Shahan v. Allstate Vehicle & Property Insurance Co
MEMORANDUM RULING re 15 MOTION to Dismiss For Failure to State a Claim Rule 12(b)(6) MOTION to Strike Class Allegations filed by Allstate Vehicle & Property Insurance Co. Signed by Judge James D Cain, Jr on 7/29/2022. (crt,Benoit, T)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF LOUISIANA
LAKE CHARLES DIVISION
CASE NO. 2:22-CV-01246
JUDGE JAMES D. CAIN, JR.
ALLSTATE VEHICLE & PROPERTY
MAGISTRATE JUDGE KAY
Before the Court is “Defendant’s Rule 12(b)(6) Motion to Dismiss and Rule
23(d)(1)(D) Motion to Strike Class allegations” (Doc. 15) wherein Defendant Allstate
Vehicle and Property Insurance Company (“Allstate”) moves to dismiss all of Plaintiff,
Amanda Shahan’s claims with prejudice and to strike the class allegations from the putative
Class Action Complaint.
On or about August 27, 2020, Hurricane Laura made landfall near Lake Charles.
During the relevant time period, Allstate issued a replacement cost homeowners insurance
policy, which covered Plaintiff’s property against perils including hurricanes.
Complaint, Plaintiff alleges that Allstate did not sufficiently compensate her for additional
living expenses, and for damages to her dwelling, structures and personal property losses.
Plaintiff asserts a breach of contract claim as well as claims for penalties and
attorney fees pursuant to Louisiana Revised Statutes 22:1973 and 22:1892. Specifically,
Complaint, ¶ 6, Doc. 1.
for this Motion, Plaintiff claims that Allstate breached the policy by wrongfully
withholding amounts due to her for Actual Cash Value (“ACV”) claims by depreciating
labor when calculating the ACV of the damaged insured property.
RULE 12(b)(6) STANDARD
Because the grounds for dismissal under Rule 12(b)(6) result in dismissal of the
claims at issue against both defendants, and defective service could still be cured, the court
will first analyze the grounds asserted under Rule 12(b)(6).
Rule 12(b)(6) allows for dismissal when a plaintiff “fail[s] to state a claim upon
which relief can be granted.” When reviewing such a motion, the court should focus on the
complaint and its attachments. Wilson v. Birnberg, 667 F.3d 591, 595 (5th Cir. 2012). The
court can also consider documents referenced in and central to a party’s claims, as well as
matters of which it may take judicial notice. Collins v. Morgan Stanley Dean Witter, 224
F.3d 496, 498–99 (5th Cir. 2000); Hall v. Hodgkins, 305 Fed. App’x 224, 227 (5th Cir.
Such motions are reviewed with the court “accepting all well-pleaded facts as true
and viewing those facts in the light most favorable to the plaintiff.” Bustos v. Martini Club,
Inc., 599 F.3d 458, 461 (5th Cir. 2010). However, “the plaintiff must plead enough facts
‘to state a claim to relief that is plausible on its face.’” In re Katrina Canal Breaches Litig.,
495 F.3d 191, 205 (5th Cir. 2007) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
(2007)). Accordingly, the court’s task is not to evaluate the plaintiff’s likelihood of success
but instead to determine whether the claim is both legally cognizable and plausible. Lone
Star Fund V (U.S.), L.P. v. Barclays Bank PLC, 594 F.3d 383, 387 (5th Cir. 2010).
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LAW AND ANALYSIS
Plaintiff’s policy is a replacement cost insurance policy where Plaintiff will receive
the actual cash value (“ACV”) of her insured property when it is damaged or destroyed by
a covered peril. ACV is calculated by taking the repair/replacement which includes both
material and labor and then deducting for depreciation. If no repairs or replacements are
made the insured is paid ACV. If the repairs or replacements are made, Allstate reimburses
the insured for the depreciation deduction.
Plaintiff alleges that when Allstate calculates the amount of the ACV, it should only
depreciate the material costs, but not the labor costs. Plaintiff argues that the ACV should
include all labor costs, even prior to the repair/replacement being made. In other words,
Plaintiff challenges Allstate’s refusal to pay 100% of the future labor costs, without any
depreciation, even if Plaintiff does not replace or repair the damaged property.
