Matchniff et al v. Great Northwest Insurance Company

Filing 76

ORDER: Defendant's Motion for Partial Summary Judgment 51 is granted with respect to the meaning and application of functional replacement cost and fungi limitation and is denied in all other respects. Plaintiffs' Motions for Parti al Summary 47 67 are DENIED. See, Formal Opinion. The parties are ordered to contact Paul Bruch, courtroom deputy for U.S. Magistrate Judge Thomas Coffin, at 541-431-4111, to schedule a settlement conference. Signed on 12/20/2016 by Judge Ann L. Aiken. (rr) Modified on 12/22/2016 to correct file and signature date (jk).

UNITED STATES DISTRICT COURT
DISTRICT OF OREGON

KENNETH AND SARAH MATCHNIFF,

Case No. 6:15-cv-00193-AA
OPINION AND ORDER

Plaintiffs,
v.
GREAT NORTHWEST INSURANCE
COMPANY,
Defendant.

AIKEN, District Judge:
Plaintiffs Kenneth and Sarah Matchniff filed suit against Great Northwest Insurance
Company alleging breach of an insurance policy after they submitted claims for loss arising from
water damage to their home. The parties dispute whether they have complied with the terms of
the policy and now file cross motions for partial summary judgment.
I. BACKGROUND

On or about December 11, 2013, while plaintiffs were away on vacation, a water pipe in
their home froze, cracked, and thawed, causing substantial damage. Plaintiffs filed a claim for

1 - OPINION AND ORDER

coverage under the terms of their Homeowner's Insurance Policy (Policy) with defendant.
Defendant has no presence in Oregon and hired a local insurance adjuster, Norcross, to work
with plaintiffs on its behalf. Norcross, in tum, assigned its employee, Trevor Winter, to adjust the
loss.
Winter met plaintiffs at their home to make an initial investigation of the damage and
discuss the next steps for adjusting the loss. Plaintiffs then contracted with Summit Restoration
to begin remediating the water damage to the structure of the home and their personal prope1iy.
Sh01tly after the loss, plaintiffs moved their family into a rental property that they owned.
Approximately one month after the loss, the property was rented to a third party and was no
longer available for plaintiffs' use. Plaintiffs then moved into a hotel for approximately six
weeks while both they and defendant attempted to locate more suitable, temporary housing.
Plaintiffs were eventually able to locate suitable housing. For over eight months after the loss,
defendant provided plaintiffs with a fixed monthly payment to cover their additional living
expenses (ALE). Defendant did so despite the fact that plaintiffs failed to provide requested
documentation of their expenses.
On February 3, 2014, Norcross generated an estimate of damages totaling $85,965.23 in
actual cash value (ACV) and $126,186.08 in replacement cost value (RVC). On February 6,
2014, defendant issued an ACV payment of $84,965.23 in accordance with the initial ACV

estimate, less $1000 for plaintiffs' deductible.
Defendant informed plaintiffs that they must contract with a licensed contractor and
complete the repairs on the home to receive the RCV, i.e., the difference between the cost to
complete the repairs and the initial ACV payment. Plaintiffs allege that they were unable to
contract for repairs because the initial ACV estimate and payment were insufficient. Plaintiff

