Opinion
CIVIL ACTION NO. 22-247-JWD-EWD
2023-05-31
Paggiwa CUMMINGS v. ALLSTATE PROPERTY AND CASUALTY INSURANCE COMPANY
Stephen J. Herman, John S. Creevy, Charles M. King, Soren E. Gisleson, Herman, Herman, Katz & Cotlar, New Orleans, LA, Adam A. Schwartzbaum, Pro Hac Vice, Edelsberg Law, P.A., Aventura, FL, Amy L. Judkins, Pro Hac Vice, Normand PLLC, Orlando, FL, Andrew J. Shamis, Pro Hac Vice, Shamis & Gentile P.A., Miami, FL, for Paggiwa Cummings. Judy Y. Barrasso, Whitney M. Antoine, Barrasso Usdin Kupperman Freeman & Sarver, L.L.C., New Orleans, LA, Janelle E. Sharer, New Orleans, LA, Kristine M. Schanbacher, Pro Hac Vice, Mark Hanover, Pro Hac Vice, Dentons U.S. LLP, Chicago, IL, for Allstate Property and Casualty Insurance Company.
Stephen J. Herman, John S. Creevy, Charles M. King, Soren E. Gisleson, Herman, Herman, Katz & Cotlar, New Orleans, LA, Adam A. Schwartzbaum, Pro Hac Vice, Edelsberg Law, P.A., Aventura, FL, Amy L. Judkins, Pro Hac Vice, Normand PLLC, Orlando, FL, Andrew J. Shamis, Pro Hac Vice, Shamis & Gentile P.A., Miami, FL, for Paggiwa Cummings. Judy Y. Barrasso, Whitney M. Antoine, Barrasso Usdin Kupperman Freeman & Sarver, L.L.C., New Orleans, LA, Janelle E. Sharer, New Orleans, LA, Kristine M. Schanbacher, Pro Hac Vice, Mark Hanover, Pro Hac Vice, Dentons U.S. LLP, Chicago, IL, for Allstate Property and Casualty Insurance Company. RULING AND ORDER JOHN W. deGRAVELLES, UNITED STATES DISTRICT JUDGE
This matter comes before the Court on the Motion to Dismiss (the "Motion") (Doc. 11) filed by Defendant Allstate Property & Casualty Insurance Company ("Allstate" or "Defendant"). Plaintiff Paggiwa Cummings ("Cummings" or "Plaintiff"), individually and on behalf of others similarly situated, opposes the Motion. (Doc. 17.) Allstate has filed a reply. (Doc. 18.) Oral argument is not necessary. The Court has carefully considered the law, the facts in the record, and the arguments and submissions of the parties and is prepared to rule. For the following reasons, the Motion is denied.
I. Background
A. Relevant Facts
This is a breach of contract case brought as a class action involving Allstate's alleged underpayment to its insureds under an auto insurance policy. The following factual allegations are taken from the Class Action Complaint ("Complaint") and are presumed to be true for purposes of the instant Motion. On or about August 22, 2018, Plaintiff was involved in an auto collision. (Compl. ¶ 48, Doc. 1.) Plaintiff's vehicle was covered under her insurance policy with Allstate. (Id. ¶¶ 45-46.) Both her policy and those of the putative class members (the "Policy") were based on standardized policy language and contained identical material terms for coverage on total loss physical damage claims. (Id. ¶ 26 (citing Doc. 1-2).) The Policy obligates Allstate to pay for "loss" to any insured auto that is caused by a covered event, including a collision. (Doc. 1-2 at 19-20.) In settling a claim for loss submitted by an insured, the Policy allows Allstate to either "pay for the loss in money" or "repair or replace the damaged or stolen property." (Id. at 22.)
The Court notes that the policy attached to Defendant's Motion is a copy of Plaintiff's actual policy, whereas the policy attached to Plaintiff's Complaint is a sample policy. (Compare Doc. 11-2 at 1 (listing Plaintiff as the named policyholder/insured) with Doc. 1-2 at 1 (listing no named policyholder/insured).) However, the sample policy and Plaintiff's actual policy are identical with respect to the provisions at issue in this ruling. As such, no distinction need be made. The Court will hereafter only cite Doc. 1-2 when discussing the "Policy."
However, Allstate's liability under the Policy is limited when a "total loss" occurs. A vehicle is declared a total loss when the "cost to repair" the damage to the insured vehicle "exceeds the value of the vehicle[.]" (Compl. ¶ 7, Doc. 1.) Under those circumstances, Allstate may instead elect to pay the "actual cash value of the property or damaged part of the property[.]" (Doc. 1-2 at 23.) This cap on Allstate's liability is specifically provided for in the Policy's "Limits of Liability" provision, which states in pertinent part:
Our limit of liability is the least of:(Id. (emphasis added).) Notably, however, the term "actual cash value" is not defined in the Policy.
(1) the actual cash value of the property or damaged part of the property at the time of loss, which may include a deduction for depreciation; or
(2) the cost to repair or replace the property or part to its physical condition at the time of loss using parts produced by or for the vehicle's manufacturer, or parts from other sources, including, but not limited to, non-original equipment manufacturers, subject to applicable state laws and regulations[.]
Following Plaintiff's auto collision in 2018, she submitted a claim to Allstate for the physical damage to her vehicle. (Compl. ¶ 48, Doc. 1 (claim number 000514294957D01).) Allstate declared the vehicle a "total loss" and "elected pursuant to the Policy to pay the [actual cash value] of the vehicle instead of the higher cost to repair [it]." (Id. ¶ 49.) Allstate's "final net payment" to Plaintiff on her claim was $22,650.85. (Id. ¶ 51 (citing Doc. 1-4 at 1).) In calculating this amount, Allstate first determined that the vehicle "had an actual cash value of $20,853.68[;]" then, Allstate "subtracted the deductible of $250.00, added $1,970.67 for state sales tax, and added $76.50 for tag and title fees." (Id. ¶¶ 50-51 (citing Doc. 1-4 at 1).) According to the Complaint, Allstate only paid the "mandatory minimum title transfer handling fee" required by Louisiana law, which is $8.00, and the "mandatory minimum title fee" required by Louisiana law, which is $68.50. (Id. ¶ 52 (citing La. R.S. §§ 32:412.1 and 32:728).)
Thereafter, Plaintiff replaced her total-loss vehicle by purchasing a replacement vehicle. (Id. ¶ 53.) To replace a car in Louisiana, an insured must pay a variety of sales taxes and fees associated with purchasing and operating a motor vehicle. (Id. ¶ 9.) These taxes and fees include a state motor vehicle sales tax, (id. ¶ 10), a mandatory local sales tax in most parishes and municipalities, (id. ¶ 11), and a range of mandatory fees, such as title fees, registration fees, transfer fees, and tag fees (hereinafter, "regulatory fees" or "fees"), (see id. ¶¶ 14-22 (outlining various other regulatory and licensing fees associated with replacing a vehicle in Louisiana)). Plaintiff alleges that she incurred these "reasonably necessary replacement costs" when she purchased her replacement vehicle. (Id. ¶ 53.)
B. Procedural History
On April 14, 2022, Plaintiff filed suit individually and on behalf of all other putative class members who similarly were insured by Allstate and allegedly underpaid after their vehicles were declared a total loss. (Id. ¶¶ 5, 55.) Specifically, Plaintiff alleges that "Allstate systematically and uniformly underpaid Plaintiff and thousands of other putative Class Members amounts owed to its insureds who suffered the total loss of a vehicle insured with comprehensive and collision coverage." (Id. ¶ 6.) According to the Complaint, actual cash value encompasses all reasonably necessary costs to replace a vehicle, including sales tax and regulatory fees. (Id. ¶¶ 8, 27, 41.) In Plaintiff's view, Allstate breached the Policy by electing to pay actual cash value on her claim but failing to pay the full actual cash value; in other words, "Allstate breached [the] Policy by failing to pay all reasonably necessary replacement costs to Plaintiff, including Regulatory Fees related to the registration, tag fees and fees incidental to the transfer of ownership." (Id. ¶ 54.) Additionally, Plaintiff claims that she is entitled to litigation expenses, including attorneys' fees and costs, for bad faith pursuant to La. R.S. §§ 22:1892(B)(1) and 22:1973. (Id. ¶ 60.)
As stated above, Plaintiff asserts the breach of contract claim, (see id. ¶¶ 71-84), and expenses of litigation claim on behalf of the purported class, (see id. ¶¶ 85-94). Hereinafter, the Court will refer only to Plaintiff but notes that these claims are brought on behalf of others.
Allstate moves to dismiss the Complaint under Federal Rule of Civil Procedure 12(b)(6), arguing that Plaintiff has failed to state a plausible claim for breach of contract because neither the Policy nor Louisiana law require Allstate to pay sales tax and regulatory fees as part of actual cash value. (Doc. 11-1 at 5.) Allstate further argues that, because Plaintiff has no viable claim for breach of contract, her claim for bad faith under La. R.S. §§ 22:1892 and 22:1973 fails too. (Id. at 5, 15.)
