Beck v. Metropolitan Property and Casualty Insurance Company

Filing 114

OPINION and ORDER - Metropolitan's motion for partial summary judgment 104 is DENIED and Beck's motion for partial summary judgment 92 is GRANTED. Beck's claims will proceed to trial for the purpose of determining the true RCV and ACV of her home. IT IS SO ORDERED. DATED this 6th day of July, 2015, by United States Magistrate Judge John V. Acosta. (peg)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON
PORTLAND DIVISION

LUCILLE BECK, an individual,
Plaintiff

Case No. 3:13-cv-00879-AC
OPINION AND ORDER

v.
METROPOLITAN PROPERTY AND
CASUALTY INSURANCE COMPANY,
a corporation,
Defendant.
ACOSTA, Magistrate Judge:
Plaintiff Lucille Beck ("Beck") filed this action against Metropolitan Property and Casualty
Insurance Company ("Metropolitan") for breach of an insurance policy on her home, which was
severely damaged in a fire. The parties dispute whether Metropolitan's tender of $347,786.34
constitutes the Actual Cash Value ("ACV") of Beck's home, to which Beck was entitled under the
insurance policy ("the Policy"). The parties have now filed cross-motions for pa1tial summary
judgment. Beck contends she is entitled to summary judgment on the question of whether
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Metropolitan breached the Policy as a matter of law. She contends that the jury at trial should be
instructed that Metropolitan breached the Policy and should be tasked only with dete1mining the
ACY of her home. She also moves for summary judgment on her request for attomey fees.
Metropolitan filed its own motion for partial summary judgment and asks the comt to hold that Beck
is contractually foreclosed from recovering the Replacement Cost Value ("RCV") of her house.
After careful review of the record, the court concludes that Beck is entitled to pa1tial
summary judgment, as no material issues of material fact exist and Beck has demonstrated that
Metropolitan breached the Policy as a matter oflaw. In addition, because Metropolitan did not settle
her claim within six months of the date she filed it, she is entitled to attorney fees as a matter oflaw.
Finally, the court concludes Metropolitan is not entitled to paitial summaiy judgment, as genuine
issue of material fact remain regarding the issues Metropolitan presents in its Motion for Paitial
Summary Judgment. 1

Factual Background
On December 20, 2011, Beck's Christmas tree caught fire and severely damaged her home.
Beck immediately notified Metropolitan, with whom she had a homeowner's insurance policy ("the
Policy"), and filed a claim. (Declaration of Margaret E. Schroeder filed September 23, 2014,
("Schroeder Deel. I") Ex. A at 6-7, 21.) The Policy provides in relevant part:
A. Actual Cash Value Settlement. Subject to the applicable deductible, we will pay
the actual cash value at the time of the loss for the damaged prope1ty, but no more
than the lesser of:
(i.) The amount required to repair or replace the damaged prope1ty with property of
like kind and quality; or

1

The comt finds this motion appropriate for disposition without oral argument pursuant to
LR 7-l(d)(l).
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(ii.) The limit of liability applying to the property.

2. If you repair or replace the damaged or destroyed property, you may make further
claim for any additional payments for Replacement Cost Settlement provided:
a. you have not reached the applicable limit of liability;
b. you still have an insurable interest in the property;
c. you notify us within 180 days after the date of the actual cash value
payment of your decision to repair or replace the damaged or destroyed
dwelling or private structure;
d. you notify us within 30 days after the repair or replacement has been
completed; and
e. the date of completion is within one year from the date of actual cash
value payment.
The foregoing title limitations shall apply unless you or your representative submits
written proof providing clear and reasonably justification for the failure to comply
with such time limitation.
(Schroeder Declaration of October 30, 2014 (Schroeder Deel. II) Ex. 2). The Policy defines ACV
as "the amount which it would cost to repair or replace covered property with material of like kind
and quality, less allowance for physical deterioration and depreciation including obsolescence."
(Schroeder Deel. II Ex. 2 at 8.)
The day after Beck's home was damaged, Metropolitan assigned James A. Lawson
("Lawson") to determine the "cause and origin" of Beck's loss and to estimate the ACV of Beck's
loss. (Schroeder Deel. I Ex. A atl0-11, 25.) Lawson prepared an estimate of the cost necessary to
repair Beck's home ("the First Lawson Estimate"). The First Lawson Estimate assigned Beck's
home a replacement cost value ("RCV") of $380,608.36. After applying an 8.3% depreciation