2 - OPINION AND ORDER

apparently had obtained estimates totaling over $350,000 to repair the damage.
On August 19, 2014, defendant obtained an estimate of damages with an RCV of
$173,738.86. The estimate did not include an ACV amount.
On February 3, 2015, plaintiffs filed this action alleging that defendant breached the
Policy and seeking damages for replacement of their dwelling and its contents and for loss of
use. On February 19, 2015, defendant obtained a third estimate of damages with an RCV of
$153,401.74 and an ACV of $121,891.11. On February 10, 2016, defendant obtained yet another
estimate of the damages, with an RCV of$173,738.86 and an ACV of$138,406.82.
On May 14, 2016, plaintiffs amended their complaint and added a claim alleging breach
of the duty of good faith and fair dealing.
II. STANDARD
To succeed on a motion for summary judgment, the moving party must establish that
"there is no genuine dispute as to any material fact." Fed. R. Civ. P. 56(a). A fact is material ifit
"is relevant to an element of a claim or defense and [its] existence might affect the outcome of
the suit." T.W Elec Serv., Inc. v. Pac. Elec. Contractors Ass'n, 809 F.2d 626, 630 (1987). A
dispute is genuine "if the evidence is such that a reasonable jury could return a verdict for the
nonmoving patty. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The initial burden
is on the moving patty to establish that there are no genuine disputes of material fact. Celotex

Corp. v. Catrett, 477 U.S. 317, 323 (1986). If the moving party meets that burden, the
nonmoving patty must "go beyond the pleadings," and "designate specific facts showing that
there is a genuine issue for trial." Id at 324. On a motion for summary judgment, the court views
all evidence and inferences in the light most favorable to the nonmoving patty. Allen v. City of

Los Angeles, 66 F.3d 1052, 1056 (9th Cir. 1994).

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Ill. DISCUSSION
Plaintiffs and defendant move for summary judgment on a number of issues. Plaintiffs
argue that defendant breached the Policy by failing to supplement its ACV payment and by
providing insufficient ALE expenses. In tum, defendant maintains that it complied with all
provisions of the Policy and argues that plaintiffs breached the Policy by failing to cooperate and
failing to act in good faith. The parties also contest the meaning and application of Policy
provisions concerning actual cash value and functional replacement cost.
To succeed on a breach of contract claim a plaintiff must show: 1) the existence of a
contract; 2) the relevant contract terms; 3) that the plaintiff fully performed and did not breach
the contract; and 4) that the defendant breached the contract terms resulting in damage to the
plaintiff. Slover v. Or. State Bd of Clinical Soc. Workers, 144 Or. App. 565, 570, 927 P.2d 1098
(1996).
A. ACV Payment and Replacement Coverage
Plaintiffs argue that defendant should have supplemented its ACV payment when it
obtained ACV estimates higher than the amount previously paid. Plaintiffs contend that the
failure to supplement the ACV "constitutes a breach of the Policy." Pl.'s Motion at 14.
However, plaintiffs fail to identify the relevant language of the Policy that required
defendant to supplement its AVC payment when it obtained higher estimates. Likewise,
plaintiffs do not identify the Policy provision under which they filed their claim, and they do not
submit any evidence indicating they sought coverage under a specific provision of the Policy. In
their reply, plaintiffs cite § C.2.e.2 of the Modified Functional Replacement Cost (MFRC)
Endorsement, which states, "You may disregard the 'functional replacement cost' loss settlement
provisions and make claim under this policy for loss to buildings on an actual cash value basis."

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Gower Deel. Ex. 1 at 81. However, plaintiffs do not provide evidence that they submitted their
claim under this specific provision or that they notified defendant of their intent to disregard the
functional replacement cost provisions. 1
Instead, plaintiffs rely solely on Beck v. J'vfetropolitan Prop. & Cas. Ins. Co., 2015 WL
4112343 (D. Or. July 6, 2015). There, the plaintiffs home was damaged in a fire. Following the
fire and a claim by the plaintiff, the insurer issued an allegedly inadequate ACV payment. Id. at
*2. Subsequently, the insurer received a series of revised, higher estimates but refused to
supplement the ACV payment. Id The policy at issue required the insurer to pay the ACV "at
the time of the loss," and the co mt held that the insurer had breached the policy because all of the
revised ACV estimates were higher than the amount paid by the insurer. Id. at *4-5, 7. Plaintiffs
argue that Beck mandates the same result in this case, because defendant obtained ACV
estimates that were higher than the initial ACV payment.
However, unlike Beck, plaintiffs point to no language in the Policy requiring defendant to
supplement the ACV payment rather than paying the difference after plaintiffs completed
repairs, as defendant indicated. I cannot discern the Policy language plaintiff relies on to support
their claim and motion, and it is not the role of this Court to ascertain what provision of the
Policy suppmts plaintiffs' breach of contract claim. Rather, plaintiffs must identify the relevant
Policy terms that support their claim to establish defendant's breach. They fail to do so.
Plaintiffs also asse11 that one of defendant's designated 30(b)(6) witnesses, Matt Warren,
admitted in his deposition that defendant breached the policy by failing to supplement its ACV