II. Rule 12(b)(6) Standard
"Federal pleading rules call for 'a short and plain statement of the claim showing that the pleader is entitled to relief,' [Fed. R. Civ. P. 8(a)(2)]; they do not countenance dismissal of a complaint for imperfect statement of the legal theory supporting the claim asserted." Johnson v. City of Shelby, Miss., 574 U.S. 10, 11, 135 S.Ct. 346, 190 L.Ed.2d 309 (2014) (citations omitted).
Interpreting Rule 8(a) of the Federal Rules of Civil Procedure, the Fifth Circuit has explained:
The complaint (1) on its face (2) must contain enough factual matter (taken as true) (3) to raise a reasonable hope or expectation (4) that discovery will reveal relevant evidence of each element of a claim. "Asking for [such] plausible grounds to infer [the element of a claim]
does not impose a probability requirement at the pleading stage; it simply calls for enough facts to raise a reasonable expectation that discovery will reveal [that the elements of the claim existed]."Lormand v. US Unwired, Inc., 565 F.3d 228, 257 (5th Cir. 2009) (internal citations omitted) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)).
Applying the above case law, the Western District of Louisiana has stated:
Therefore, while the court is not to give the "assumption of truth" to conclusions, factual allegations remain so entitled. Once those factual allegations are identified, drawing on the court's judicial experience and common sense, the analysis is whether those facts, which need not be detailed or specific, allow "the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." [Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009);] Twombly, 55[0] U.S. at 556 . This analysis is not substantively different from that set forth in Lormand, supra, nor does this jurisprudence foreclose the option that discovery must be undertaken in order to raise relevant information to support an element of the claim. The standard, under the specific language of Fed. Rule Civ. P. 8(a)(2), remains that the defendant be given adequate notice of the claim and the grounds upon which it is based. This standard is met by the "reasonable inference" the court must make that, with or without discovery, the facts set forth a plausible claim for relief under a particular theory of law provided there is a "reasonable expectation" that "discovery will reveal relevant evidence of each element of the claim." Lormand, 565 F.3d at 257[;] Twombly, 55[0] U.S. at 556 .Diamond Servs. Corp. v. Oceanografia, S.A. De C.V., No. 10-177, 2011 WL 938785, at *3 (W.D. La. Feb. 9, 2011) (citation omitted).
In deciding a Rule 12(b)(6) motion, all well-pleaded facts are taken as true and viewed in the light most favorable to the plaintiff. Thompson v. City of Waco, Tex., 764 F.3d 500, 502 (5th Cir. 2014) (citation omitted). The task of the Court is not to decide if the plaintiff will eventually be successful, but to determine if a "legally cognizable claim that is plausible" has been asserted. Id. at 503 (quoting Doe ex rel. Magee v. Covington Cnty. Sch. Dist. ex rel. Keys, 675 F.3d 849, 854 (5th Cir. 2012)).
Finally, when deciding a Rule 12(b)(6) motion dismiss, "the factual information to which the court addresses its inquiry is [generally] limited to (1) the facts set forth in the complaint, (2) documents attached to the complaint, and (3) matters of which judicial notice may be taken under Federal Rule of Evidence 201." Gomez v. Galman, 18 F.4th 769, 775 (5th Cir. 2021) (per curiam) (quoting Walker v. Beaumont Indep. Sch. Dist., 938 F.3d 724, 735 (5th Cir. 2019)). Attached to the operative complaint in this case are the relevant insurance policy, declarations page, and the settlement letter Plaintiff received from Allstate. (See Doc. 1-2; Doc. 1-3; Doc. 1-4.) Thus, the Court may properly consider these documents in its analysis.
III. Discussion
A. Parties' Arguments
1. Allstate's Memorandum in Support of its Motion (Doc. 11-1)
Allstate begins by asserting that the Complaint fails to state a plausible claim for sales tax and regulatory fees under the Policy or Louisiana law. (Doc. 11-1 at 8.) First, as to the language of the Policy, it is Allstate's view that "[n]othing in the plain language of the Policy requires payment of Sales Tax and Fees, and therefore the Court should enforce the Policy terms as written." (Id. (citing Bilbe v. Belsom, 530 F.3d 314, 315 (5th Cir. 2008)).) In addition, according to Allstate, Plaintiff's argument that Allstate must pay sales tax and regulatory fees because they are a component of actual cash value is flawed because the Policy defines Allstate's payment obligation in terms of "loss" and not actual cash value; instead, "actual cash value" as used in the Policy functions as a limit of liability only. (Id. at 8-9 (citing Doc. 11-2 at 18).)
The page numbers in Allstate's memorandum differ from those assigned by the Court's e-filing system, "CM-ECF." When discussing this memorandum, (Doc. 11-1), the Court will cite to the page numbers assigned by CM-ECF only. The same is true with respect to Plaintiff's opposition brief. (See Doc. 17.)
As Defendant uses it, "Sales Tax and Fees" includes "sales tax and title fees, including handling fees, notary fees and registration and license plate transfer fees." (Doc. 11-1 at 5.)
Putting aside the "plain language of Allstate's Policy," Allstate submits that "the Louisiana Supreme Court has found that sales tax is not an element of the value of a total loss vehicle at the time of loss." (Id. at 9 (citing State Farm Mut. Auto. Ins. Co. v. Berthelot, 98-1011 (La. 4/13/99), 732 So. 2d 1230, 1235).) Allstate also cites Clark v. Clarendon Insurance. Co. as showing that "[o]ther Louisiana courts" have also found actual cash value in an insurance policy did not include sales tax. (Id. at 10 (citing 2002-1314 (La. App. 3d Cir. 3/26/03), 841 So. 2d 1039, 1046).)
Next, Allstate attacks Plaintiff's reliance on La. R.S. § 22:1892(B)(5); according to Allstate, that statutory provision cannot be used to support Plaintiff's breach of contract claim for principally three reasons. (Id. at 11-15.) First, Allstate argues, La. R.S. § 22:1892(B)(5) is not applicable in this case because
[o]n its face, the language of (B)(5) applies to total loss vehicle claims only under circumstances where an insurer elects a cash settlement "based on the actual cost to purchase a comparable motor vehicle." Here, Allstate allegedly made a "cash settlement," but Plaintiff pleads no facts to establish that such settlement was "based on the actual cost to purchase a comparable motor vehicle." In absence of any factual predicate to invoke (B)(5), Plaintiff has no grounds to recover under the statute.(Id. at 12 (emphasis in original).) Second, even if La. R.S. § 22:1892(B)(5) does apply here, "none of the three enumerated options for valuing a total loss vehicle [under that statutory provision] mandate payment of Sales Tax and Fees." (Id.) Rather, Allstate argues, each option set forth in the statute relates to the "market value" of the total loss vehicle. (Id. at 13.) The Court will discuss the methodologies for valuation under La. R.S. § 22:1892(B)(5) in more detail below. Third, Allstate contends that nothing on the face of La. R.S. § 22:1892(B)(5) grants a policyholder a private right of action. (Id. (citations omitted).) Thus, "the Court should grant judgment in favor of Allstate to the extent Plaintiff attempts to recover based on an alleged violation of La. R.S. § 22:1892(B)(5)." (Id. at 14.)
Lastly, Allstate claims that all of Plaintiff's claims for bad faith damages fail as a matter of law because "[t]he penalty statutes pursuant to Title 22 are not available unless Plaintiff has stated a valid claim for breach of the Policy or underpayment of the amount owed[,]" and, in Allstate's view, Plaintiff has not done so. (Id. at 15 (citation omitted).)
2. Plaintiff's Opposition (Doc. 17)
Opposing the Motion, Plaintiff begins by stating that Louisiana law requires "insurance companies making 'cash settlements' based on the [actual cash value] of a totaled vehicle . . . to ultimately pay insureds the 'actual cost to purchase a comparable motor vehicle.' " (Doc. 17 at 5.) Furthermore, "[t]o purchase a comparable vehicle in Louisiana, an insured is required to pay taxes, title fees, and registration fees[;]" in other words, "it is impossible to purchase a comparable vehicle in Louisiana without incurring the cost of [these] taxes and fees." (Id.) Thus, Plaintiff avers, Allstate breached the Policy by failing to include said taxes and fees in its payment of actual cash value. (Id. at 16.) Plaintiff then emphasizes the fact that, because this dispute principally concerns interpretation of an ambiguous insurance policy provision, the law favors her interpretation. (See id. at 7 ("Ambiguous provisions 'susceptible to more than one reasonable interpretation' must be construed against the insurer.") (citation omitted).) Thus, Plaintiff argues, "[u]nless Defendant can show that its interpretation of the Policy is the only reasonable interpretation, dismissal on the pleadings is not appropriate." (Id. (emphasis in original) (citation omitted).)