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factor, Lawson estimated the ACV of Beck's home was $348,036.34. (Schroeder Deel. I Ex. A at
123.) However, only two days after the First Lawson Estimate, Lawson issued a second repair
estimate, wherein he revised the RCV and ACV of Beck's home upward by $1,863.20 to
$382,471.56 and $349,899.54, respectively. (Schroeder Deel. Ex A at 16-18, 219.)
On February 29, 2012, Metropolitan tendered payment to Beck in the amount of$347. 786.34
("the Payment"). (Answer ii 11.) Metropolitan's payment was based only on the First Lawson
Estimate and did not account for the upward revisions in the Second Lawson Estimate. (Answer ii
11.) Since then, Metropolitan has not provided Beck with a supplemental payment or otherwise
provided additional compensation for her loss. (Schroeder Deel. Ex. A at 18-19.)
In March 2012, Metropolitan assigned Spencer Funk ("Funk") to serve as the adjustor of
Beck's claim. (Schroeder Deel. Ex.Bat 7-10.) Funk reviewed Beck's losses and prepared a third
estimate of Beck's repair costs (the "First Funk Estimate"). (Schroeder Deel I, Ex. B at 14-15.) In
the First Funk Estimate, Funk determined Beck's home had an RCV of $428,040.20, but did not
calculate an ACV. (Schroeder Deel. Ex. A at 14-15.) Funk later met with a Harry Shook ("Shook"),
a general contractor hired by Beck to help the adjustment process, and participated with a two-day
property review. (Declaration of Spencer Funk ("Funk Deel.") (Dkt. No 40) ii 5.) Ultimately, Shook
and Funk agreed on a revised estimate (the "Second Funk Estimate") which assigned Beck's home
an RCV of $438,822.50. (Funk Deel.

ii 17 .)

Similar to the First Funk Estimate, the Second Funk

Estimate did not articulate an ACV. (Funk Deel. Ex. 7.)
After Beck filed this lawsuit, Metropolitan retained the services of expe1t witness Jim
Omundson ("Omundson"), who prepared a "Fire Restoration/Expe1t Disclosure Review" estimating
the ACV of Beck's home (the "Expert Report"). (Schroeder Deel. I, Ex. Fat 1.) In the Expert

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Report, Omundson applied the same 8.3% depreciation factor that Lawson used to render the First
and Second Lawson Estimates and concluded Beck's home had an ACY of $402,401. (Schroeder
Deel. I, Ex. Fat 1.) Moreover, in his rebuttal report, Omundson opined that his review of Beck's
expett-witness report"[did] not lead [him] to alter [his] prior Cost Analysis, which was forwarded
to [Beck July 30, 2014,] and totaled $402,401 Actual Cost Value (ACY)." (Schroeder Deel Ex. F
at 3.)
Legal Standard

A court should grant a motion for summary judgment "if the movant shows that there is no
genuine dispute as to any material fact and the movant is entitled to judgment as a matter oflaw."
FED.R.C1v.P. 56(a). The moving party bears the burden of establishing that no issue of fact exists
and that the nonmovant cannot prove one or more essential elements of a claim or defense. Celotex
Corp. v. Catrett, 477 U.S. 317, 324 (1986). If the movant meets his burden, the nonmovant must

"go beyond the pleadings [] by her own affidavits ... [to] designate specific facts showing that there
is a genuine issue for trial." Id. (internal quotation marks omitted). On summary judgment, the court
is bound to view all facts in a light most favorable to the nonmovant and must draw all justifiable
inferences in the nonmovant's favor. Narayan v. EGI, Inc., 616 F.3d 895, 899 (9th Cir. 2010).
Discussion

Both parties now move for partial summary judgment. Metropolitan asks the coutt to find
that the Policy's language forecloses Beck from recovering the full RCV of her home as damages
in this case. Beck's motion asks the court to find that Metropolitan breached the Policy as a matter
of law by failing to supplement the Payment on her claim. She also moves for summary judgment
to declare a right for attorney fees under OR. REV. STAT.§ 742.061(1). After careful review of the

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record, the court grants Beck's Motion for partial summary judgment and denies Metropolitan's
motion for partial summary judgment.

I. Applicable Law
Federal comis siting in diversity must apply state substantive law and federal procedural law.
Gasperini v. Ctr.for Humanities, Inc., 518 U.S. 415, 427 (1996). However, the distinction between
the procedural and substantive is not always clear. Id.

