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Bond v. Liberty Insurance Corp.

United States District Court, W.D. Missouri, Central Division

July 24, 2017

DAVID BOND and REBECCA BOND, individually and on behalf of others similarly situated, Plaintiffs,
v.
LIBERTY INSURANCE CORPORTATION, Defendant.

          ORDER

          NANETTE K. LAUGHREY United States District Judge.

         Pending before the Court are the cross motions for summary judgment of Plaintiffs David and Rebecca Bond and Defendant Liberty Insurance Corporation. [Docs. 72 and 74]. The motions are granted in part and denied in part.

         I. Undisputed Facts[1" name="FN1" id="FN1">1]

         Plaintiffs David and Rebecca Bond purchased a LibertyGuard Deluxe Homeowners Insurance Policy, Form HO 00 03 (Edition 04 09), from Defendant Liberty Insurance Corporation (“Liberty”). The Bonds' policy includes an endorsement for wind and hail damage. In April 2014, the Bonds' home was damaged by hail, and they submitted a claim to Liberty for coverage of that hail damage.

         A. Liberty's General Claims Handling Procedure

         When a homeowner sustains damage to a dwelling or other structure covered by a LibertyGuard Deluxe Homeowners Policy, the claim is handled and paid in two phases: (1) the actual cash value (“ACV”) phase and (2) the replacement cost value (“RCV”) phase. After the policyowner makes his or her claim, an adjustor goes to the location of the insured property to ascertain the damage. [Doc. 75-3, p. 141-45 (Depo. of Ricky Summerlin)]. The adjustor then uses a program called “Xactimate” to put a dollar figure on the amount of the damage. Id. The amount that Xactimate totals is the estimated amount to repair or replace the damage for a dwelling or other structure loss. [Doc. 79, p. 13 of 29]. After this amount is calculated, the adjustor inputs factors for depreciation, and the amount of depreciation is subtracted from the replacement cost to arrive at the ACV. [Doc. 75-3, p. 145-46].

         Following this calculation, the policyowner is paid the ACV of the loss, minus the deductible. No further payment on the claim is made unless the insured decides to repair or replace the damage to the property. Id. at p. 155-56. The insured is not required to undertake this repair. Id. at p. 148-50. Nor is the insured required to come back and submit a replacement cost claim for payment of the withheld depreciation. Id. at p. 150-51. Instead, the insured may take the ACV payment in satisfaction of their claim to do with whatever he or she chooses. Id. at p. 148-50. To recover the RCV, the insured must repair or replace the damage and submit proof of the repairs to Liberty. Id. at p. 155-56.

         B. The Bonds' Claim

         In April 2014, the Bonds' home suffered hail damage, and they submitted a claim for coverage. This claim constituted a loss that was covered under the terms of the policy. Liberty inspected the Bonds' home and paid the Bonds the ACV minus a $1, 522 deductible. On April 29, 2016, the Bonds filed a putative class action against Liberty alleging that Liberty unlawfully applied a deductible to the ACV payment for their hail damage claim.

         On May 26, 2016, the Court granted the Bonds' unopposed motion to bifurcate the class certification proceedings into separate Rule 23(b)(2) and (b)(3) phases. See [Doc. 36].

         On May 1, 2017, the Court certified a Rule 23(b)(2) class divided into injunctive and declaratory relief subclasses and appointed the Bonds as class representatives:

(1) Injunctive Relief Subclass: all persons with a dwelling or other structure located in the state of Missouri insured by Liberty Insurance Corporation under policy Form HO 03 (Edition 04 09) and endorsements at the time of class certification.
(2) Declaratory Relief Subclass: all persons insured by Liberty Insurance Corporation who incurred physical loss or damage to their dwelling or other structures located in the state of Missouri from April 20, 2009 to the date of class certification arising under policy Form HO 03 (Edition 04 09) and endorsements.[2]

[Doc. 66');">66');">66');">66].

         C. Class Members' Policies

         The class members' policies contain three relevant sections: the Declarations, the base policy language, and the endorsements. These sections work together to define the parameters of their coverage. The Declarations set out the limits on recovery under the policy, list the endorsements included in the policy, and note the deductibles that may be assessed under the policy. The base policy language contains the standard terms of the policy. The endorsements are additions to the policy which customize the coverage and terms of the base policy language to create the specific coverage purchased by the policyowner. The terms of the endorsements control over conflicting provisions in the base policy language or Declarations. Grable v. Atlantic Cas. Ins. Co., 104');">280 S.W.3d 104, 108 (Mo.Ct.App. 2009).

         1. The Base Policy

         The Bonds' and class members' base policy form HO 00 03 (Edition 04 09) includes, among others, the following: Section I - Property Coverages; Section I - Perils Insured Against; Section I - Exclusions; and Section I - Conditions. The base policy's coverage provision states:

SECTION I - PROPERTY COVERAGES
COVERAGE A - Dwelling
We cover:
1. The dwelling on the “residence premises” shown in the Declarations, including structures attached to the dwelling; and . . .
COVERAGE B - Other Structures
We cover other structures on the “residence premises” set apart from the dwelling by clear space. . . .
COVERAGE C - Personal Property
We cover personal property owned or used by an “insured” while it is anywhere in the world.
. . .
COVERAGE D - Loss of Use
The limit of liability for Coverage D is the total limit for all the coverages that follow.
1. If a loss covered under this Section makes that part of the “residence premises” where you reside not fit to live in, we cover, at your choice, either of the following. . . . . .
ADDITIONAL COVERAGES
. . .
4. Fire Department Service Charge. We will pay up to $500 for your liability assumed by contract or agreement for fire department charges incurred when the fire department is called to save or protect covered property from a Peril Insured Against. . . .This coverage is additional insurance. No deductible applies to this coverage.
. . .

