United States District Court, M.D. Georgia, Macon Division
JOHN THOMPSON and LEIGH ANN THOMPSON, Individually and on Behalf of All Others Similarly Situated, Plaintiffs,
STATE FARM FIRE AND CASUALTY COMPANY, Defendant.
T. TREADWELL, UNITED STATES DISTRICT COURT.
case presents one of the latest efforts of policyholders to
reap the benefit of court rulings that casualty insurance
policies, absent an appropriate exclusion, cover diminished
value. See, e.g., State Farm Mut. Auto. Ins. Co.
v. Mabry, 274 Ga. 498, 556 S.E.2d 114 (2001). The
Plaintiffs owned a townhouse in Smyrna, Georgia, that was
insured by State Farm Fire and Casualty Company under a
homeowners policy. Docs. 19-2 at ¶¶ 1-2; 19-4. The
Plaintiffs' townhouse suffered water damage on September
20, 2013 when a pipe burst. Docs. 6 at ¶ 13; 24-5 at
58:8-11. Plaintiff John Thompson then called State Farm and
asked if State Farm would pay for “diminished
value” to the townhouse. Docs. 19-2 at ¶ 8; 24-3
at 90:15-91-24. According to the Plaintiffs, State Farm
stated that it did not provide such coverage. Doc. 19-2 at
¶ 9. The next day, the Plaintiffs filed this lawsuit.
order entered on March 9, 2016 and amended on February 23,
2017, the Court certified a Rule 23(b)(3) class of:
All former or current Georgia homeowners insurance
policyholders of State Farm who, within the period beginning
six years prior to the commencement of the instant civil
action and ending January 24, 2017, presented first-party
claims arising from direct physical losses to their
properties as a result of water damage to their homes, which
are events covered by the policy, wherein diminished value
was not paid in connection with said claims.
Docs. 78 at 27; 103 at 3. This class was certified with
respect to “[a] breach of contract claim against State
Farm based on its failure to assess for diminished
value.” Doc. 78 at 27-28. The Court declined to certify
a class of plaintiffs who claimed that State Farm had failed
to pay diminished value. Id. at 18.
Farm sought leave to appeal the Court's class
certification under. Doc. 90-3 at 13. The Plaintiffs sought
leave to cross-appeal. See Doc. 94-1. On January 24,
2017, the Eleventh Circuit denied State Farm's petition
and the Plaintiffs' cross-petition. Id.
Order addresses numerous motions for summary judgment filed
by the parties.
Plaintiffs seek partial summary judgment, asserting that:
(1) “[T]he insurance policies issued to the Class cover
diminished value.” Doc. 121 at 1.
(2) “Endorsement FE-5621 is ineffective in excluding
coverage for diminished value as to all class members or,
alternatively, as to all class members who were issued
renewal policies.” Doc. 123 at 1.
(3) “State Farm had a duty to assess the Class's
claims for diminished value.” Doc. 121 at 1.
(4) “State Farm breached its duty to assess the
Class's claims for diminished value.” Doc. 138 at
(5) “[T]he Class is entitled to recover monetary
damages if State Farm breached that duty.” Doc. 121 at
(6) “State Farm has waived the contractual limitations
provision [of one year to file suit] in the policies with
respect to any claims with a date of loss before January 22,
2013.” Doc. 124 at 1.
State Farm responded with cross-motions for summary judgment,
(1) All claims with a date of loss before January 22, 2013
are barred by the one-year limitations provision. Doc. 125 at
(2) Summary judgment is due against “all class
members' claims, on the ground that class members'
homeowners policies do not cover, and thus include no
obligation to assess for, diminished value.” Doc. 126
(3) Summary judgment is due against the Thompsons on their
individual claims, because “(i) damage is an essential
element of a breach-of-contract claim under Georgia law; (ii)
the undisputed facts show that the Plaintiffs have suffered
no damage on which to base a breach-of-contract claim; and
(iii) as a matter of Georgia law, there can be no claim for a
breach of the implied covenant of good faith and fair dealing
absent a viable breach-of-contract claim.” Doc. 136 at
discussed below, the Plaintiffs' motions seeking partial
summary judgment (Docs. 121; 123; 124; 138) are
GRANTED IN PART and DENIED IN
PART. These motions are GRANTED in
part in that (1) policies issued prior to November
1, 2013, being issued without FE-5621, cover diminished value
(even if they were renewed with FE-5621 and its accompanying
notice), and (2) State Farm breached its duty to assess for
diminished value as to those policies. But the
Plaintiffs' motions are DENIED in part
because, as a matter of law, (1) FE-5621 was effective to
eliminate coverage for diminished value as to new policies
issued with the endorsement, and (2) the Plaintiffs are not
entitled to recover monetary damages.