In parsing the procedural from the

substantive, courts must determine whether the statute in question has "so impmiant an effect upon
the fortunes of one or both of the litigants that failure to apply it" would lead to inconsistent results
or would lead to judicial forum shopping. Hanna v. Plummer, 380 U.S. 460, 468 n.9 (1965). More
recently, the Supreme Court held that a state statute is substantive ifit "significantly affects the result
ofa litigation" on the merits. Shady Grove Orthopedic Assocs., P.A. v. Allstate Ins. Co., 559 U.S.
393, 406 (2010).
An insurance policy is a contract. Stewart v. Morosa Bros. Transp. Co., 611 F.2d 778, 781
(9th Cir. 1980). The Ninth Circuit, as well as courts in this district, have long held that contract
interpretation is a matter of substantive law to which state law applies. Get/in v. Maryland Cas. Co.,
196 F.2d 249, 250 (9th Cir. 1952), Snookv. St. Paul Fire & Marine Ins. Co., 220 F. Supp. 314, 31617 (D. Or. 1963) ("This being a diversity case, jurisdiction is grounded on that fact and the
[insurance] policy must be interpreted and construed in accordance with the Laws of Oregon, the
place where the contract was made."). Because the primary issue in this case is the interpretation
and application of an insurance policy, the court will apply Oregon law to determine the outcomes
of each party's motion.

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II. Metropolitan's Motion for Partial Summary Judgment
Metropolitan moves for partial summary judgment on the issue ofwhether Beck may recover
the RCV of her home. Specifically, Metropolitan contends Beck has not met the conditions
precedent to recover RCV because she did not complete reconstruction of her home within one year
of the date Metropolitan tendered to Beck the ACV of her home. Beck argues that Metropolitan's
motion is based on a disputed fact, and is not appropriate for summary judgment at this time. The
court agrees with Beck and denies Metropolitan' s motion.
The Policy provides that, in the event the covered property suffered a loss covered by the
Policy, Metropolitan would "pay the [ACV] at the time of the loss for the damaged property."
(Schroeder Deel. II Ex. 2.) The Policy fmther provides that the insured may recover the full RCV
of the covered prope1ty if, among other things, the insured notifies Metropolitan within 180 days
after receipt of ACV payment that he or she intends to rebuild the covered property and "the date of
completion is within one year from the date of [ACV] payment." (Schroeder Deel. II Ex. 2.)
Metropolitan contends that it paid Beck the ACV of her home on February 29, 2012, and she
gave no notice of her intent to rebuild or repair the covered prope1ty. Metropolitan also points out
it is undisputed that Beck did not complete construction of her home within one year after
Metropolitan tendered the Payment. However, Metropolitan' s argument is based on a premise which
is in dispute. Metropolitan claims that by paying Beck $347,786.34 on February 29, 2012, it
triggered the one-year time-frame during which Beck was required to complete reconstruction of her
home. However, as the court will discuss in more detail supra, the true ACV of Beck's home is in
dispute, and the record does not support a conclusion that no reasonable jury could find in Beck's
favor. Viewing the facts in a light most favorable to Beck, as the court must do on defendant's

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motion for summary judgment, the court cannot conclude Metropolitan tendered the full ACY of
Beck's home as a matter oflaw. Because a dispute exists regarding whether Beck has received the
ACY of her home, the court cannot conclude as a matter of law that the one-year "reconstrnction"
period began when Metropolitan tendered the February 29, 2012 payment or that the period has
ended. Thus, a genuine issue of material fact forecloses this court from granting Metropolitan's
Motion for Partial Summary Judgment.
III. Beck's Motion for Partial Summary Judgment
Beck acknowledges that the true ACY ofher home remains in dispute, but nonetheless moves
for summary judgment on the issue of whether Metropolitan breached the policy. In addition, Beck
moves for summary judgment on the issue of whether she is entitled to attorney fees. Metropolitan
contends that a genuine issue of material fact precludes this court from granting Beck summary
judgment on both issues.

A. Breach of the Policy
Although Beck concedes that a genuine issue of material fact exists regarding the true ACY
ofher home, she contends that this court may nonetheless conclude Metropolitan breached the Policy
as a matter oflaw. Specifically, Beck observes that Lawson, Funk, and Omundson all agreed that
the true ACY of Beck's home was higher than the amount aiticulated in the First Lawson Estimate.
Because Metropolitan based its Payment on the First Lawson Estimate, and has not provided her
supplemental payment, Beck argues no reasonable jury could find Metropolitan complied with the
Policy by paying her the ACY of her home. Metropolitan maintains that the Payment fully
accounted for the ACY of Beck's home, and a genuine issue of material fact remains on whether it
breached the Policy.
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As the comt has already discussed, an insurance policy is a conh·act. Stewart v. Moros a Bros.