         The base policy's loss settlement provisions for Coverages A, B, and C are included within Section I - Conditions, as follows:

SECTION I - CONDITIONS . . .
3.Loss Settlement. Covered property losses are settled as follows:
a. Property of the following types:
(1) Personal property;
(2) Awnings, carpeting, household appliances, outdoor antennas and outdoor equipment, whether or not attached to buildings; and
(3) Structures that are not buildings; at actual cash value at the time of loss but not more than the amount required to repair or replace.
b. Buildings under Coverage A or B at replacement cost without deduction for depreciation, subject to the following:
(1) If, at the time of loss, the amount of insurance in this policy on the damaged building is 80% or more of the full replacement cost of the building immediately before the loss, we will pay the cost to repair or replace, after application of deductible and without deduction for depreciation, but not more than the least of the following amounts:
(a) The limit of liability under this policy that applies to the building;
(b) The replacement cost of that part of the building damaged for like construction and use on the same premises; or
(c) The necessary amount actually spent to repair or replace the damaged building.
(2) If, at the time of loss, the amount of insurance in this policy on the damaged building is less than 80% of the full replacement cost of the building immediately before the loss, we will pay the greater of the following amounts, but not more than the limit of liability under this policy that applies to the building:
(a) The actual cash value of that part of the building damaged; or
(b) That proportion of the cost to repair or replace, after application of deductible and without deduction for depreciation, that part of the building damaged, which the total amount of insurance in this policy on the damaged building bears to 80% of the replacement cost of the building.
. . .
(4) We will pay no more than the actual cash value of the damage until actual repair or replacement is complete. Once actual repair or replacement is complete, we will settle the loss according to the provisions of b. (1) and b. (2) above.
. . .
(5) You may disregard the replacement cost loss settlement provisions and make claim under this policy for loss or damage to buildings on an actual cash value basis. You may then make claim within 180 days after loss for any additional liability according to the provisions of this Condition 3. Loss Settlement.

[Doc. 73-1, p. 14-16 of 44 (Bond Policy)].

         2. The Endorsements

         The Bonds' and some class members' insurance policies include a Home Protector Plus Endorsement. If certain conditions are met, [3] the Home Protector Plus Endorsement has a slightly different loss settlement provision, as follows:

HOMEPROTECTOR PLUS ENDORSEMENT
B. REPLACEMENT COST PROVISION - DWELLING AND PERSONAL PROPERTY
. . .
3. Loss Settlement. Covered property losses are settled as follows:
a. The applicable limit of liability for Buildings under Coverage A or B is the replacement cost, after application of deductible and without deduction for depreciation, subject to the following:
(1) We will pay the cost of repair or replacement, but not exceeding:
. . .
(3) We will pay no more than the actual cash value of the damage until actual repair or replacement is complete. Once actual repair or replacement is complete, we will settle the loss according to the provisions of a. (1) above.
. . .
c. Personal property, carpeting and domestic appliances: at replacement cost but not exceeding the amount needed to repair or replace subject to the following: . . .
(3) We will not pay for any loss to personal property under this endorsement until actual repair or replacement is complete.
d. You may disregard the replacement cost provision and make a claim for loss of or damage to property on an actual cash value basis and then make claim within 180 days after loss for additional liability under this endorsement.
D. ADDITIONAL COVERAGES
Lock Replacement Coverage
We will pay up to $250 for replacing the locks or cylinders on the exterior doors of the residence premises when your keys have been stolen. The theft of the keys must be reported to the police for this coverage to apply.This coverage is additional insurance. No deductible applies to this coverage.

[Doc. 73-1, p. 23-24 (Bond Policy)].

         The Bonds' and some class members' insurance policies also contain a Windstorm or Hail Deductible Endorsement (“Wind/Hail Endorsement”), which states:

WINDSTORM OR HAIL DEDUCTIBLE - DWELLING
The following special Deductible is added to the policy:
For the premium charged, we will pay only that part of the total of covered direct physical loss to property covered under Section I of this policy caused by Windstorm or Hail that exceeds the Windstorm or Hail Deductible as shown on the Declarations as follows:
A. When this Windstorm or Hail Deductible Applies '
This Deductible applies in the event of direct physical loss to property covered under this policy caused directly or indirectly by the perils of Windstorm or Hail. . . .
B. How the Windstorm or Hail Deductible Amount is Determined
The Windstorm Deductible may be either a fixed dollar amount or percentage based, but not both. . . .

[Doc. 73-1, p. 42 (Bond Policy)].

         Some class members' policies contain a Functional Replacement Cost Loss Settlement Endorsement (“FRCE”). This endorsement also contains its own loss settlement provision, which provides:

FUNCTIONAL REPLACEMENT COST LOSS SETTLEMENT
. . .
SECTION I - CONDITIONS
The following definition is added when this endorsement is attached to the policy: 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 to obsolete, antique or custom construction materials used in the original construction of the building.
. . .
For the premium charges, item 3.b. Loss Settlement is deleted and replaced by the following:
b. Buildings under Coverage A or B:
(1) If, at the time of loss,
(a) 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
(b) You contract for repair or replacement of the damaged building for the same use, within 180 days of the damage ...

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