Plaintiff also addresses Allstate's argument that actual cash value is a limit of liability and not a payment obligation and argues that this interpretation "results in an illogical reading of Policy provisions." (Id. at 8.) Allstate has two options under the Policy after an insured experiences damage to an insured vehicle: "(1) 'pay for the loss in money,' or (2) 'repair or replace the damaged or stolen property.' " (Id. (quoting (Doc. 1-2 at 22)).) Here, Plaintiff claims, the Complaint shows that Allstate "opted not to 'repair or replace the damaged [ ] property,' and instead chose to make a money payment based on [actual cash value], resulting in significant savings to Allstate." (Id. (quoting Compl. ¶ 49, Doc. 1).) As such, Allstate "cannot now—after disposing of Plaintiff's vehicle and purporting to pay Plaintiff [actual cash value]—claim that it did not owe [actual cash value] at all." (Id. (citing 12A COUCH ON INS § 176:23 ("Once the insurer has properly made its election [to either pay actual cash value or to repair or replace], it is bound thereby and cannot by its own action revoke it.")).) It is Plaintiff's view that if Allstate's interpretation is used, Allstate would never be obligated to pay actual cash value, and "[s]uch an interpretation would render [actual cash value] a pointless, meaningless term, an interpretation which is not permitted by Louisiana law." (Id. (citation omitted).)
Next, Plaintiff maintains that her interpretation of actual cash value "as including taxes and fees associated with purchasing a comparable vehicle" is reasonable and thus the Court should construe the ambiguous provision in her favor and deny the Motion. (See id. at 10.) Plaintiff claims that this interpretation "is supported by Louisiana law," specifically La. R.S. § 22:1892(B)(5), "and by Allstate's partial payment of taxes and fees with [actual cash value] payments." (Id.) The Court will elaborate on Plaintiff's arguments on this point in more detail below.
Plaintiff then argues that she is not, as Allstate contends, bringing a direct action under La. R.S. § 22:1892(B)(5). (Id. at 16.) Instead, "[t]he crux of Plaintiff's case is that Defendant violated the requirements of Louisiana Revised Statute § 22:1892(B)(5) and, in doing so, paid Plaintiff less than [actual cash value]. By underpaying [actual cash value], Defendant breached its insurance obligations." (Id.)
Plaintiff asserts that "[m]ultiple Louisiana courts have found allegations that an insurer violated the requirements of La. R.S. §[ ]22:1892(B)(5) are sufficient to state claims for breach of contract and insurance bad faith." (Id. (citing Prudhomme v. GEICO Ins. Co., 2015 WL 2345420, at *4, 2015 U.S. Dist. LEXIS 63539, at *11 (W.D. La. May 13, 2015); Durgin v. Allstate Prop. & Cas. Ins. Co., 2020 WL 4018664, at *8, 2020 U.S. Dist. LEXIS 126198, at *21 (W.D. La. July 16, 2020); Shields v. State Farm Mut. Auto. Ins. Co., 2020 WL 838280, at *3, 2020 U.S. Dist. LEXIS 28649, at *8 (W.D. La. Feb. 19, 2020); Slade v. Progressive Sec. Ins. Co., 2013 WL 12182957, at *6, 2013 U.S. Dist. LEXIS 204559, at *16 (W.D. La. Feb. 3, 2013)).) Plaintiff summarizes her argument by stating: "[i]n Louisiana, allegations that an insurer violates the requirements for calculating [actual cash value] under La. R.S. § 22:1892(B)(5) are sufficient to support claims for breach of contract. Defendant's argument that there is no private cause of action for violation of § 22:1892(B)(5) is irrelevant." (Id. at 17.)
Finally, Plaintiff argues that her bad faith claim survives because her breach of contract claim survives. (Id. at 19.) She continues: "Defendant's only argument directed at this claim is that it cannot survive absent a breach of the policy or underpayment of the amount owed. (Id. at 19 (citing Doc. 11-1 at 15).) According to Plaintiff, because she pled a viable claim for breach of the Policy, her bad faith claims also survive. (Id.)
3. Allstate's Reply (Doc. 18)
In its reply brief, Allstate re-urges three main arguments:
(i) neither the Policy nor Louisiana law requires payment of Sales Tax and Fees; (ii) under La. R.S. § 22:1892(B)(5) . . . , there is no private right of action permitting a direct suit for an alleged statutory violation; and (iii) as Plaintiff has not sufficiently plead a breach of contract claim, her statutory bad faith claims necessarily fail.(Doc. 18 at 2.)
Beginning with the first argument, Allstate again contends that "[t]he Policy specifies that 'actual cash value' serves only as a limit of liability—and not the amount Allstate promises to pay." (Id. (emphasis in original).) According to Allstate, the Policy clearly and unambiguously establishes that actual cash value merely functions as a limit of liability and "[s]uch clear and unambiguous language must be enforced according to its terms." (Id. (citations omitted).) More specifically, Allstate contends that
the Policy provides that Allstate's limit of liability is the actual cash value of the "property," i.e., Plaintiff's 2016 Chevy. (See [Doc. 11-2 at 18]). But Plaintiff's Opposition points to no Policy language that requires Allstate to pay "actual cash value" for her total loss vehicle—rather, the operative language requires Allstate to pay for "loss to your insured auto[.]" (Id. at 16-17). Under these exact circumstances, numerous courts have found there is no obligation to pay for Sales Tax or Fees.(Id. at 2-3 (emphasis in original).)
Moreover, Allstate argues, "[e]ven if the Policy were to somehow obligate Allstate to pay actual cash value for losses, then such obligation would not include Sales Tax and Fees, as they are associated with the purchase of a replacement vehicle, rather than actual cash value." (Id. at 5.) "While the Policy does not define actual cash value, the relevant language refers to lost 'property or the damaged part of the property at the time of loss.' " (Id. (emphasis in original).) In Allstate's view, the definition of actual cash value "is limited to the value of the vehicle, and does not include replacement costs like Sales Tax and Fees." (Id. at 5-6) (citing, inter alia, Singleton v. Elephant Ins. Co., 953 F.3d 334, 337-39 (5th Cir. 2020); Wilkerson v. Am. Fam. Ins. Co., 997 F.3d 666, 669 (6th Cir. 2021).) Concluding on this point, Allstate avers that "[t]he parties simply did not contract for payment of Sales Tax and Fees in the event of a total loss, and the Court cannot rewrite the Policy to include them." (Id. at 6 (quoting Cadwallader v. Allstate Ins. Co., 2002-1637 (La. 6/27/03), 848 So. 2d 577, 580 ("Courts lack the authority to alter the terms of insurance contracts under the guise of contractual interpretation when the policy's provisions are couched in unambiguous terms.")).)
In addition, Allstate contends that "the Court should disregard Plaintiff's argument that Allstate somehow conceded that it owes all Sales Tax and Fees because it allegedly paid some amounts beyond actual cash value." (Id. (emphasis in original).) Instead, Allstate claims, "[t]he relevant question is whether Allstate had a contractual obligation to pay all Sales Tax and Fees—which is unaffected by Allstate's alleged decision to settle the claim for an amount allegedly above actual cash value." (Id. (emphasis in original) (citations omitted).)
Next, Allstate addresses Plaintiff's reliance on La. R.S. § 22:1892(B)(5): "[j]ust as the Policy sets forth no affirmative obligation to pay Sales Tax and Fees, neither does [section] (B)(5)." (Id. at 7.) According to Allstate, "the statute only requires that if an insurer elects to pay a cash settlement based on the actual cost to purchase a comparable motor vehicle, then costs may be derived by using three options[.]" (Id. (emphasis in original).) Allstate contends that "[n]one of these enumerated options (i.e., fair market value survey, retail cost, or qualified expert appraiser) envision or reference Sales Tax and Fees. Rather, all of them relate to underlying valuation, as opposed to Sales Tax and Fees associated with change in title or transfer of ownership." (Id. (emphasis in original).)
Allstate claims that its argument that La. R.S. § 22:1892(B)(5) does not require it to pay sales tax and fees is further supported by cannons of statutory construction. (See id. at 7-8.) For example, Allstate states that "a later section of the same statute explicitly references sales tax in relation to 'fire and extended coverage policies.' " (Id. (emphasis in original) (citing La. R.S. § 22:1892(F)(2)).) The Court will discuss this argument in more detail in its analysis, but the gist of Allstate's point here is that the Louisiana Legislature purposefully omitted sales tax from the statute and thus, the statute does not establish a uniform mandate to pay sales tax and fees. Allstate then reiterates its argument from its memorandum that section 1892(B)(5) does not provide a private right of action, and Plaintiff fails to allege any independent breach of her policy separate from section 1892(B)(5). (Id. at 9.) Finally, regarding Plaintiff's claims for bad faith penalties and damages, Allstate repeats its argument that, because Plaintiff has not sufficiently pled a breach of contract claim, her statutory bad faith claims must necessarily fail too. (Id. at 10.)
B. Claim for Breach of Contract
1. Applicable Law
The Court has diversity jurisdiction over this case pursuant to 28 U.S.C. § 1332. In diversity cases, the Court applies state substantive law. Moore v. State Farm Fire & Cas. Co., 556 F.3d 264, 269 (5th Cir. 2009); Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). The parties do not dispute that Louisiana law applies in this case. Generally, to recover for breach of contract in Louisiana, a plaintiff must prove the following elements: "(1) the obligor's undertaking an obligation to perform; (2) the obligor failed to perform the obligation (the breach); and (3) the failure to perform resulted in damages to the obligee." Deep S. Commc'ns, LLC v. Fellegy, No. 22-598, 652 F.Supp.3d 636, 664 (M.D. La. Jan. 23, 2023) (deGravelles, J.) (quoting RAMJ Constr., L.L.C. v. Seola Enterprises, Inc., No. 17-01789, 2018 WL 3232781, at *2 (M.D. La. July 2, 2018) (quoting Denham Homes, L.L.C. v. Teche Fed. Bank, 2014-1576 (La. App. 1 Cir. 9/18/15), 182 So. 3d 108, 119 (citing La. Civ. Code art. 1994))).