1

Similarly, § C.2.b. provides: "If you do not make a claim under 2.a. above, we will pay,
after application of any deductible, the least of the following amounts: (1) The limit ofliability
under this policy that applies to the building; or (2) The actual cash value of the damaged pait of
the building." Again, plaintiffs provide no evidence that they submitted their claim under this
provision.
5 - OPINION AND ORDER

payment. 2 Gower Deel. Warren Dep. at 46-50. Defendant disputes that Wanen was a designated
witness on this topic. Defendant designated Warren as the witness to discuss "the handling of the
claim prior to litigation," and Tony Van Eck as the witness to discuss "the policy, policy
interpretations, and policy defenses." Martin Deel. 2 (doc. 50). Whether defendant designated or
authorized Warren to discuss the issue of ACV payments is a genuine issue of material fact. A
reasonable jury could find that WatTen was not designated or authorized to speak on the
sufficiency of defendant's ACV payments. Accordingly, plaintiffs are not entitled to summary
judgment on their breach of contract claim with respect to the ACV payment.
Defendant moves for summary judgment on grounds that it fully complied with the
relevant MFRC. Defendant argues that under§ C.2.a. of the MFRC Endorsement, plaintiffs were
required to contract for repairs before defendant was obligated to make additional payments.
Section C.2.a provides that defendant will pay under the Policy:
if, at the time of the loss, the amount of insurance in this policy on the damaged
building is 80% or more of the "functional replacement cost" of the building
immediately before the loss; and you [the insured] contract for repair or
replacement of the damaged building for the same use[.]
Gower Deel. Ex. 1 at 80. Defendant thus argues that it was not required to provide additional
payments until plaintiffs contracted for repair of the premises, and they failed to do so.
Like plaintiffs, defendant fails to establish that this particular provision of the MFRC
Endorsement governs plaintiffs' insurance claim and defendant's obligations under the Policy. In
fact, neither party provides evidence showing that plaintiffs submitted their insurance claim
pursuant to a particular provision of the Policy. Moreover, plaintiffs contend that defendant's

2

Federal Rule of Civil Procedure 30(b)(6) provides that a "named organization
must. .. designate one or more officers, directors, or managing agents, or designate other persons
who consent to testify on its behalf' and "may set out the matters on which each person
designated will testify."
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underpayment and undervaluation of the ACY prevented plaintiffs from complying with the
conditions necessary to obtain replacement cost benefits. It remains an issue of material fact
whether defendant's alleged failure to supplement the ACY payment prevented plaintiffs from
contracting for repairs. Therefore, summary judgment on this issue is not appropriate.

B. Additional Living Expense Payments
Next, defendant moves for summary judgment on the issue of Additional Living Expense
(ALE) payments and argues that the ALE payments were sufficient under the terms of the
Policy. The relevant Policy provision provides:

