacements. (Doc. 103-2). Sumner specifically agreed that
Hickey is entitled to plaster walls if he wants them. (Doc. 73-5, PageID.1581; Doc. 83,
PageID.2095)). Hickey’s current contention that State Farm used cheaper items
stems from the following exchange during Howarth’s deposition:
Howarth: Now, in this instance, the State Farm adjuster is not using
the same materials or similar materials to what is in the home. He is
substituting cheaper items in the State Farm estimate than what’s
actually there.
SF Counsel: Can you give me some examples of the cheaper items?
Howarth: Yes, sir. One is he is utilizing for plaster an entry for gypsum
lath and two-coat plaster.
SF Counsel: As opposed to the three-coat plaster that you’re
recommending?
Howarth: Yes, sir. This is a wood lath with three-coat plaster. And in a
historical application, we would – our estimate would have gone back
with wood lath and three-coat plaster.
SF Counsel: Would –
Howarth: Hang on. Hang on. The last time I priced that, close to $20 a
square foot. In this case, we utilized the closest thing to it. And that the
Xactimate entry for wire lath and three-coat plaster. And that would be
the most appropriate entry. State Farm used cheaper product there. The
used a cheaper product for insulation. There were other places where
they used cheaper products.
SF Counsel: Was the original construction of this house three-layer
plaster?
Howarth: Yes. The original construction is wood lath. And wood lath
and plaster is a three-coat plaster process. A brown coat, scratch coat,
and a finish coat. Parts of this house had drywall. And, of course, that’s
12
easy. Half inch or three-quarter inch of drywall. The ceiling in the
upstairs kitchen was a particleboard backer with three-coat plaster on
it. It was not a gypsum board. That would be closer. But it’s still a threecoat application. And putting three coats of any wet cementitious
substance, material on a wall takes a lot longer than just two coats.
Because there’s drying times, you have to wait overnight. You come
back. And so that’s why it’s much cheaper to go with a gypsum and two
coat than wire and three coat. And that was inappropriate. And, look,
everybody makes mistakes. But they’ve got plenty of time to fix it.
They’ve seen the facts now and they’ve just dug in their heels and
refused to do what’s right. That’s where the misconduct exists.
(Doc. 73-13, PageID.1699-1701).
As an initial observation, State Farm’s estimate includes several line-items
relating to plaster walls – for example, entries 23-25, 54-56, 75-76, 155-56, 170-171,
196-197 and 220-221. As such, it would appear that Sumner’s statement affirming
Hickey’s entitlement to plaster walls is not contradictory of what is already in State
Farm’s estimate. The exchange between Howarth and State Farm’s counsel indicates
the dispute over “like kind and quality” has to do with the materials used to repair
and replace the plaster walls, 9 with Howarth essentially contending that State
Farm’s use of gypsum boards and two-coat plaster is not a “like kind and quality”
replacement for the original wood lath with three-coat plaster. (See Doc. 73-13).
Hickey again points to the State Farm Operations Guide for support here, specifically
to its definition of “similar construction” as meaning “having characteristics in
common or strictly comparable.” (Doc. 104, PageID.2461 (citing Doc. 73-16,
PageID.1734)).
9
No additional discussion is included in Hickey’s recent filings regarding insulation. (Docs. 104, 111)
13
It should again be noted that this Operations Guide is not the policy and is not
binding, it is only “guidance.” (Doc. 73-16, PageID.1734). Moreover, because the
original plaster walls were wood lath with three-coat plaster, it follows that a “strictly
comparable” replacement would be wood lath with three-coat plaster. (See Doc. 7313). State Farm does not use wood lath with three-coat plaster in its estimate. (Doc.