The controversy in this case involves the first two elements. More specifically, Allstate maintains that the Policy requires it to pay for "loss," not actual cash value, as actual cash value functions as a limit of liability only. Plaintiff disagrees, which raises the question of whether Allstate undertook an obligation to pay Plaintiff the actual cash value of her vehicle. In addition, Allstate argues that even if the Policy imposes an affirmative obligation on Allstate to pay actual cash value when it elects that option under the Policy, no breach occurred in this case. According to Allstate, neither the Policy nor Louisiana law mandate payment of sales tax and regulatory fees as part of actual cash value. Plaintiff responds that Allstate breached the Policy by failing to pay reasonably necessary replacement costs—including sales tax and regulatory fees—because actual cash value includes those costs.
The Court will address these issues in turn. As explained more fully below, the Court finds that Plaintiff has plausibly alleged both that Allstate undertook an obligation to pay Plaintiff the actual cash value of her vehicle and that Allstate failed to perform that obligation. The central issue before the Court is whether "actual cash value" means the underlying value of an insured vehicle only, or whether it contemplates all costs necessary to replace a vehicle in Louisiana, including the taxes and fees described above. Because resolution of this question necessarily requires the Court to interpret the terms of the Policy, the Court turns to the following well-established principles.
"Under Louisiana law, '[a]n insurance policy is a contract between the parties and should be construed by using the general rules of interpretation of contracts set forth in the Louisiana Civil Code.' " In re Katrina Canal Breaches Litig., 495 F.3d 191, 206 (5th Cir. 2007) (quoting Cadwallader v. Allstate Ins. Co., 848 So. 2d 577, 580 (La. 2003)). "The Louisiana Civil Code provides that '[i]nterpretation of a contract is the determination of the common intent of the parties.' " Id. (quoting La. Civ. Code art. 2045). "The words of a contract must be given their generally prevailing meaning." Id. at 207 (quoting La. Civ. Code art. 2047); see also Cadwallader, 848 So. 2d at 580 ("Words and phrases used in an insurance policy are to be construed using their plain, ordinary and generally prevailing meaning, unless the words have acquired a technical meaning.") (citations omitted).
"When the words of a contract are clear and explicit and lead to no absurd consequences, no further interpretation may be made in search of the parties' intent." In re Katrina Canal Breaches Litig., 495 F.3d at 207 (quoting La. Civ. Code art. 2046). In other words, when "the policy wording at issue is clear and unambiguously expresses the parties' intent, the insurance contract must be enforced as written." Id. (quoting Cadwallader, 848 So. 2d at 580). If, however, the policy provisions at issue are ambiguous, other rules of construction come into play. As the Fifth Circuit has explained:
Where, however, an insurance policy includes ambiguous provisions, the "[a]mbiguity . . . must be resolved by construing the policy as a whole; one policy provision is not to be construed separately at the expense of disregarding other policy provisions." La. Ins. Guar. Ass'n, 630 So. 2d at 763 (citing LA. CIV. CODE ANN. art. 2050 (1987) ("Each provision in a contract must be interpreted in light of the other provisions so that each is given the meaning suggested by the contract as a whole.")). "Words susceptible of different meanings must be interpreted as having the meaning that best conforms to the object of the contract." LA. CIV. CODE ANN. art. 2048 (1987). "A provision susceptible of different meanings must be interpreted with a meaning that renders it effective and not with one that renders it ineffective." Id. art. 2049 [ ].Id.
Ambiguity may also be resolved through the use of the reasonable-expectations doctrine—i.e., "by ascertaining how a reasonable insurance policy purchaser would construe the clause at the time the insurance contract was entered." La. Ins. Guar. Ass'n, 630 So. 2d at 764 (quoting Breland v. Schilling, 550 So. 2d 609, 610-11 (La. 1989)). "The court should construe the policy 'to fulfill the reasonable expectations of the parties in light of the customs and usages of the industry.' " Id. (quoting Trinity Indus., Inc. v. Ins. Co. of N. Am., 916 F.2d 267, 269 (5th Cir. 1990)). "A doubtful provision must be interpreted in light of the nature of the contract, equity, usages, the conduct of the parties before and after the formation of the contract, and of other contracts of a like nature between the same parties." LA. CIV. CODE ANN. art. 2053 (1987).
If—after application of the above rules of construction—an ambiguity still remains, then "the ambiguous contractual provision is to be construed against the drafter, or, as originating in the insurance context, in favor of the insured." Id. (quoting La. Ins. Guar. Ass'n, 630 So. 2d at 764); see also La. Civ. Code art. 2056. "Under this rule of strict construction, equivocal provisions seeking to narrow an insurer's obligation are strictly construed against the insurer." Id. (quoting Cadwallader, 848 So. 2d at 580). That said, this "strict construction principle" will only apply "if the ambiguous policy provision is susceptible to two or more reasonable interpretations;" it is not enough that the provision is susceptible to more than one interpretation, "but each of the alternative interpretations must [also] be reasonable." Id. (quoting Cadwallader, 848 So. 2d at 580). In addition, "[t]he fact that a term is not defined in the policy itself does not alone make that term ambiguous." Id. (quoting Am. Deposit Ins. Co. v. Myles, 783 So. 2d 1282, 1287 (La. 2001)).
2. Analysis
a. Whether the Policy Requires Payment of Actual Cash Value
First, the Court addresses Allstate's argument that the Policy does not actually impose an affirmative obligation to pay actual cash value. According to Allstate, Plaintiff's argument that Allstate must pay sales tax and regulatory fees because they are a component of actual cash value is flawed "because the Policy explicitly defines Allstate's payment obligation in terms of 'loss' and not 'actual cash value.' " (Doc. 11-1 at 8.) Rather, Allstate contends, "actual cash value merely serves as a limit of liability[.]" (Id. (internal quotation marks omitted).) Moreover, Allstate argues, Plaintiff does not allege that she ever sought to replace her total loss vehicle or that she ever incurred any sales taxes or fees on any such replacement. (Id. at 9.)
Allstate is mistaken in this contention, as the Complaint provides that "Plaintiff replaced her total-loss vehicle with a replacement vehicle[,]" and "[t]he cost to replace her vehicle included all reasonably necessary replacement costs, including all Regulatory Fees such as all sales tax, title, registration, and transfer fees." (Compl. ¶ 53, Doc. 1.)
In opposing this argument, Plaintiff acknowledges that Allstate's limit of liability under its Policy is actual cash value, but states that "after [Allstate] declares a vehicle a total loss—meaning the damage to the vehicle exceeds the value of the vehicle—[actual cash value] becomes the relevant payment obligation." (Doc. 17 at 5.) Thus, Plaintiff contends, Allstate's "attempt to frame its payment obligations after a total loss as something other than [actual cash value] is nothing more than an attempt to avoid liability for purposefully underpaying Plaintiff and thousands of other class members." (Id. at 5-6.) In reply, Allstate again argues that "[t]he Policy specifies that 'actual cash value' serves only as a limit of liability—and not the amount Allstate promises to pay." (Doc. 18 at 2 (emphasis in original).)
Whether Allstate's payment obligation under the Policy is disconnected from the provision limiting its liability is a question of policy interpretation. In sum, the Court is unconvinced by Allstate's argument that the Policy does not impose an affirmative obligation to pay actual cash value. By its clear terms, the Policy obligates Allstate to pay for "loss" to the insured's vehicle. (See Doc. 1-2 at 19-20.) Elsewhere, the Policy explains that Allstate "may pay for the loss in money, or may repair or replace the damaged or stolen property." (Id. at 22.) Indeed, the Policy limits Allstate's liability for loss to the lesser amount of either "the actual cash value of the property or damaged part of the property at the time of loss . . ." or "the cost to repair or replace the property or part to its physical condition at the time of loss . . ." (Id. at 23.) Even though the Policy describes actual cash value as a "limit" on the amount Allstate must pay for a loss, that language does not allow Allstate to elect the less-costly option—to pay actual cash value—and simultaneously escape paying the full amount of actual cash value. If Allstate elects to satisfy its obligation in either of the two ways provided for in the Policy, the option chosen becomes Allstate's payment obligation. Put another way, if Allstate declares a total loss and chooses to pay actual cash value on that basis, as it did here, then Allstate is required to pay the full amount of actual cash value within the meaning of the Policy.