The policy provides as follows:
How We Pay for Loss
[P]ayment for covered loss will be one or more of the following methods:
b) Actual Cash Value. If you do not repair or replace the damaged, destroyed
or stolen property, payment will be on an actual cash basis. This means there
may be a deduction for depreciation. Payment will not exceed the Limit of
Liability shown on the Policy Declarations for the coverage that applies to
the damaged, destroyed or stolen property, regardless of the number of items
involved in the loss.
You may make claim for additional payment as described in paragraph c) . .
. below if applicable, if you repair or replace the damaged, destroyed or
stolen covered property within 180 days of the actual cash value payment.
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c) Building Structure Reimbursement . . . .[W]e will make additional
payment to reimburse you for cost in excess of actual cash value if you
repair, rebuild or replace damaged destroyed or stolen covered property
within 180 days of the actual cash value payment. . . .
Building Structure Reimbursement will not exceed the smallest of the
1) The replacement cost of the part(s) of the building structure(s) for
equivalent construction for similar use on the same residence premises;
2) The amount actually and necessarily spent to repair or replace the
damaged building structure(s) with equivalent construction for similar
use on the same residence premises; or
3) The Limit of Liability applicable to the building structure(s) as shown
on the Policy Declarations[.] . . .
Building structure Reimbursement will be limited to the difference between
any actual cash value payment made for the covered loss to the building
structure and the smallest of 1), 2), or 3) above. 2
Plaintiff bases her argument on the fact that “depreciation” is not defined in the
policy. Plaintiff argues that because “labor” is an intangible, this component should be
dissected out of the ACV calculation and not be depreciated. Plaintiff relies on numerous
lower court rulings, appellate rulings, and descriptions and/or opinions of labor
depreciation in other jurisdictions that have ruled adverse to Allstate—to not depreciate
labor costs in calculating ACV.
Plaintiff suggests that Allstate’s interpretation of ACV leaves the insured in a worse
condition than before the loss. See Mitchell v. State Farm Fire & Cas. Co., 954 F.3d 700,
706 (5th Cir. 2020) (applying Mississippi law); Hicks v. State Farm Fire & Cas. Co., 751
Defendant’s exhibit A, pp. 40-41.
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Fed. App’x. 703, 706 (6th Cir. 2018) (the cost of labor to install a new garage would be
[the] same as installing a garage with 10-year old materials.”); Adams v. Cameron Mut.
Ins. Co., 430 S.W.3d 675, 678-79 (Ark. 2013) (proper indemnity requires giving insured
the cash value of depreciated shingles and the cost of their installation).
Allstate argues that the parties’ reasonable expectation is that labor costs for future
repair would be paid when the labor is incurred and paid to the laborer, after the loss.
Plaintiff disagrees and opines that it is illogical to expect any policyholder to interpret
Allstate’s policy in such a manner. Citing e.g., Franklin v. Lexington Ins. Co., ___S.W.3d
___ 2022 WL 2310031, at *12 (Mo. Ct. App. June 28, 2022). Plaintiff argues that: (1) ACV
is indemnity coverage intended to return the policyholder back to the status quo ante which
could never be accomplished if repair labor is withheld; and (2) Allstate itself always pays
at least a portion of the repair labor up front with its ACV payments.
The Court disagrees with Plaintiff and respectfully disagrees with those courts
and/or opinions cited by Plaintiff.
“[A]n insurance policy is a contract between the parties and should be construed
using general rules of interpretation of contracts set forth in the Civil Code.” Sims v.
Mulhearn Funeral Home, Inc., 956 So.2d 583, 588–589 (La. 2007). “According to those
rules, the responsibility of the judiciary interpreting insurance contracts is to determine the
parties’ intent.” Id. at 589 (citing Louisiana Civil Code article 2045). “Courts begin their
analysis of the parties’ common intent by examining the words of the insurance contract
itself.” Id. (citing Louisiana Civil Code article 2046.). “In asserting the common intent,
words and phrases in an insurance policy are to be construed using their plain, ordinary
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and generally prevailing meaning, unless the words have acquired a technical meaning, in
which case the words must be ascribed their technical meaning.” Id. (citing Louisiana Civil
Code article 2047).