Farm's motions seeking (1) summary judgment because the
“class members' homeowners policies do not cover,
and thus include no obligation to assess for, diminished
value” (Doc. 126); and (2) summary judgment against the
Thompsons on the grounds that their property has suffered no
diminished value (Doc. 136) are DENIED.
because there are genuine disputes of material fact as to
whether State Farm waived the policies' one-year
contractual limitations period, the parties'
cross-motions on that issue (Docs. 124; 125) are both
SUMMARY JUDGMENT STANDARD
shall grant 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 of law.”
Fed.R.Civ.P. 56(a). “A factual dispute is genuine only
if ‘a reasonable jury could return a verdict for the
nonmoving party.'” Info. Sys. & Networks
Corp. v. City of Atlanta, 281 F.3d 1220, 1224 (11th Cir.
2002) (quoting United States v. Four Parcels of Real
Prop., 941 F.2d 1428, 1437 (11th Cir. 1991)). The burden
rests with the moving party to prove that no genuine issue of
material fact exists. Id. (citation omitted). The
party may support its assertion that a fact is undisputed by
“citing to particular parts of materials in the record,
including depositions, documents, electronically stored
information, affidavits or declarations, stipulations
(including those made for purposes of the motion only),
admissions, interrogatory answers, or other materials.”
the moving party bears the burden of proof at trial, the
moving party must establish all essential elements of the
claim or defense in order to obtain summary judgment.”
Anthony v. Anthony, 642 F.Supp.2d 1366, 1371 (S.D.
Fla. 2009) (citing Four Parcels of Real Prop., 941
F.2d at 1438). The moving party must carry its burden by
presenting “credible evidence” affirmatively
showing that, “on all the essential elements of its
case on which it bears the burden of proof at trial, no
reasonable jury could find for the nonmoving party.”
Four Parcels of Real Prop., 941 F.2d at 1438
(citation omitted). In other words, the moving party's
evidence must be so credible that, if not controverted at
trial, the party would be entitled to a directed verdict.
Id. (citation omitted).
the moving party makes such an affirmative showing, it is
entitled to summary judgment unless the nonmoving party, in
response, ‘come[s] forward with significant, probative
evidence demonstrating the existence of a triable issue of
fact.'” Id. (quoting Chanel, Inc. v.
Italian Activewear of Fla., Inc., 931 F.2d 1472, 1477
(11th Cir. 1991)) (alteration in original). However,
“[c]redibility determinations, the weighing of the
evidence, and the drawing of legitimate inferences from the
facts are jury functions, not those of a judge . . . . The
evidence of the non-movant is to be believed, and all
justifiable inferences are to be drawn in his favor.”
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255
(1986) (citation omitted). Thus, the Court “‘can
only grant summary judgment if everything in the record
demonstrates that no genuine issue of material fact
exists.'” Strickland v. Norfolk S. Ry.
Co., 692 F.3d 1151, 1154 (11th Cir. 2012) (quoting
Tippens v. Celotex Corp., 805 F.2d 949, 952 (11th
contrast, “[w]hen the nonmoving party has the
burden of proof at trial, the moving party is not required to
‘support its motion with affidavits or other similar
material negating the opponent's
claim.'” Four Parcels of Real Prop., 941
F.2d at 1437 (quoting Celotex Corp. v. Cartrett, 477
U.S. 317, 323 (1986)). The moving party “simply may
show . . . that there is an absence of evidence to support
the nonmoving party's case.” Id. at 1438
(internal quotation marks and citation omitted).
“Assuming the moving party has met its burden, the
non-movant must then show a genuine dispute regarding any
issue for which it will bear the burden of proof at
trial.” Info. Sys. & Networks Corp., 281
F.3d at 1224-25 (citing Celotex Corp., 477 U.S. at
standard of review for cross-motions for summary judgment
does not differ from the standard applied when only one party
files a motion. See Am. Bankers Ins. Grp. v. United
States, 408 F.3d 1328, 1331 (11th Cir. 2005).
“Cross-motions for summary judgment will not, in
themselves, warrant the court in granting summary judgment
unless one of the parties is entitled to judgment as a matter
of law on facts that are not genuinely disputed.”
United States v. Oakley, 744 F.2d 1553, 1555 (11th
Cir. 1984) (internal quotation marks and citation omitted).
The Court will consider each motion on its own merits,
resolving all reasonable inferences against the party whose
motion is under consideration. See Am. Bankers Ins.
Grp., 408 F.3d at 1331.