Transp. Co., 611F.2d778, 781 (9th Cir. 1980). Thus, for Beck to succeed on her Motion for Partial
Summary Judgment, she must demonsh·ate that there are no genuine issues of material fact and the
record demonstrates she should succeed on a claim for breach of contract. Id. To succeed in a claim
for breach of conh·act, a plaintiff must demonstrate: ( 1) the existence of an enforceable contract; (2)
the plaintiff performed under the contract; (3) the defendant breached the contract; and (4) the
plaintiff suffered damages. Slover v. Ore. State Bd OfClinical Soc. Workers, 144 Or. App. 565, 570
(1996).
The parties stipulate that the Policy was valid and Beck performed under the contract, but
Metropolitan disputes that it breached the conh·act and that Beck suffered damages. The Policy
provides that, in exchange for Beck's payment ofinsurance premiums, Metropolitan promised to pay
Beck the ACV of her home in the event she suffered a covered loss. (Schroeder Deel. IL Ex. 2.) The
Policy defines ACV as, "the amount which it would cost to repair or replace covered prope1ty with
material oflike kind and quality, less allowance for physical deterioration and depreciation including
obsolescence." (Schroeder Deel. II. Ex. 2 at 8.) Thus, the ACV is calculated by applying a
depreciation factor to the RCV. (Thenell Deel. (Dkt. No. 98) Ex. 2 at 95.) While preparing the First
Lawson Estimate and Second Lawson Estimate, Lawson applied an 8.3% depreciation factor to the
RCV to determine the ACV. Moreover, Omundson applied an identical 8.3% depreciation factor
to determine the ACV in his expe1t report. Meh·opolitan admitted "that the Lawson Scope applies
depreciation in a manner that complies with Met P&C's usual practices and procedures .... "
(Schroeder Deel. I Ex. Cat 5.)
Metropolitan argues summary judgment on the ACV issue is inappropriate because a genuine

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issue of material fact exists regarding the ACY of Beck's home. But Beck does not ask the court
to fix the ACY; instead, she requests the coutt find that no reasonable jury could find that the
Payment constituted the true ACY, and that by failing to supplement the Payment, Metropolitan is
in breach of the Policy as a matter of law. The court agrees with Beck and concludes that no
reasonable jury could find Metropolitan fulfilled its obligations under the Policy by tendering the
Payment to Beck.
Metropolitan does not contend Beck failed to pay her premiums or otherwise fulfill her
obligations under the Policy, so Metropolitan is in breach of the Policy unless the Payment
constitutes the true ACY of Beck's home. Metropolitan's February 29, 2012 Payment was based
on the First Lawson Estimate minus Beck's $250 deductible, and amounted to $347,786.34. Just
two days after he completed the First Lawson Estimate, however, Lawson issued the Second Lawson
Estimate, which revised the RCY and ACY of Beck's home upward $1,863.20After Metropolitan
assigned Funk to beck's claim, the estimated RCY and ACY increased twice more. The First Funk
Estimate put the RCY at $428,040.20 and the Second Funk Estimate increased the RCY to
$438,822.50. Omundson adopted the RCY from the Second Funk Estimate and, after applying the
8.3% depreciation factor utilized by Lawson, rendered an ACY estimate of $402,401. Despite
numerous upward revisions in its RCY and ACY estimates, Metropolitan did not make a second
payment to supplement the Payment. The court concludes that no reasonable jury could find that
Metropolitan complied with the Policy, as the overwhelming evidence on the record shows that the
amount of the true ACY is higher that tendered by Metropolitan on February 29, 2012.
Metropolitan's two arguments to suppmt its position it already has paid Beck the ACY of
her home are unavailing. First, it contends that a reasonable jury could find the First Lawson
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Estimate accurate. However, only two days after he completed the First Lawson Estimate, Lawson
completed the Second Lawson Estimate, which increased the RCV and ACV of Beck's home. The
fact that Lawson, unilaterally and without prompting, increased the estimated value of Beck's home
shows the First Lawson Estimate was inaccurate. Thus, basing its payment on an inaccurate ACY
would not yield a payment which would fulfill Metropolitan's obligations under the Policy.
Second, Metropolitan argues that there are multiple ways of calculating depreciation, and
even ifthe RCY of Beck's home was higher than that aiticulated in the First Lawson Estimate, the
ACV of her home may be at or below the amount of the Payment. However, in response to Beck's
requests for admission, Metropolitan admitted "that the Lawson Scope applies depreciation in a
manner that complies with Met P&C's usual practices and procedures." (Schroeder Deel. I Ex Cat
4.) Moreover, Metropolitan's expe1t witness applied the same 8.3% depreciation factor to calculate
ACY for his expert-witness report. Under Federal Rule of Civil Procedure 36, "a matter admitted
[in a request for admission] is conclusively established unless the court, on motion, permits the
admission to be withdrawn or amended:" FED. R. C1v. P. 36(b). Because Metropolitan admitted that
Lawson and Omundson used a method consistent with its policies to calculate depreciation,
Metropolitan cannot now contend that a new calculation could or should be applied to yield an ACV
at or below that calculated in the First Lawson Estimate.

