State Farm Win Highlights Insurance Class Trend

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By Perry Cooper

State Farm Fire and Casualty Insurance Co. successfully convinced the Eighth Circuit Sept. 25 that a suit over homeowners insurance payouts isn’t suitable for classwide resolution ( In re State Farm Fire & Cas. Co. , 2017 BL 337703, 8th Cir., No. 16-3185, 9/25/17 ).

How the insurer calculates the actual cash value of a homeowner’s losses may only be determined based on the facts of each individual’s loss, Judge James B. Loken wrote for the U.S. Court of Appeals for the Eighth Circuit.

“This decision is part of a growing trend of appellate decisions ruling in favor of insurers on this issue, including decisions by the Minnesota Supreme Court (cited in this decision), Tenth Circuit and Nebraska Supreme Court,” defense attorney Wystan M. Ackerman of Robinson & Cole LLP in Hartford, Conn., told Bloomberg BNA. Ackerman represented the American Insurance Association and the Property Casualty Insurers Association of America as amicus curiae in favor of State Farm.

“Only the Arkansas Supreme Court has ruled in favor of insureds, but that state’s legislature recently enacted a statute that effectively overrides the state Supreme Court and allows insurers to apply depreciation to the full replacement cost value if they so provide in their policy,” Ackerman, who blogs about insurance class actions at Class Action Insider, said in an email.

The decision could affect class actions beyond the insurance context, he said.

“This is the first federal appellate decision on class certification on this issue,” he said. “It may have implications for non-insurance cases involving judgment calls on individual transactions with consumers like this one.”

Counsel for the homeowners and their amici didn’t respond to requests for comment.

Labor Depreciation Claims

Amanda LaBrier filed a claim with State Farm after a hailstorm damaged the roof, siding, and gutters of her St. Louis home. State Farm paid LaBrier $4,600 for the actual cash value of the damaged property. It cost her $6,000 to repair her home.

She sued State Farm on behalf of 145,000 potential class members alleging its practice of deducting “labor depreciation” from estimated replacement cost in determining actual cash value breached the insurance contract.

She argued labor shouldn’t be depreciated like materials, which diminish in value based on age and wear and tear, because labor costs don’t diminish in value over time.

The lower court certified a class of all State Farm policyholders whose payments on structural damage claims were reduced by the withholding of labor depreciation.

The Eighth Circuit reversed. Although it didn’t rule out the possibility that State Farm’s estimating methodology “would produce an unreasonable estimate of the actual cash value of some partial losses, this issue may only be determined based on all the facts surrounding a particular insured’s partial loss,” the court said.

Judges Roger Leland Wollman and Diana E. Murphy joined the opinion.

Gustafson & Gluek; Jacobson & Press; Butsch & Roberts; and Larson & King represented the homeowners.

Riley & Safer and Wilke & Wilke represented State Farm.

To contact the reporter on this story: Perry Cooper in Washington at

To contact the editor responsible for this story: Steven Patrick at

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