State Farm's standard form policies cover diminished
Farm first argues that its standard policy language-“We
insure for accidental direct physical loss to the
property”-does not cover diminished value because
“any diminution in value beyond the cost to repair or
replace would be an intangible, economic loss, not
‘accidental direct physical loss' . . . included
within the policy's insuring agreement.” Docs. 126
at 2, 7-10; 128-1 ¶ 3. Second, State Farm argues that
its loss settlement provision limits its “payment
obligation . . . to the cost to repair or replace the damaged
property.” Doc. 126 at 11-12. The Court disagrees.
arguments are, at best, small variations on the arguments
rejected by the Georgia Supreme Court in Mabry, the
seminal diminished value case in Georgia. There, the insurer,
State Farm Mutual Automobile Insurance Company, contended
“that its only obligation under the contract of
insurance, when it elects to rely on the limitation of
liability provision, is to pay for repairs which return the
vehicle to its pre-loss condition.” Mabry, 274
Ga. at 503, 556 S.E.2d at 119. The Georgia Supreme Court
rejected that contention, holding:
[T]he insurance policy, drafted by the insurer, promises to
pay for the insured's loss; what is lost when
physical damage occurs is both utility and value; therefore,
the insurer's obligation to pay for the loss
includes paying for any lost value. That interpretation has
stood for 75 years in Georgia and has become, therefore, part
of the agreement between the parties when they enter into a
contract of insurance which includes the promise to pay for
the insured's loss. Thus, our holding in this
case that State Farm [Mutual Automobile Insurance Company] is
obligated to pay for diminution in value when it occurs is
based in reason, precedent, and the intent of the parties.
Recognition of diminution in value as an element of
loss to be recovered on the same basis as other
elements of loss merely reflects economic reality.
Id. at 508, 556 S.E.2d at 122 (emphases added,
citation omitted). In Royal Capital Dev. LLC v. Maryland
Cas. Co., the Georgia Supreme Court clarified that
Mabry's holding also applies to insurance
contracts for real property. See 291 Ga. 262, 267,
728 S.E.2d 234, 238 (2012) (“[W]e hold that our ruling
in Mabry is not limited by the type of property
insured, but rather speaks generally to the measure of
damages an insurer is obligated to pay.”).
could not be clearer. If the insured suffers a covered
“loss, ” diminished value is an element of that
“loss, ” absent a different definition of loss in
the policy. State Farm's parsing of the adjectives
modifying loss and its attempt to characterize diminished
value as purely “intangible, economic damages”
are unavailing. See Doc. 126 at 8-10. Again,
Mabry is clear: “[W]hat is lost when physical
damage occurs is both utility and value;” diminished
value is based on this loss of value and specifically refers
to any amount by which property's pre-loss value exceeds
the property's value post-repair. See Mabry, 274 Ga.
at 505, 556 S.E.2d at 120-21 (referring to “diminution
in value” as “the difference between pre-loss
value and post-loss value . . . modified by . . . repair so
that the measure would be the difference between pre-loss
value and post-repair value”). Accordingly, under this
definition, if an insurer has a duty to pay for repair and
restoration, it, to the same degree, has a duty to pay for
any diminished value remaining notwithstanding the repairs.
Farm's arguments based on “limitation of
liability” or “loss settlement” language in
its policies are just as clearly foreclosed by Mabry
and Royal Capital. State Farm's standard form
policies insure against any “accidental direct physical
loss to the property described in Coverage A, except as
provided in SECTION I - LOSSES NOT INSURED.” Doc.
121-4 at 34 (emphasis added). The loss settlement provisions
relied on by State Farm (see Doc. 126 at 11) do not
appear in SECTION I - LOSSES NOT INSURED; instead they appear
in SECTION I - LOSS SETTLEMENT. Doc. 121-4 at 34-40. Even
more to the point, the Georgia Supreme Court rejected this
precise argument: “[A] limitation of liability
provision affording the insurer an option to repair serves
only to abate, not eliminate, the insurer's liability for
the difference between pre-loss value and post-loss
value.” Royal Capital, 291 Ga. at 262, 728
S.E.2d at 235 (quoting Mabry, 274 Ga. at 506, 556
S.E.2d at 121).
discussed below, State Farm, after Royal Capital,
moved to change by endorsement the definition of loss to
exclude diminished value. But absent an effective endorsement
redefining loss, the State Farm policies at issue cover
Endorsement FE-5621 excludes coverage for diminished value in
new policies issued with the endorsement, but not
Royal Capital, State Farm began including the
following endorsement with all new and renewed homeowners
policies in Georgia:
FE-5621 DIMINUTION IN VALUE LOSS RESTRICTION
When used in Section I of this policy, loss does not include
diminution in value. This does not preclude payments as
described in the Section I loss ...