1. Additional Living Expense
If a loss covered under Section I makes that part of the "residence premises"
where you reside not fit to live in, we cover any necessary increase in living
expenses incurred by you so that your household can maintain its n01mal
standard of living.
Payment will be for the shortest time required to repair or replace the damage
or, if you pe1manently relocate, the shortest time required for your household
to settle elsewhere.
Gower Deel. Ex. 1 at 9 (emphasis added).
Defendant began making ALE payments on December 11, 2013 and continued to make
payments for approximately eight and a half months before ceasing payments on August 31,
2014. The parties and their respective expert witnesses agree that the damage to plaintiffs home
would take between four and six months to repair. Based on those estimates, and allowing for a
reasonable amount of time for plaintiffs to hire a contractor, defendant argues that the "shottest
time required to replace or repair" the damages was no more than eight months. Plaintiffs
respond that defendant's failure to supplement its ACY payment prevented them from
contracting for repairs and required an extension of ALE payments until plaintiffs had sufficient
funds. Accordingly, plaintiffs maintain that the "shortest time required" to repair was not
7 - OPINION AND ORDER

necessarily limited to eight months.
The Policy does not define "the sho1test time required to repair or replace the damage,"
and does not indicate whether factors umelated to the actual construction or repairs, such as
disputes over coverage, for example, affect the amount of time "required." Given the patties'
disputes over the sufficiency of the ACY payment and whether defendant was required to
supplement it, I find that questions of fact preclude summary judgment on this issue. If defendant
was required to supplement the ACY payment, and if its failure to do so interfered with
plaintiffs' ability to repair the structure, the "sho1test time required" would not be limited to the
eight-month period after the loss. Therefore, defendant's motion for summary judgment is
denied.
C.

Non-Cooperation and Good Faith Affirmative Defenses

Both patties move for partial summary judgment on defendant's affirmative defenses of
failure to cooperate and breach of the duty of good faith and fair dealing.
Defendant first maintains that plaintiffs breached the Policy by failing to comply with
defendant's requests for ALE documentation as required and by failing to hire a contractor to
repair their home. See Gower Deel. Ex. 1 at 17 ("Duties After Loss"). As a result of their
noncooperation, defendant maintains that plaintiffs did not perform under the Policy and cannot
sustain a breach of contract claim against defendant. Plaintiffs argue that defendant waived or
should be judicially estopped from asserting the affirmative defense of noncooperation.
To establish the affirmative defense of noncooperation in Oregon, an insurer must prove
that: 1) it acted with reasonable diligence and made good faith effmts to secure the cooperation
of the insured; 2) the insured willfully failed to cooperate, and 3) the insurer was prejudiced.
Rosalez v. Unigard Ins. Co., 283 Or. 63, 67, 581 P.2d 945 (1978) (discussing willfulness); Bailey

8 - OPINION AND ORDER

v. Universal Underwriters Ins. Co., 258 Or. 201, 224-25, 474 P.2d 746 (1970) (discussing
diligence and prejudice). Defendant argues that it repeatedly requested documentation of
plaintiffs' ALE expenses and that they failed to provide inf01mation regarding their temporary
housing, costs for renting furniture and electronics, and other living expenses. Martin Deel. Exs.
F, I, K, U. Defendant also emphasizes that plaintiffs did not contract for repairs despite the
Policy's requirement to do so in order to obtain RCV payments. Defendant maintains that it has
been prejudiced by issuing ALE payments to which plaintiffs were not entitled and by being
forced to defend plaintiffs' allegations. Plaintiffs respond that defendant cannot show it acted
with reasonable diligence, because defendant gave plaintiffs no deadlines for producing
information and did not repeat its requests for certain information. Plaintiffs further argue that
defendant fails to show actual prejudice arising from plaintiffs' alleged acts of noncooperation,
given that defendant did not supplement its ACV payment and ceased ALE payments after
approximately eight months.3
Although defendant's argument and evidence concerning plaintiffs' lack of cooperation is
persuasive, the question of whether defendant acted with "reasonable diligence" and whether it
suffered prejudice are questions of fact. While defendant's letter and email requests sought
additional information from plaintiffs, defendant did not warn plaintiffs that they were failing to
cooperate or at risk of forfeiting coverage, aside from the possible exception of a March 2014
email from Winter. Maitin Deel. Ex. F, I, K, U. Therefore, defendant's motion for summary
judgment on its noncooperation defense is denied.