This conclusion is further buttressed by other courts' refusal to dismiss an insured's breach of contract claim based on the same argument advanced by Allstate here. For example, in Thompson v. United Services Automobile Association, the defendant, USAA, likewise argued that it was not required to pay the fees and taxes sought by the plaintiff because the policy did not obligate USAA to pay actual cash value; instead, USAA was "only required to pay the amount of 'loss.' " Thompson v. United Servs. Auto. Ass'n, No. 20-123, 2022 WL 2980694, at *3 (N.D. Miss. July 27, 2022). The relevant policy provisions in Thompson were synonymous with those at issue in this case. See id. at *2-3. The court stated that USAA's argument on this point created a question of policy interpretation and concluded that, "at least for purposes of this stage in the proceedings[,]" the policy was ambiguous as to whether it required USAA to pay the actual cash value or the amount of "loss." Id. at *4. For this reason, the court rejected USAA's argument for dismissal on this ground. Id. ("Consequently, the Defendant's argument for dismissal on this point is not well-taken."). Moreover, the court noted that, although the policy required USAA to pay for "loss," the ambiguity as to whether the policy obligated USAA to pay actual cash value in the event it elected that limit of liability following a total loss was further compounded by the fact that USAA "ha[d] already chosen to pay its limit of liability as opposed to the amount of 'loss.' " Id.
Similarly, in Buddington v. United Services Automobile Association, USAA offered the same argument in support of its motion to dismiss; relying in part on Thompson, the Buddington court declined to dismiss the breach of contract claim for failure to pay the full amount of actual cash value. See Buddington v. United Servs. Auto. Ass'n, No. 22-1566, 2023 WL 2742129, at *1, *4 (E.D. La. Mar. 31, 2023). The court found that the plaintiff's allegations of breach were sufficient "to survive USAA's Rule 12(b)(6) attack" because their interpretation of the relevant policies as requiring payment of sales taxes and fees as part of actual cash value was reasonable. Id. at *4. In addition, like in Thompson, the Buddington court found that "USAA's own actions, in electing to limit their liability to [actual cash value] while voluntarily paying some, but not all, taxes and fees to [p]laintiffs further muddie[d] the waters of the [p]olicies' coverages." Id.
Like in Thompson and Buddington, Allstate declared Plaintiff's vehicle a total loss and elected, pursuant to the Policy, to pay its limit of liability. (See Compl. ¶¶ 49-51, Doc. 1 (citing Doc. 1-4 at 1).) Allstate chose the same course with respect to the other putative class members' claims for loss. (Id. ¶¶ 55-58.) Thus, when Allstate elects to limit its liability to the actual cash value of the insured vehicle, Allstate must pay the full amount of actual cash value. However, even if Allstate is correct that its affirmative payment obligation is disconnected from the Policy provision limiting its liability, at the very least, Allstate's decision to pay actual cash value in every one of these instances renders the Policy ambiguous as to whether it requires Allstate to pay actual cash value as opposed to mere "loss." Considering the discussion above, the Court finds that Plaintiff's interpretation of the Policy in this respect is reasonable. Therefore, the Court will not dismiss Plaintiff's breach of contract claim on this ground.
b. Whether Actual Cash Value Includes Sales Tax and Regulatory Fees
The Court must now determine whether Plaintiff has sufficiently alleged that Allstate breached the Policy by electing to pay actual cash value but failing to include sales taxes and regulatory fees in that payment calculation. Because the term "actual cash value" is undefined by the Policy here, the Court must first resort to its "plain, ordinary and generally prevailing meaning[.]" Cadwallader, 848 So. 2d at 580 (citations omitted). Merriam-Webster's general definition of actual cash value is the "money equal to the cost of replacing lost, stolen, or damaged property after depreciation[.]" However, Merriam-Webster sets forth two legal definitions of actual cash value; one is virtually identical to the general definition—"the cost of replacing or repairing damaged property less any applicable depreciation"—whereas the other defines actual cash value as "FAIR MARKET VALUE[.]" Similar to the varying legal definitions provided by Merriam-Webster, Black's Law Dictionary provides the following on actual cash value: "1. Replacement cost minus normal depreciation[,]" and "2. See fair market value." Value, BLACK'S LAW DICTIONARY (11th ed. 2019).
Actual Cash Value, Merriam-Webster.com, https://www.merriam-webster.com/dictionary/actual%20cash%20value (last visited May 24, 2023).
Id. Merriam-Webster defines "fair market value" as "a price at which buyers and sellers with a reasonable knowledge of pertinent facts and not acting under any compulsion are willing to do business." Fair Market Value, Merriam-Webster.com, https://www.merriam-webster.com/dictionary/fair%20market%20value#legalDictionary (last visited May 24, 2023).
The Court notes that at least one other court, in an opinion cited herein, used a Black's Law Dictionary definition of "actual cash value" that differs from the definition provided above. See Clark v. Clarendon Ins. Co., 2002-1314 (La. App. 3 Cir. 3/26/03), 841 So. 2d 1039, 1046 (explaining that the fourth edition of Black's Law Dictionary from 1968 "defines 'actual cash value' in terms of 'fair or reasonable cash price' and '[w]hat property is worth in money.' "). The Court chooses to use the definition provided above from the eleventh edition issued in 2019, as it is more current.
The ordinary, plain meaning of actual cash value as provided by the two sources referenced above seems to favor Plaintiff's contention that actual cash value includes all reasonably necessary costs to replace a motor vehicle. Nonetheless, because both Merriam-Webster and Black's Law Dictionary also mention fair market value—which appears to support Allstate's interpretation of actual cash value—the Court cannot say that the meaning of the term can be ascertained by the plain definition of actual cash value. Again, to construe the ambiguous provision in favor of the insured—here, Plaintiff—that provision must be "susceptible to two or more reasonable interpretations[ ] . . ." In re Katrina Canal Breaches Litig., 495 F.3d at 207 (emphasis in original) (quoting Cadwallader, 848 So. 2d at 580). For the following reasons, the Court finds that the term "actual cash value" is open to at least two reasonable interpretations.
Allstate maintains that even if the Policy requires it to pay actual cash value, "actual cash value" within the meaning of the Policy "does not implicate Sales Tax and Fees, which are logically associated with the transfer of ownership for a replacement vehicle, not the loss itself or the characteristics of the property." (Doc. 11-1 at 9.) To support this interpretation, Allstate first states that "the Louisiana Supreme Court has found that sales tax is not an element of the value of a total loss vehicle at the time of loss." (Id. (citing State Farm Mut. Auto. Ins. Co. v. Berthelot, 98-1011 (La. 4/13/99), 732 So. 2d 1230, 1235).) However, Berthelot is distinguishable from this case in several critical respects. There, one individual, Franklin, was involved in an auto collision caused by another individual, Berthelot; as a result of the accident, which was indisputably caused by Berthelot, Franklin's vehicle was declared a total loss by his insurer, State Farm. Berthelot, 732 So. 2d at 1231. The policy between State Farm and Franklin limited State Farm's liability to the lesser of either "the cost of repair or replacement[ ]" or "the actual cash value[,]" and the policy stated that actual cash value would be "determined by the market value, age and condition at the time the loss occurred." Id.
State Farm elected the actual cash value option for payment on Franklin's claim and calculated the actual cash value by including both the base price of Franklin's vehicle and a reimbursement for sales tax. Id. Pursuant to the policy, State Farm—as the subrogee of its insured—sought payment of the actual cash value amount from Berthelot's insurer, Southern United Fire Insurance Company ("SUFIC"). Id. "SUFIC then paid State Farm for the cash value of Franklin's vehicle, but refused to pay the sales tax." Id. Subsequently, State Farm filed suit against SUFIC and Berthelot "seeking repayment of the sales tax assessed on Franklin's automobile." Id. The court noted that, unlike the claim asserted in the present matter, "State Farm's claim against Berthelot and SUFIC [was] a subrogation action against the tortfeasor and his liability insurer." Id. at 1232. Thus, the issue before the Berthelot court was "whether a tort victim [could] recover sales tax from a tortfeasor who causes the total loss of the tort victim's vehicle." Id. at 1231.
Although the court concluded that sales tax was "not a recoverable item of damages" under the circumstances presented in that case, the court made equally clear that its analysis of whether sales tax was owed was "governed by the rights available to the tort victim[,]" not by the contractual relationship between State Farm and Franklin created by their insurance policy. Id. at 1232; see id. (further explaining that the rules governing damages available to tort victims applied because the subrogation action State Farm brought against SUFIC and tortfeasor Berthelot was "not a conventional subrogation, but a legal subrogation, i.e., subrogation by operation of law."). Given the distinction made between damages available to a tort victim from a tortfeasor and the rights of an insured seeking compensation for loss from its insurer, Berthelot does not support a finding that sales tax is excluded from payment of "actual cash value" under the Policy in this case.
To further support its argument, Allstate also cites Clark v. Clarendon Insurance Co., 2002-1314 (La. App. 3d Cir. 3/26/03), 841 So. 2d 1039. (See Doc. 11-1 at 10.) In Clark, the Louisiana Third Circuit Court of Appeal considered a policy provision nearly identical to the one at issue in this case. Clark, 841 So. 2d at 1046. Additionally, like the Policy in this case, the Clark policy did not define actual cash value. Id. Because actual cash value was undefined by the policy, the court resorted to the "generally prevailing meaning" of that term and stated that its dictionary definition did "not reference or indicate that 'actual cash value' include[d] sales tax." Id. Relying on this definition and the Berthelot court's examination of the nature of a sales tax, inter alia, the Clark court concluded that payment of actual cash value under the policy did not require sales tax to be included. Id.