If Lawson and Omundson, by Metropolitan's admission, used the proper method of
calculating ACV, and the upward revisions from the First Lawson Estimate were adopted by
Lawson, Funk, and Omundson, then Metropolitan clearly did not pay, and still has not paid, Beck
the full ACY of her home when it tendered the Februai·y 29, 2012 Payment. Although the ACV
amount remains in dispute, no reasonable jury could find that the true ACV is an amount less than
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the ACV from the Second Lawson Estimate, as Lawson, Funk, and Omundson disavowed the First
Lawson Estimate by repeatedly increasing the RCV and ACV of Beck's home throughout the claims
process. No matter which ACV figure Metropolitan generated over the period oftime between when
Lawson revised his First Estimate and the conclusion of all discovery in this case, there is no genuine
issue of material fact that the February 29, 2012 Payment was not adequate under the Policy.
Because no reasonable jury could find that the Februaiy 29, 2012 Payment constituted the full ACV
of Beck's home, the court concludes Metropolitan breached the Policy as a matter oflaw.

B. Attorney Fees
Beck also moves for summary judgment on whether she is entitled to recover attorney fees
under OR. REV. STAT. § 742.061. Metropolitan argues Beck's request for attorney fees is premature,
as a genuine issue of fact exists as to the true ACV of Beck's home. In diversity cases, state law
governs the paities' entitlement to attorney fees. Riordan v. State Farm Mut. Auto. Ins. Co., 589
F.3d 999, 1004 (9th Cir. 2009). Thus, whether Beck may recover fees is governed solely by the law
of Oregon. Oregon law provides in relevant part:
[I]f settlement is not made within six months from the date proof ofloss is filed with
an insurer and an action is brought in any court of this state upon any policy of
insurance of any kind or nature, and the plaintiffs recovety exceeds the amount of
any tender made by the defendant in such action, a reasonable amount to be fixed by
the court as attorney fees shall be taxed as pait of the costs of the action and any
appeal thereon.
OR. REV. STAT.§ 742.061(1). Coutts in this district have interpreted§ 742.061 to require a plaintiff
to prove the following elements: ( 1) Plaintiff must have filed a proof of loss with its insurer; (2)
settlement must not have occurred within six months of filing of that proof ofloss; (3) Plaintiff must
have brought a court action upon the policy; and (4) Plaintiff must have ultimately recovered more

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than the amount of any tender made by Defendant in the action." Precision Seed Cleaners v.
Country Mui. Ins. Co., 976 F. Supp. 2d 1228, 1236 (D. Or. 2013) (citing Petersen v. Farmers Ins.
Co. of Or., 162 Or. App. 462, 466 (1999)).
Here, Beck timely filed a proof of loss, was dissatisfied with the adequacy of the Payment,
and filed an action in court to recover the difference between the true ACY of her home and the
Payment. Moreover, there is no question that more than six months has elapsed since Beck filed her
proof of loss. Therefore, Beck is entitled to attorney fees so long as her recovery in this action
exceeds the amount of the Payment. As the coutt has already discussed, no reasonable jury could
find that the Payment constituted the entire ACY of Beck's home. Therefore, Beck will be able to
prove the foutth and final element for her attorney-fee claim as a matter of!aw, and will be entitled
to attorney fees at trial.
Metropolitan contends it is premature to find Beck is entitled to attorney fees because the
ACY of Beck's residence remains in dispute. Although the exact amount of the ACY is in dispute,
the record shows to a legal certainty the ACY exceeds the $347.786.34 Metropolitan tendered to
Beck on February 29, 2012. Whether the ACY of Beck's home exceeds Metropolitan's payment by
one cent or ten-thousand dollars, she will be able to prove Metropolitan failed to settle her claim
within six months after the date she filed her proof of loss. Therefore, Beck is entitled to attorney
fees, and the court grants Beck's Motion for Partial Summary Judgment.
Conclusion
For the aforementioned reasons, Metropolitan' s Motion for Partial Summary Judgment (Dkt.
No. 104) is DENIED and Beck's Motion for Partial Summary Judgment (Dkt. No. 92) is
GRANTED. Beck's claims will proceed to trial for the purpose of determining the true RCY and
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ACV of her home.
IT IS SO ORDERED.
DATED this

~y of July, 2015.
~~JIN V. ACOSTA
United States Magistrate Judge

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