3

Plaintiffs also argue that the info1mation requested by defendant exceeded the scope of
their duties under Or. Rev. Stat.§ 742.230. Pl.'s Response to MSJ at 19. However,§ 742.230
recites provisions that must be included in fire insurance policies; it does not define or limit an
insured's duties under an insurance contract. Regardless, defendant's requests did not exceed the
scope of this statute.
9 - OPINION AND ORDER

Plaintiffs also argue that defendant waived or is estopped from asserting this defense and
move for summary judgment on this issue. To establish waiver, plaintiffs must show that
defendant intentionally and unequivocally relinquished or abandoned "a known right or
privilege." Moore v. i'vfut. Of Enumclaw Ins. Co., 317 Or. 235, 240, 855 P.2d 626 (1993); adidasAmerica, Inc. v. Payless Shoesource, Inc., 546 F. Supp. 2d 1029, 1074 (D. Or. 2008). Plaintiffs

argue that because defendant provided coverage to plaintiffs despite their alleged failure to
document their expenses or contract for repairs, defendant intentionally relinquished its right to
asse1t noncooperation. Defendant acknowledges that it made ALE payments despite plaintiffs'
noncooperation but argues that it never intended, either explicitly or implicitly, to waive its right
to asseli noncooperation as an affirmative defense. Defendant's argument is bolstered by the fact
that it continued to request documentation and informed plaintiffs that it did not intend to waive
any tenns or conditions of the Policy. Gower Deel. Ex. 12 at 9. Nevertheless, whether
defendant's actions, individually or in the aggregate, constituted an implicit waiver of
noncooperation is a question of material fact. Accordingly, plaintiffs' motion is denied to the
extent that defendant waived the affirmative defense of noncooperation; however, plaintiff may
raise the issue of waiver at trial.
Plaintiffs also contend that defendant is estopped from asserting a noncooperation
defense based on its actions. To establish estoppel in the context of an insurance contract, the
insured must establish "a representation or conduct amounting to a representation by someone
acting on behalf of the insurer that was inconsistent with the express tenns of the policy and that
[plaintiffs] reasonably relied on the representation." Kabban v. 1Vfackin, 104 Or. App. 422, 42627, 801 P.2d 883 (1990). Plaintiffs contend that defendant, by remaining silent about plaintiffs'
alleged noncooperation and continuing to treat the Policy as binding, falsely represented that

10 - OPINION AND ORDER

plaintiffs were in compliance with Policy requirements, despite defendant's belief that plaintiffs
had failed to cooperate. Plaintiffs emphasize that they were unaware that defendant believed
them to be noncooperative, and that defendant intended and induced them to act upon the falsity.
However, the evidence is insufficient to show that defendant's representations or actions
- seeking documentation and making payments - were false or inconsistent with the express
te1ms of the Policy. Plaintiffs also fail to show that defendant believed plaintiffs to be in breach
but nevertheless induced plaintiffs into treating the Policy as valid and enforceable so that
defendant could argue that plaintiffs were in breach all along. Even if plaintiffs could meet these
elements, they fail to show that they acted in reliance on defendant's alleged false representation.
To the contrary, the only reliance plaintiffs cite is their continued efforts to provide info1mation
requested by defendant. Pl.'s Motion at 25. Accordingly, plaintiffs' motion for summary
judgment on this issue of estoppel is denied.
Finally, the parties move for summary judgment on defendant's affirmative defense of
good faith. Defendant argues that plaintiffs' delays and failure to cooperate breached their implied
duty of good faith and fair dealing. Every contract contains an implied duty of good faith, "to be
applied in a manner that will effectuate the reasonable contractual expectations of the pmiies."
Pac. First Bank v. New iV!organ Park Corp., 319 Or. 342, 353, 876 P.2d 761 (1994) (citation
omitted). For the reasons explained above, I find that issues of fact remain regarding whether
plaintiffs' alleged noncooperation breached their implied duty of good faith and fair dealing and
the parties' expectations under the Policy.
D. Functional Replacement Cost
The pmiies dispute the meaning of "functional replacement cost" within the MFRC
Endorsement and move for summary judgment accordingly. Specifically, the pmiies dispute