Although Clark supports Allstate's interpretation of actual cash value, for the following reasons, the Court finds that a different result is warranted here. In diversity cases, when applying Louisiana law to resolve a particular issue, a federal court's job "is to 'determine as best [it] can [how] the Louisiana Supreme Court would decide' it." Jorge-Chavelas v. La. Farm Bureau Cas. Ins. Co., 917 F.3d 847, 850 (5th Cir. 2019) (quoting Gulf & Miss. River Transp. Co. v. BP Oil Pipeline Co., 730 F.3d 484, 488 (5th Cir. 2013) (citation omitted)). Neither party has pointed the Court to a Louisiana Supreme Court case that directly addresses whether payment of "actual cash value" to an insured includes sales tax and regulatory fees when that term is not defined in the insurance policy, and the Court has found none. When the Louisiana Supreme Court has not definitively resolved an issue, the United States Fifth Circuit instructs federal courts to proceed as follows:
When the absence of a controlling high court decision requires us to make an "Erie guess" about Louisiana law, we consider many of the same sources we use when guessing the law of other jurisdictions: decisions and reasoning of
the state's courts; general rules of the jurisdiction, such as those governing statutory interpretation; and secondary sources like treatises. [Gulf & Miss. River Transp. Co., 730 F.3d] at 488-89. But Louisiana's "civilian methodology" means the pecking order of those sources is different than it is for a common law state. Boyett v. Redland Ins. Co., 741 F.3d 604, 607 (5th Cir. 2014). Louisiana's "Constitution, codes, and statutes" are of paramount importance to its judges. Am. Int'l Specialty Lines Ins. Co. v. Canal Indem. Co., 352 F.3d 254, 260 (5th Cir. 2003). The doctrine of stare decisis, a creature of common law, is alien to the civilian system. Boyett, 741 F.3d at 607. Unlike stare decisis, which can flow from one decision, in the civil system numerous court decisions must agree on a legal issue to establish jurisprudence constante (French for constant jurisprudence). And even when that consensus exists in the caselaw, it remains only persuasive authority for the Erie guess; "we are not strictly bound" by the decisions of Louisiana's intermediate courts. Am. Int'l Specialty Lines, 352 F.3d at 261 (quoting Transcon. Gas Pipe Line Corp. v. Transp. Ins. Co., 953 F.2d 985, 988 (5th Cir. 1992)); see generally Alvin B. Rubin, Hazards of a Civilian Venturer in Federal Court: Travel and Travail on the Erie Railroad, 48 LA L. REV. 1369 (1988).Jorge-Chavelas, 917 F.3d at 850-51.
As illustrated by the well-established principles set out above, this Court is not bound by one Louisiana intermediate court's decision. Id. at 852 ("Three decisions do not jurisprudence constante make."). Moreover, even if this Court was required to adhere to the ruling in Clark, the Court finds a different outcome is justified here. Notably, the definition of actual cash value used in Clark was from an older version of Black's Law Dictionary than the version cited herein. See Clark, 841 So. 2d at 1046 ("BLACK'S LAW DICTIONARY 53 (4th ed. 1968) . . . defines 'actual cash value' in terms of 'fair or reasonable cash price' and '[w]hat property is worth in money.' "). As stated above, the plain, ordinary meaning of actual cash value from both Merriam-Webster and the more recent edition of Black's Law Dictionary indicate that the term can also include replacement costs. Thus, the inquiry of whether actual cash value includes sales tax and regulatory fees in this case does not end with Clark.
Plaintiff argues that her interpretation of actual cash value as including the taxes and fees associated with purchasing a comparable vehicle is not only reasonable, but that it is also supported by "Louisiana law"—namely La. R.S. § 22:1892(B)(5). (Doc. 17 at 10-11.) More specifically, Plaintiff claims that La. R.S. § 22:1892(B)(5) is "incorporated into [Allstate]'s Policy" and that, as a result, "Allstate was required to pay Plaintiff the 'cost to purchase a comparable vehicle.' " (Id. at 11 (citation omitted).) Plaintiff alleges that "she could not buy a comparable vehicle under Louisiana law without payment of sales tax and fees[,]" as "Louisiana imposes a sales and use tax on any vehicle sale within the state[ ] and prohibits the sale of a vehicle with[out] payment of title and registration fees." (Id. (citing Compl. ¶¶ 17-23, Doc. 1).) Thus, Plaintiff avers, "[i]t is quite literally impossible to purchase a 'comparable vehicle' in Louisiana without incurring the cost of sales tax and fees." (Id. at 11-12 (citing Compl. ¶¶ 17-23, Doc. 1).)
The Court agrees with Plaintiff that La. R.S. § 22:1892(B)(5) supports her interpretation of "actual cash value" in this context. The Louisiana Insurance Code specifically instructs auto insurers on how to adjust a claim based on actual cash value through La. R.S. § 22:1892(B)(5), which reads:
One of the foundational precepts of contract law is that parties to a contract are generally presumed to have contracted in a manner consistent with applicable law existing at the time the contract was made. See Norfolk & W. Ry. Co. v. Am. Train Dispatchers Ass'n, 499 U.S. 117, 130, 111 S.Ct. 1156, 113 L.Ed.2d 95 (1991) (citation omitted) ("Laws which subsist at the time and place of the making of a contract, and where it is to be performed, enter into and form a part of it, as fully as if they had been expressly referred to or incorporated in its terms. This principle embraces alike those laws which affect its construction and those which affect its enforcement or discharge."). Although Louisiana law—not the common law of contracts—applies to this dispute, this fundamental principle further supports the Court's position that La. R.S. § 22:1892(B)(5) should be given significant weight in interpreting actual cash value in a case such as this one, where actual cash value is undefined by the Policy.
When an insurance policy provides for the adjustment and settlement of first-party motor vehicle total losses on the basis of actual cash value or replacement with another of like kind and quality, and the insurer elects a cash settlement based on the actual cost to purchase a comparable motor vehicle, such costs shall be derived by using one of the following:La. R.S. § 22:1892(B)(5) (emphasis added).
(a) A fair market value survey conducted using qualified retail automobile dealers in the local market area as resources. If there are no dealers in the local market area, the nearest reasonable market can be used.
(b) The retail cost as determined from a generally recognized used motor vehicle industry source; such as, an electronic database, if the valuation documents generated by the database are provided to the first-party claimant, or a guidebook that is available to the general public. If the insured demonstrates, by presenting two independent appraisals, based on measurable and discernable factors, including the vehicle's preloss condition, that the vehicle would have a higher cash value in the local market area than the value reflected in the source's database or the guidebook, the local market value shall be used in determining the actual cash value.
(c) A qualified expert appraiser selected and agreed upon by the insured and insurer. The appraiser shall produce a written nonbinding appraisal establishing the actual cash value of the vehicle's preloss condition.
(d) For purposes of this Paragraph, local market area shall mean a reasonable distance surrounding the area where a motor vehicle is principally garaged, or the usual location of the vehicle covered by the policy.
The Court interprets the language of La. R.S. § 22:1892(B)(5) as supporting Plaintiff's argument that actual cash value includes all reasonably necessary costs associated with obtaining a replacement vehicle for primarily two reasons.
First, "actual cash value" as used in the statute is synonymous with "a cash settlement based on the actual cost to purchase a comparable motor vehicle[.]" La. R.S. § 22:1892(B)(5). This is evidenced by a directive issued by the Commissioner of the Louisiana Department of Insurance on May 27, 2021, which states in pertinent part: "The requirements for determining the actual cash value of the motor vehicle in an automobile total loss settlement are now statutorily provided for in La. R.S. [§] 22:1892(B)(5)." (Directive 18-R, Doc. 17-1 (emphasis added)); see also Gautreaux v. La. Farm Bureau Cas. Ins. Co., 22-294 (La. App. 3 Cir. 12/29/22), 362 So.3d 896, 901 ("Louisiana Revised Statutes 22:1892(B)(5) provides three exclusive methods for determining the actual cash value of a total loss vehicle . . ."), reh'g denied, 2022-00294 (La. App. 3 Cir. 2/15/23), 2023 WL 2000969; see also Durgin v. Allstate Prop. & Cas. Ins. Co., No. 19-721, 2020 WL 4018664, at *4 (W.D. La. July 16, 2020) (stating that La. R.S. § 22:1892(B)(5) sets forth the permissible methodologies for an insurer to determine actual cash value in a total loss case and analyzing the "appraisal" methodology under subsection (c)). Thus, on its face, the statute contemplates that a payment of actual cash value is to be a payment based on the costs associated with purchasing a comparable replacement vehicle, not—as Allstate contends—solely the underlying value of the vehicle without consideration of transaction costs.
