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(Article from Insurance Law Alert, December 2018)

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The Eighth Circuit affirmed an Arkansas district court decision certifying a class of homeowners who allege that State Farm improperly withheld amounts for labor depreciation when making claim payments.  Stuart v. State Farm Fire & Casualty Co., 2018 WL 6358447 (8th Cir. Dec. 6, 2018).

The class consists of State Farm policyholders who allege that State Farm improperly depreciated the costs of labor when calculating “actual cash value” (“ACV”) payments under their policies.  The district court concluded that the plaintiffs demonstrated that “questions of law or fact common to class members predominate over any questions affecting any individual members,” as required by Federal Rule of Civil Procedure 23(b)(3).  Affirming the ruling, the Eighth Circuit found that plaintiffs’ claims shared a common, predominating question of law – namely, whether State Farm breached its contracts by depreciating labor costs when calculating claim payments.  The Eighth Circuit rejected State Farm’s assertion that individual issues of liability and damages exist for each plaintiff that cannot be established with common evidence.  Distinguishing cases in which commonality was not found because of case-by-case differences in calculating claim values, the court emphasized that here, the policies specified the method for calculating actual cash value payments. 

The Eighth Circuit also rejected State Farm’s contention that class certification was inappropriate because certain plaintiffs lacked standing.  State Farm argued that plaintiffs who completed repairs at or below the cost of the ACV payment did not suffer injury and thus lacked standing.  The court disagreed, finding that any individual that received an improperly-depreciated ACV payment suffered a legal injury “regardless of whether the ACV payment was more than, less than, or exactly the same as the ultimate cost of repairing or replacing their property.”