Mitchell v. State Farm Fire & Casualty Co., No. 18-60776 (5th Cir. 2020)Annotate this Case
The term "Actual Cash Value" is ambiguous with respect to the withholding of labor depreciation in Mississippi homeowners insurance policies that provide no further definition of ACV. The Fifth Circuit affirmed the district court's denial of State Farm's motion to dismiss with respect to plaintiff's breach of contract claim. The court found that, in the context of a Mississippi homeowners policy that refers to "Actual Cash Value" without further definition, both interpretations are reasonable. Therefore, the court held that the contract was ambiguous and the court applied Mississippi's interpretive canons, which provides that an ambiguous insurance contract is interpreted against the insurance company.
The court reversed the district court's denial of State Farm's motion to dismiss with respect to plaintiff's tort claims. The court explained that, because the law on this question of interpreting "Actual Cash Value" in Mississippi was unsettled, State Farm had an arguable basis to depreciate labor costs. The court also found that the district court did not abuse its discretion in certifying a class of Mississippi State Farm policyholders similarly situated to plaintiff, who received "Actual Cash Value" payments in which labor was depreciated and whose contracts similarly did not define "Actual Cash Value."