Second, the language of subsection (b), which sets forth the "retail cost" methodology for ascertaining actual cash value, suggests that sales tax and regulatory fees could be included as one of the "measurable and discernable factors" used in determining the vehicle's value in the local market. La. R.S. § 22:1892(B)(5)(b). Subsection (b) provides in part: "If the insured demonstrates, by presenting two independent appraisals, based on measurable and discernable factors, including the vehicle's preloss condition, that the vehicle would have a higher cash value in the local market area than the value reflected in the source's database or the guidebook, the local market value shall be used in determining the actual cash value." Id. (emphasis added).
As a matter of statutory construction, it is well-established that "[t]he word 'includes' has 'traditionally introduced a non-exhaustive list.' " Alcoa, Inc. v. Whittaker Corp., No. 02-84, 2007 WL 2900591, at *4 (S.D. Tex. Sept. 30, 2007) (emphasis added) (quoting BRYAN A. GARNER, GARNER'S MODERN AMERICAN USAGE 44 (Oxford University Press) (2003)); see also NORMAN SINGER & SHAMBIE SINGER, 2A SUTHERLAND STATUTES AND STATUTORY CONSTRUCTION § 47.7 (7th ed. 2022) ("The word 'includes' is usually a term of enlargement, and not of limitation . . .") (citations omitted). Thus, it is reasonable to assume the term "including" as used in subsection (b) signals the beginning of an illustrative list of several "measurable and discernable factors," one of which is the vehicle's "preloss condition[.]" La. R.S. § 22:1892(B)(5)(b). This conclusion is further strengthened when subsection (b) is read together with the opening paragraph preceding it, which—again—establishes that an insurer chooses to pay actual cash value when it "elects a cash settlement based on the actual cost to purchase a comparable motor vehicle[.]" La. R.S. § 22:1892(B)(5) (emphasis added).
A fair reading of the Complaint supported by Plaintiff's brief demonstrates that Plaintiff is not, as Allstate suggests, asserting a cause of action under La. R.S. § 22:1892(B)(5) or solely based on an alleged violation of that statutory provision. Rather, Plaintiff uses La. R.S. § 22:1892(B)(5) to support her claim that Allstate breached its contractual obligations under the Policy. Again, according to Plaintiff, section 1892(B)(5) shows that "actual cash value" as contemplated by the Insurance Code means "a cash settlement based on the actual cost to purchase a comparable motor vehicle[.]" Id. (emphasis added). And, Plaintiff argues, because Allstate failed to pay her necessary replacement costs associated with obtaining a replacement vehicle—including sales tax and regulatory fees—Allstate underpaid actual cash value; as a result, Allstate breached its obligation under the Policy. (Doc. 17 at 13, 15-16.)
Allstate also argues that the plain language of La. R.S. § 22:1892(B)(5) "only requires that if an insurer elects to pay a cash settlement based on the actual cost to purchase a comparable motor vehicle, then costs may be derived by using three options[.]" (Doc. 18 at 7 (emphasis in original).) This is a plain mischaracterization of the statute, as section 1892(B)(5) states that if "the insurer elects a cash settlement based on the actual cost to purchase a comparable motor vehicle, such costs shall be derived by using one of the" three methodologies set forth therein. La. R.S. § 22:1892(B)(5) (emphasis added). In addition, Allstate's contention that La. R.S. § 22:1892(B)(5) only applies "if" an insurer "elects" to pay the actual cost and that the Complaint fails to allege Allstate elected such option, (see Doc. 18 at 7), is also belied by the fact that, as indicated above, numerous authorities show that when an insurer elects this option, it is bound by the statute to pay actual cash value. (Directive 18-R, Doc. 17-1); see also Gautreaux, 362 So.3d at 900-01; see also Durgin, 2020 WL 4018664, at *4.
Finally, Allstate argues that La. R.S. § 22:1892(B)(5) cannot be read to include sales tax and regulatory fees because "a later section of the same statute explicitly references sales tax in relation to 'fire and extended coverage policies.' " (Doc. 18 at 7-8 (emphasis in original) (citing La. R.S. § 22:1892(F)(2) (prohibiting deduction of "sales tax" under certain circumstances)).) To support this contention, Allstate relies on a doctrine of statutory construction, "Expressio Unius est Exclusio Alterius." (Id. at 8 (citing Int'l Paper Co. v. Hilton, 966 So. 2d 545, 558-59 (La. 2007) ("[T]his Court also must apply the settled doctrine of statutory construction, Expressio Unius est Exclusio Alterius, which dictates that 'when the legislature specifically enumerates a series of things, the legislature's omission of other items, which could have easily been included in the statute, is deemed intentional.' ") (internal quotations omitted)).) Thus, in Allstate's view, the Louisiana Legislature purposefully omitted sales tax from La. R.S. § 22:1892(B)(5).
Another federal district court outside of this circuit addressed a similar argument concerning a remarkably similar Florida statute. See Glover v. Liberty Mut. Ins. Co., 418 F. Supp. 3d 1161 (S.D. Fla. 2019). The Court finds that the court's response on this point in Glover is particularly instructive in illustrating why Allstate's statutory construction argument, though persuasive, falls short here. In Glover, the plaintiff brought a putative class action against two insurance companies alleging breach of contract for their "practice of refusing to pay full Actual Cash Value [ ], including state and local title transfer and vehicle registration fees, to first-party total loss insureds[.]" Id. at 1164. Because the policy at issue did not define actual cash value, the court looked to "the statutory method for determining [actual cash value]" to aid its analysis. Id. at 1168 (agreeing with the defendants that "section 626.9743(5) [of the Florida Statute] serves to furnish a definition of the undefined [actual cash value] in the Insurance Policy and describes what items are included in [actual cash value].").
Like La. R.S. § 22:1892(B)(5), the Florida statute considered in Glover (a) governed claim adjustment and settlement practices relating to motor vehicle insurance policies, and (b) required insurers that elect to pay actual cash value in the event of a total loss to comply with one of the methods listed in the statute when calculating the amount to be paid. Id. at 1166-67 (citation omitted). Unlike La. R.S. § 22:1892(B)(5), however, the Florida statute specifically provided that "sales tax" was to be included in the payment of actual cash value. Id. at 1167; see Fla. Stat. § 626.9743(5)(a) ("The insurer may elect a cash settlement based upon the actual cost to purchase a comparable motor vehicle, including sales tax . . ."). Whether actual cash value included sales tax was not in dispute; rather, the issue was whether the statute contemplated other mandatory fees associated with obtaining a vehicle as part of actual cash value. Glover, 418 F. Supp. 3d at 1164.
The defendants argued that "the 'plain' statutory language of the 'cost to purchase' a vehicle [did] not include ancillary fees, and if the Legislature had intended title and tag fees to be part of the 'actual cash value,' it would have said so." Id. at 1169. Furthermore, the defendants argued, the fact that the statute "specifically identifie[d] sales tax as part of the actual cost to purchase but d[id] not identify tag and transfer fees[ ]" only further supported their position that ancillary fees were not intended to be included. Id. The court disagreed, concluding that the defendants' construction of the statutory provision was "not supported by canons of statutory construction or the plain language of the statute itself." Id.
Turning to the plain language of the statute, the court explained that "[t]he Florida Legislature in section 626.9743(5) used the word 'including,' which like 'its more specific, arguably redundant cousin, including , but not limited to ,' 'impl[ies] that there are necessarily more relevant factors than those [the Legislature] enumerated.' " Id. at 1170 (citations omitted). Elaborating on this point, the court stated:
That "including" carries this non-exhaustive meaning in statutory construction is not novel. In White, for example, the Florida Supreme Court examined Florida Statute section 542.335, defining "legitimate business interest" as "includ[ing], but [ ] not limited to" an enumerated list of interests, and concluded "[t]he statute was never designed or intended to be an exhaustive list." White [v. Mederi Caretenders Visiting Serv. of Southeast Fla., LLC,] 226 So. 3d [774,] 780-81 [(Fla. 2017)] (alterations added). In disapproving intermediate appellate courts' contrary constructions, the Supreme Court in White noted, "because the statute does not expressly exclude any claimed interests, it seems that those courts necessarily applied the principle expression[ ] unius est exclusion[ ] alterius - 'the mention of one thing implies the exclusion of another.' " Id. at 781 (citation omitted; emphasis in original). Yet, expression[ ] unius does not apply "to a statute in which the Legislature used the word 'include.' " Id. (citation omitted; emphasis in original). "[T]he Legislature uses the word 'including' in a statute as a word of expansion, not one of limitation." Id. (alteration added; citations omitted). Consequently, "includes, but is not limited to" signifies "the Legislature intended to allow the protection of more interests than simply those set forth in the non-exhaustive list." Id. at 783.Id. at 1170.
With that reasoning in mind, the court found that the Florida statute's definition of actual cash value was non-exhaustive and thus could encompass both sales tax and ancillary fees:
Because of the well-accepted construction given a statute's use of the word "includes," the undersigned does not agree the Florida Legislature intended to exclude from "actual cost to purchase a comparable motor vehicle, including sales tax, if applicable," Fla. Stat. § 626.9743(5), ancillary fees as part of "actual cash value." The Florida Legislature understood by using "includes," it was providing a non-exhaustive definition of the term [actual cash value]. Defendants' construction of the statute is contrary to canons of statutory construction and misreads its plain text.Id. at 1170-71 (footnote omitted).