103-2). But neither does Howarth; he used “wire lath and three-coat plaster,” which
he asserts is the “closest thing” to wood lath and three-coat plaster for on his
Xactimate estimate. (Doc. 73-13; Doc. 105-1). However, his Xactimate estimate was
based on an improper price list. See II(A)(i), supra. And Hickey has not offered
anything further beyond Howarth’s opining based on this improper price list to show
that State Farm’s use of gypsum lath and two-coat was an inappropriate like kind
and quality replacement. At a minimum, it appears State Farm’s use of gypsum and
two-coat plaster has “characteristics in common” with the original wood lath and
three-coat plaster in the home. As such, the undersigned concludes State Farm’s use
of these replacement materials was appropriate here.
B. State Farm Used Appropriate Depreciation Rates
The second main point of contention in this cost dispute deals with the proper
depreciation rate to be applied to the items on State Farm’s estimate. As noted above,
the depreciation rate is used in the RCV calculation to reach ACV, and the Court
finds the rate(s) applied by State Farm here were appropriate.
As an initial point, Howarth’s estimate does not include depreciation. (Doc.
105-1). He explained during his deposition that the goal of his estimate was to
14
determine RCV, and that depreciation rate(s) were typically applied “at the end of
the process.” (Doc. 103-6, PageID.2449-50). He opined that an 8% depreciation rate
“to the bottom line” in this case would be appropriate because in his experience “they
all run around eight percent.” (Id.). Yet, he also makes clear that certain items are
depreciated at different rates than others, which runs contrary to his eight-percentacross-the-board approach. (Id.).
State Farm, on the other hand, applied varying depreciation rates to each of
the individual line-items based upon the factors articulated in the policy for reaching
ACV. (Doc. 103, PageID.2215-20). (See Doc. 103-2).10 Thibault stated that he applied
varying rates for each of the items because “different aspects of the property have
different ages and conditions.” (Doc. 103-4). His conclusions, which align with the
relevant provision of the policy, were reached after conducting an inspection of the
home with Hickey’s participation. (Id.). The undersigned does not see any error with
the methodology applied by Thibault, nor has Hickey pointed to an alternative
approach beyond the 8% depreciation rate “to the bottom line” opined by Howarth in
his deposition. As such, the Court is satisfied that State Farm has utilized an
appropriate deprecation rate.
C. State Farm Owes Nothing Further to Hickey
As previously noted, after removing the $3,681.96 payment made directly to
ServPro, State Farm calculated a RCV of $78,203.69 among 252 line-items included
Hickey’s contention that “State Farm took a whopping 40% depreciation on its estimate” is
disingenuous. (Doc. 104, PageID.2457). While State Farm’s estimate may have resulted in an
approximate 40% depreciation rate to the bottom line, its estimate applies varying depreciation rates
to each individual line-item. (See Doc. 103-2).
10
15
on its estimate. (Doc. 103-2). It used the appropriate price list from September 2020
in doing so. See II(A)(i), supra. Then, State Farm appropriately depreciated each of
the 252 line-items at varying rates based upon the factors set out in the policy,
including taxes, by $30,263.50, see II(B), supra., removed costs for General Contractor
Overhead & Profit ($6,053.16) and applied a deductible ($17,135.00) to reach an ACV
of $24,752.03. (Doc. 103-2, PageID.2286). Because State Farm has already paid
Hickey this ACV amount in two installments of $22,885.44 and $1,866.59, (Doc. 511, PageID.778), he is owed nothing further from State Farm for Hickey’s breach of
contract claim for failure to pay.
III.
Conclusion
For the reasons stated herein, the outstanding cost disputes remaining after
the May 30 entry of partial summary judgment in favor of State Farm and against
Hickey are resolved in State Farm’s favor, and nothing further is owed to Hickey
under the policy. Accordingly, it is ORDERED that judgment be entered in favor of
State Farm and that Plaintiff’s action be DISMISSED with prejudice. Final
judgment shall enter separately in accordance with Fed. R. Civ. P. 58.
DONE and ORDERED this the 6th day of February 2023.
/s/ Katherine P. Nelson
KATHERINE P. NELSON
UNITED STATES MAGISTRATE JUDGE
16
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