Scott v. Safeco Insurance Company of America

Filing 48

ORDER denying 29 motion for judgment on the pleadings. Signed District Judge M. Douglas Harpool June 3, 2024. (Clark, Christopher)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF MISSOURI,
CENTRAL DIVISION
SHAUNDA E. SCOTT,

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Plaintiff,
vs.
SAFECO INSURANCE COMPANY
OF AMERICA,
Defendant.

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

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
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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).
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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

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.

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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
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).

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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

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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

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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.

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