Similarly, the Court here believes that the Louisiana Legislature's use of the word "including" in subsection (b) forecloses Allstate's argument that the doctrine of statutory construction "Expressio Unius est Exclusio Alterius" shows that section 1892(B)(5) does not contemplate sales tax and regulatory fees as being part of actual cash value. La. R.S. § 22:1892(B)(5)(b). Accordingly, for the reasons stated above, the Court finds that the plain language of La. R.S. § 22:1892(B)(5) buttresses the reasonableness of Plaintiff's interpretation of actual cash value in this case.
Lastly, the Court addresses the fact that Allstate included some taxes and regulatory fees in its payment on Plaintiff's claim. According to Plaintiff, her reasonable interpretation of the Policy is further supported "by Allstate's partial payment of taxes and fees with [actual cash value] payments." (Doc. 17 at 10.) Plaintiff contends that, by including said costs in its settlement payments, Allstate acknowledges that actual cash value includes sales tax and regulatory fees:
After Plaintiff's total loss, Defendant provided Plaintiff with a summary of her total-loss settlement. (See Exhibit B to the Complaint, Doc. 1-4). In that summary, Allstate represented that Plaintiff's vehicle was a total loss and provided an (incorrect) estimate of [actual cash value]. (Id.). Allstate included in that estimate $1,970.67 for "tax," and an additional $76.50 in "Tag/Title Fees." (Id.). The fact that Allstate included some replacement costs in its estimate of [actual cash value] demonstrates that Allstate recognizes that [actual cash value] includes the costs of mandatory regulatory fees and taxes, and is not limited to the cost of damage to the property, as Allstate now suggests. (See Doc. 11-1, at p. 5).(Id. at 13.)
The problem, Plaintiff avers, "is that [Allstate] underpays the mandatory fees that are owed as part of [actual cash value,]" arbitrarily choosing which costs to include and which not to include. (Id.) Elaborating on this point, Plaintiff states:
To transfer title of a motor vehicle in Louisiana, an insured must pay the following title fees: (1) title fee of $68.50; (2) title transfer fee of $8.00; (3) a title lien fee of $10.00; and a notary fee of $15.00. ([Compl. ¶ 22, Doc. 1.]). In addition to the fees associated with transferring title, an insured must also incur the costs of registering the new vehicle, which, depending upon the weight of the vehicle, range between $10 and $28. (Id. ¶ 20). Allstate included $76.50 for tag and title fees, which amounts only to the $68.50 title fee and the $8.00 title transfer fee. Defendant failed to include any amounts for lien fees, notary fees, or any registration fees. There is no difference—in the Policy or under Louisiana law—between the title fees Allstate pays and the additional fees Allstate opts not to pay. Either [actual cash value] includes all costs to purchase a comparable vehicle, or it does not. There is nothing in Defendant's Policy language that permits Allstate to pay some regulatory fees and not others where all are mandatory elements of the cost to purchase a vehicle. Defendant's partial payment of some regulatory fees and taxes supports Plaintiff's reasonable interpretation that taxes and fees are required components of the [actual cash value] of a totaled vehicle.(Id. at 13-14 (emphasis added).)
In its reply brief, Allstate responds that "the Court should disregard Plaintiff's argument that Allstate somehow conceded that it owes all Sales Tax and Fees because it allegedly paid some amounts beyond actual cash value." (Doc. 18 at 6 (emphasis in original).) Instead, Allstate argues, "[t]he relevant question is whether Allstate had a contractual obligation to pay all Sales Tax and Fees—which is unaffected by Allstate's alleged decision to settle the claim for an amount allegedly above actual cash value." (Id. (emphasis in original) (citations omitted).)
The Court agrees with Plaintiff that Allstate's partial payment of some taxes and fees strengthens her position here. While Allstate maintains that its partial payment of sales taxes and regulatory fees was in no way mandated by the Policy, the Court can glean no other possible reason why an insurance company would choose to pay over and above what is required. To be sure, the Court does not take such as an admission or conclusive proof that actual cash value within the meaning of the Policy includes sales tax and regulatory fees. At the very least, however, Allstate's partial payment of said costs lends further support to the conclusion that Plaintiff's interpretation of actual cash value is reasonable. See, e.g., Buddington, 2023 WL 2742129, at *4 (finding that "USAA's own actions, in electing to limit their liability to [actual cash value] while voluntarily paying some, but not all, taxes and fees to [p]laintiffs further muddie[d] the waters of the [p]olicies' coverages.").
Considering the above discussion, the Court finds that Plaintiff's interpretation of the ambiguous Policy provision as mandating that sales tax and regulatory fees be included in payment of actual cash value is certainly a reasonable one. That is not to say that Allstate's interpretation is not reasonable; that issue is not before the Court. When construing the ambiguous Policy provision in favor of Plaintiff—as the Court must do here—it is clear that Plaintiff has stated a plausible claim for breach of contract based on Allstate's failure to pay the full amount of actual cash value under its Policy. See In re Katrina Canal Breaches Litig., 495 F.3d at 205-06. Accordingly, the Motion seeking dismissal of Plaintiff's breach of contract claim under Rule 12(b)(6) is denied.
C. Claims for Litigation Expenses under La. R.S. §§ 22:1892(B)(1) and 22:1973
Plaintiff additionally alleges that Allstate violated La. R.S. §§ 22:1892 and 22:1973 by failing to pay her the full actual cash value owed on her claim because Allstate knew at the time it declared her vehicle a total loss that its Policy "obligated it to pay full replacement costs of the vehicles, less depreciation." (Compl. ¶¶ 88-89, Doc. 1.) Plaintiff further alleges that "Allstate advertised on its website that it pays the [actual cash value] cost to replace the vehicle based on the cost of comparable vehicles in the insured's geographic area[,]" (id. ¶ 90 (citation to website omitted)), and—"[d]espite its advertised promise to pay [actual cash value—Allstate failed to do so] within thirty days of receipt of proof of the loss[,]" violating La. R.S. § 22:1892(B)(1), (id. ¶ 91). Hence, Plaintiff alleges, "Allstate has acted in bad faith, been stubbornly litigious, and caused Plaintiff and [putative] [c]lass [m]embers unnecessary trouble and expense by failing to comply with the clear requirements of the Policies and Louisiana law." (Id. ¶ 92.) As such, Plaintiff claims entitlement to expenses of litigation, including all attorneys' fees and costs pursuant to La. R.S. §§ 22:1892 and 22:1973. (Id. ¶ 94.)
1. Applicable Law
"Louisiana law requires insurers to pay claims 'within thirty days after receipt of satisfactory proofs of loss from the insured or any party in interest.' " Wright v. GEICO Cas. Co., No. 20-823, 2021 WL 4429190, at *6 (M.D. La. Sept. 27, 2021) (quoting La. R.S. § 22:1892(1)). "An insurer's failure to make a timely payment may prompt penalties above and beyond the required payment." Id. (citing La. R.S. § 22:1892(B)(1)). Penalties above and beyond the required payment will only be imposed if "such failure is found to be arbitrary, capricious, or without probable cause." Id. (quoting La. R.S. § 22:1892(B)(1)).
In the same vein, La. R.S. § 22:1973 places an "affirmative duty" on an insurer "to adjust claims fairly and promptly and to make a reasonable effort to settle claims with the insured or the claimant or both." Id. "Any insurer that breaches these duties is liable for damages." Id. (citing La. R.S. § 22:1973). Moreover, the insurer is subject to additional damages if it fails to make a timely payment on a claim or fails "to pay the amount of any claim due any person within sixty days after receipt of satisfactory proof of loss from the claimant when such failure is arbitrary, capricious, or without probable cause[.]" Id. (quoting La. R.S. § 22:1973(C)).
"The phrase 'arbitrary, capricious, or without probable cause' . . . describe[s] an insurer whose willful refusal of a claim is not based on a good-faith defense." First Am. Bank v. First Am. Transp. Title Ins. Co., 759 F.3d 427, 436 (5th Cir. 2014) (quoting La. Bag Co. v. Audubon Indem. Co., 2008-0453 (La. 12/2/08), 999 So. 2d 1104, 1114).
2. Analysis
Allstate's sole argument for why Plaintiff's claims for bad faith penalties and damages under La. R.S. §§ 22:1892 and 22:1973 should be dismissed is that they die with Plaintiff's breach of contract claim. (See Doc. 11-1 at 5, 15; see Doc. 18 at 10 ("Because Plaintiff's allegations do not state any breach of the Policy or underpayment of the amount owed, her statutory bad faith claims under Section 1973 and Section 1892 fail as a matter of law.").) Allstate presents no alternative argument for why said claims should be dismissed in the event this Court finds that Plaintiff has stated a plausible claim for breach of contract. As such, the Court declines to dismiss Plaintiff's claims for bad faith penalties and damages. Therefore, with respect to Plaintiff's claims under La. R.S. §§ 22:1892 and 22:1973, the Motion is denied.
IV. Conclusion
Accordingly,
IT IS ORDERED that the Motion to Dismiss (Doc. 11) filed by Defendant Allstate Property & Casualty Insurance Company is DENIED.