11 - OPINION AND ORDER

when a damaged structure may be repaired or replaced with less costly, functionally equivalent
methods or materials. The MFRC Endorsement provides:
"Functional replacement cost" means the amount which it would cost to repair or
replace the damaged building with less costly common construction materials and
methods which are functionally equivalent to obsolete, antique or custom
construction materials and methods used in the original construction of the
building.
Gower Deel. Ex. 1 at 80. Plaintiffs assert that the definition should be interpreted to mean that
defendant may use less costly replacement materials and methods only when "obsolete, antique,
or customs" materials and methods were used when the building was first constructed. If such
methods and methods were not used in the initial construction of the structure, plaintiffs argue
that defendant may not utilize less costly materials and methods to repair the damage to their
home. Defendant, on the other hand, argues that "original construction" refers to the time when
the loss occmTed, not to when the building was first constructed. Defendant maintains that the
Policy allows for less costly construction materials and methods so long as the materials and
methods are functionally equivalent to the materials repaired or replaced. I agree.
Under Oregon law, "[i]nterpretation of an insurance policy is a question of law, and [the
court's] task is to ascertain the intention of the pmiies to the insurance policy" by looking to "the
terms and conditions of the insurance policy." Holloway v. Republic Indem. Co. ofAm., 34 l Or.
642, 649-50, 147 P.3d 329 (2006) (citation omitted). Oregon has established a tlll'ee-step analysis
for ascertaining the intention of pmiies in insurance policies. Id. at 650, 147 P.3d 329. First,
courts look for explicit definitions in the insurance policy and, if present, apply the term as
defined in the policy. Id. Second, the court will dete1mine whether the term or phrase is
ambiguous, i.e., whether the te1m or phrase is "is susceptible to only one plausible
interpretation." Id. (quoting Groshong v. Mutual of Enumclaw Ins. Co., 329 Or. 303, 308, 985

12 - OPINION AND ORDER

P.2d 1284 (1999)). If the te1m or phrase is only susceptible to one plausible interpretation, the
comt will apply it. Id. If the term is susceptible to more than one plausible interpretation, the
court will examine the te1m or phrase in "the paiticular context in which that [phrase] is used in
the policy and the broader context of the policy as a whole." Id. (quoting Hoffinan Construction
Co. v. Fred S. James. & Co., 313 Or. 464, 470, 836 P.2d 703 (1992)). Third, if any ambiguity

remains after examining the phrase in context, the court will construe the phrase against the
drafter and apply the plausible interpretation that the non-drafting party advanced. Id.
I find that defendant's interpretation gives effect to language of the Policy. Importantly,
the Policy provides coverage forjimctional replacement costs, not for actual replacement costs or
replacement costs in general. By its express terms, the Policy refers to replacement construction
materials or methods that are fimctionally equivalent to those used with respect to the damaged
portion of the structure; in other words, the replacement materials and methods must serve the
same function as those being replaced or repaired. Moreover, the Policy is not intended to
provide replacement coverage only for damaged portions that were pait of the original
construction of the building. Under plaintiffs' interpretation, damage to any portion of a building
that was remodeled or added after the initial construction would not be covered by the Policy,
and they would not be entitled to the replacement value of any pait of the building that was not
pait of the original construction.
Thus, in light of the context of the phrase, and the broader context of the policy as a
whole, I agree with defendant's construction of the phrase. Defendant's motion for summary
judgment is granted as to the meaning of"functional replacement cost."
E. Depreciation ofLabor

The parties also move for summary judgment on the issue of whether labor is depreciable