“An insurance contract is to be construed as a whole and each provision in the
contract must be interpreted in light of the other provisions.” Id. “One provision of the
contract should not be construed separately at the expense of disregarding other
provisions.” Id. “Neither should an insurance policy be interpreted in an unreasonable or a
strained manner so as to enlarge or to restrict its provisions beyond what is reasonably
contemplated by its terms or so as to achieve an absurd conclusion.” Id.
“When the words of an insurance contract are clear and explicit and lead to no
absurd consequences, no further interpretations may be made in search of the parties’ intent
and courts must enforce the contract as written.” (citing Louisiana Civil Code article 2046).
“Courts lack the authority to alter the terms of insurance contracts under the guise of
contractual interpretation when the policy’s provisions are couched in unambiguous
terms.” Id. Significantly, a contractual term is “not automatically considered ambiguous
merely because it is not defined in the contract.” Sumner v. Mathes, 52 So.3d 931, 935 (La.
Ct. App. 4 Cir. 2010).
If, after applying the general rules of contractual interpretation to an insurance
contract, an ambiguity remains, the ambiguous contractual provisions is generally
construed against the insurer and in favor of coverage. Sims, 956 So.2d at 589-90. A policy
is only ambiguous “if the ambiguous policy provision is susceptible to two or more
reasonable interpretations.” Id. at 590. “The fact that a term is not defined in the policy
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itself does not alone make that term ambiguous.” Burmaster v. Paquemines Parish Gov’t,
64 So.3d 312, 317 (La. Ct. App. 4 Cir. 2011). “Words and phrases used in an insurance
policy are to be construed using their plain, ordinary and generally prevailing meaning,
unless the words have acquired a technical meaning.” Cadwallader v. Allstate Ins. Co.,
848 So.2d 577, 580 (La. 2003). “Words susceptible of different meanings must be
interpreted as having the meaning that best conforms to the object of the contract.”
Louisiana Civil Code article 2048.
“Ambiguity in an insurance policy must be resolved by construing the policy as a
whole; one policy provision is not to be construed separately at the expense of disregarding
other policy provisions.” Louisiana Ins. Guar Ass’n v. Interstate Fire & Cas. Co., 630
So.2d 759, 763 (La. 1994).
Plaintiff attempts to create an ambiguity where none exists. “The rules of contractual
interpretation simply do not authorize a perversion of the words or the exercise of inventive
powers to create an ambiguity where none exists or the making of a new contract when the
terms express with sufficient clarity the parties’ intent.” Sims, 956 So.2d 589. To be clear,
the language of the policy could not be interpreted to pay the insured for all future labor
costs, which have not yet, nor may they ever be incurred. This would be an absurd and
illogical interpretation of the policy. Simply put, depreciation is the actual value of the
damaged property reduced by a time factor depending upon the life expectancy of the
property. ACV is the replacement of that property less the depreciation. Plaintiff’s attempt
to dissect and remove components of depreciation distorts the plain, ordinary and generally
prevailing meaning of depreciation. As such, the Court finds that Plaintiff’s claims for
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additional damages for future labor costs to any covered, damaged property must be
Motion to Strike Class Allegations
Allstate moves to strike from the complaint any and all class action allegations.
Based on this Court’s conclusion that Plaintiff’s claim for future labor costs should be
dismissed, the Court also finds that the complaint fails to plead the minimum facts
necessary to establish the existence of a class under the mandates of Rule 23 of the Federal
Rules of Civil Procedure. Aguilar v. Allstate Fire & Cas. Ins. Co., 2007 WL 734809 at *2
(E.D. La. Mar. 6, 2007). As such, any such allegations will be stricken.
Allstate moves to dismiss the complaint in its entirety as well as to strike the class
allegations. The Court will grant Allstate’s Motion to Dismiss as to Plaintiff’s claims for
future labor costs, and the Court will grant Allstate’s Motion to Strike the Class allegations.
However, the Court will permit Plaintiff to amend her complaint to assert a breach of
contract claim, if any she has, consistent with the Court’s ruling.
THUS DONE AND SIGNED in Chambers this 29th day of July, 2022.
JAMES D. CAIN, JR.
UNITED STATES DISTRICT JUDGE
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