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Dennington v. State Farm Fire and Casualty Co.

United States District Court, W.D. Arkansas, Texarkana Division

March 14, 2016

JEFF DENNINGTON and JAMES STUART, PLAINTIFFS
v.
STATE FARM FIRE AND CASUALTY COMPANY and STATE FARM GENERAL INSURANCE COMPANY DEFENDANTS

ORDER

SUSAN O. HICKEY, UNITED STATES DISTRICT JUDGE

Before the Court is Defendants State Farm Fire and Casualty Company and State Farm General Insurance Company’s (collectively “State Farm”) Motion to Dismiss the Second Amended Complaint with Prejudice. (ECF No. 71). State Farm moves to dismiss Plaintiffs’ claims pursuant to Federal Rule of Civil Procedure 12(b)(1) and 12(b)(6). Plaintiffs Jeff Dennington (“Dennington”), James Stuart (“Stuart”), and Careda L. Hood (“Hood”) have responded. (ECF No. 76). State Farm has filed a Reply. (ECF No. 77). The Court finds this matter ripe for consideration.

I. BACKGROUND

Plaintiffs’ First Amended Class Action Complaint (ECF No. 39), brought individually and on behalf of a class of individuals, alleged breach of contract and unjust enrichment claims against State Farm. The Plaintiffs allege that on or about May 2, 2009, Dennington’s property, insured under a homeowners policy issued by State Farm, sustained damage for which Dennington made a claim to State Farm. State Farm made a payment on the claim. On or about April 25, 2011 and again on June 12, 2013, properties owned by Stuart, also insured under State Farm policies, sustained damage for which Stuart made claims. State Farm compensated Stuart. The Court granted Plaintiffs leave to amend their First Amended Complaint. (ECF No. 68). Plaintiffs filed their Second Amended Complaint on June 1, 2015 adding a third Plaintiff, Careda L. Hood. (ECF No. 69). Plaintiffs allege that Hood suffered a loss to her property covered by a State Farm policy. Hood made a claim and State Farm made a payment to her.

All three Plaintiffs had a replacement cost policy. In the policies, State Farm agreed to pay the reasonable and necessary cost to repair or replace damaged property, in two steps. First, prior to the insured making any repair or replacement, State Farm agreed to pay “the actual cash value at the time of the loss of the damaged part of the property, ” with “actual cash value” (“ACV”) defined as “the amount it would cost to repair or replace damaged property, less depreciation.” (ECF No. 42, Ex. 2-3). For all three Plaintiffs, at this first step, State Farm’s adjuster estimated the cost, which included the cost of labor and materials. State Farm then paid the Plaintiffs the ACV of their loss, after subtracting the deductible and depreciation from the adjuster’s estimate. The depreciated amount included depreciation for both labor and materials. Upon completion of the repairs, if the insured decided to repair or replace the damage, State Farm would make the second payment. Under the second step, State Farm agreed to pay “the covered additional amount” that the insured “actually and necessarily spen[t] to repair or replace the damaged part of the property.” (ECF No. 42, Ex. 2-3).

In their Second Amended Complaint, Plaintiffs allege that Arkansas law prohibits an insurance company from depreciating the cost of labor. Therefore, by depreciating this cost in the ACV payments, Plaintiffs claim that State Farm (1) breached their contract with Plaintiffs and (2) was unjustly enriched.

State Farm asserts that Dennington’s contract and unjust enrichment claims are barred by a settlement in a previous case and res judicata. State Farm argues that Stuart lacks standing to sue because he has not suffered an injury that could be redressed by a decision of this court. They also assert that Plaintiffs have failed to allege facts sufficient to support viable claims for breach of contract and unjust enrichment, and that State Farm General should be dismissed from this action because no Plaintiff claims to have purchased insurance from it.

II. STANDARD

“In appraising the sufficiency of the complaint we follow, of course, the accepted rule that a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that plaintiff can prove no set of facts in support of his claim that would entitle him to relief.” Conley v. Gibson, 355 U.S. 41, 45-46 (1957). When ruling on a Federal Rule of Civil Procedure 12(b)(6) motion to dismiss for failure to state a claim, the Court must take as true the alleged facts and determine whether they are sufficient to raise more than a speculative right to relief. Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007). In deciding a Rule 12(b)(6) motion, courts are required to accept all of the Complaint’s well-pled allegations as true and resolve all inferences in the Plaintiffs’ favor. Miller v. Redwood Toxicology Lab., Inc., 688 F.3d 928, 933 n.4 (8th Cir. 2012). The issue in considering such a motion is not whether the Plaintiffs will ultimately prevail, but whether the Plaintiffs are entitled to present evidence in support of the claim. See Nusku v. Williams, 490 U.S. 319, 327 (1989).

In reviewing a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), the court is “not precluded in [its] review of the complaint from taking notice of items in the public record” or considering documents that do not contradict the complaint. Papasan v. Allain, 478 U.S. 265, 269 n.1 (1986); Stahl v. U.S. Dep’t of Agric., 327 F.3d 697, 700 (8th Cir. 2003); Nixon v. Coeur D’Alene Tribe, 164 F.3d 1102, 1107 (8th Cir. 1999). All documents submitted to the court are either matters of public record or do not contradict the Plaintiffs’ Second Amended Complaint, so the Court will review the current motion under Federal Rule of Civil Procedure 12(b)(6) standards. Compare BJC Health Sys. v. Columbia Cas. Co., 348 F.3d 685, 687-88 (8th Cir. 2003) (district court erred in relying on matters outside the pleading that were not public documents). Moreover, State Farm’s argument that the Plaintiffs lack standing is a question of jurisdiction. Because jurisdiction is a threshold question, the court may look outside the pleadings in order to determine whether subject matter jurisdiction exists. Osborn v. United States, 918 F.2d 724, 728-30 (8th Cir. 1990).

III. DISCUSSION

A. Plaintiff Dennington

i. Chivers Settlement

First, State Farm argues that Dennington’s claims have been released by a settlement agreement in an earlier case, Chivers v. State Farm Fire and Casualty Co., State Farm Lloyds andState Farm General Insurance Co., Case No. CV-2010-251-3 (Ark. Cir. Ct.), and the claims should therefore be dismissed because Dennington lacks standing. The Chivers class action was filed in Miller County, Arkansas before Judge Kirk Johnson. The Plaintiffs in the Chivers suit alleged that State Farm Fire, State Farm General, and State Farm Lloyds improperly underpaid homeowners structural loss claims by failing to properly pay for General Contractor’s Overhead and Profit (“GCOP”) from September 6, 1996 to April 30, 2010. The parties negotiated a settlement ...


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