13 - OPINION AND ORDER

when determining ACV of the damaged structure. The pmiies agree that the Policy does not
define ACV, and the pmiies maintain that ACV is calculated generally as RCV less depreciation.
The parties dispute whether labor can ever be depreciable under this analysis.
Plaintiffs argue that the plain meaning of depreciation implicates only material objects
subject to "wear, tear, or obsolescence" and should not include labor. Pl.'s Mot. at 17. Defendant
agrees that labor, on its own, is not subject to depreciation. Rather, defendant argues that labor is
depreciable when necessary to create a product that is itself subject to wear, tear, or
obsolescence. For example, according to defendant, an installed roof is the product of labor and
materials and is subject to depreciation, because the value of the roof derives not only from the
roofing materials but also from the labor required to install them.
Oregon comis have not discussed this issue. Several other courts have found that the
failure of an insurance policy to address depreciation of labor renders the tetm "actual cash
value" ambiguous, and that the ambiguity should be construed against the insurance policy and
disallow the depreciation of labor necessary to repair damage to a structure. See, e.g., Adams v.
Cameron }.;fut. Ins. Co., 430 S.W.3d 675, 678-79 (Ark. 2013). Others have held that the cost of

labor to repair or replace damaged propetiy is one of several factors that may be considered
when detetmining depreciation and ACV. E.g., Wilcox v. State Farm Fire & Cas. Co., 874
N.W.2d 780, 784-85 (Minn. 2016); Redcorn v. State Farm Fire & Cas. Co., 55 P.3d 1017, 1021
(Okla. 2002). I am not convinced that the term "actual cash value" is ambiguous or that
depreciation of labor is never relevant to ACV. Although the term "actual cash value" is not
defined by the Policy, this phrase generally means the value of the actual loss sustain by the
insured.
Futiher, I find persuasive the reasoning in Wilcox and agree that depreciation of labor is

14- OPINION AND ORDER

one of several factors that may be considered "when such evidence logically tends to establish
the actual cash value of a covered loss." 874 N.W.2d. at 785. When determining the actual cash
value of damaged property, numerous factors may be relevant, including the depreciation of
materials and sometimes labor. Id. at 784-85. When a party contracts for insurance coverage,
they are not contracting for coverage of the materials necessary to replace the damaged building
but for coverage of the finished product. In some instances, such as when a roof or siding must
be replaced or repaired, the value of the finished product will incorporate materials and
"embedded" labor. Id Thus, when calculating ACV, the labor necessary for replacement of
certain parts of the structure may be depreciable; it depends on the on the nature of damage being
replaced and other factors related to ACV.
Accordingly, I do not find, as a matter of law, that the cost of labor is or is not subject to
depreciation when calculating ACV. Rather, depreciation of labor is a case-specific issue. Here,
the parties did not provide details regarding defendant's depreciation of labor in calculating
ACV. Therefore, their motions for summary judgment are denied.

F. Fungi Limitation
Finally, defendant moves for summary judgment on the issue of whether the fungi limit
applies. Plaintiffs respond that there is no dispute that losses and costs arising from fimgi, wet or
dry rot, or bacteria are subject to a coverage limit of$10,000. Accordingly, defendant's motion is
granted to this limited extent.
CONCLUSION
Defendant's Motion for Partial Summary Judgment (doc. 51) is granted with respect to
the meaning and application of functional replacement cost and fungi limitation and is denied in
all other respects. Plaintiffs' Motions for Partial Summary (docs. 47, 67) are DENIED. The

15- OPINION AND ORDER

parties are instructed to contact Paul Bruch, comiroom deputy for U.S. Magistrate Judge Thomas
Coffin, at 541-431-4111, to schedule a settlement conference.
IT IS SO ORDERED.
Dated

thi~ of December, 2016

Oudll0

Ann Aiken
United States District Judge

16 - OPINION AND ORDER