United States District Court, M.D. Tennessee, Nashville Division
GREGORY J. LAMMERT, JAMIE LAMMERT, LARRY REASONS, and SUSAN REASONS, Plaintiffs,
AUTO-OWNERS MUTUAL INSURANCE COMPANY, Defendant.
MEMORANDUM OPINION AND ORDER
WAVERLY D. CRENSHAW, JR., CHIEF UNITED STATES DISTRICT JUDGE
litigation arose out of Auto-Owners Insurance Company's
practice of depreciating portions of labor cost when
determining replacement costs under actual cash value
homeowner and dwelling insurance policies. These include
policies purchased by Plaintiffs Gregory and Jamie Lammert,
and Larry and Susan Reasons.
debatable propriety of that practice led the Court to deny
without prejudice Plaintiffs' Motion to Certify Class
(Doc. No. 32) and Auto-Owners' Motion to Dismiss (Doc.
No. 35) in favor of certifying the following question to the
Tennessee Supreme Court:
Under Tennessee law, may an insurer in making an actual cash
value payment withhold a portion of repair labor as
depreciation when the policy (1) defines actual cash value as
“the cost to replace damaged property with new property
of similar quality and features reduced by the amount of
depreciation applicable to the damaged property immediately
prior to the loss, ” or (2) states that “actual
cash value includes a deduction for depreciation”?
Lammert v. Auto-Owners (Mut.) Ins. Co., 286
F.Supp.3d 919, 927 (M.D. Tenn. 2017). That court graciously
accepted the request, and answered the question: “no,
the insurance company cannot withhold a portion of the labor
costs as depreciation under either [the Lammert's or the
Reasons'] policy.” Lammert v. Auto-Owners
(Mut.) Ins. Co., 572 S.W.3d 170, 179 (Tenn. 2019).
time the Court certified the question, the Amended Complaint
contained a straightforward breach of contract claim that
sought compensatory and punitive damages, plus declaratory
and injunctive relief. They also putatively represented a
class containing all other similarly situated insureds
“who received ‘actual cash value' payments
from Auto-Owners for direct physical loss to a dwelling or
other structure located in Tennessee in which the cost of
repair or replacement labor was depreciated.” (Doc. No.
24, Amended Complaint ¶ 90).
the favorable ruling from the Tennessee Supreme Court,
Plaintiffs again amended their complaint. The Second Amended
Complaint retained the breach of contract claim and request
for punitive damages, but also added a statutory bad faith
claim. It also arguably expanded the proposed class period.
before the Court is Auto-Owners' fully-briefed Motion to
Dismiss and to Strike Class Allegations (Doc. Nos. 85, 86,
117 & 120). In the motion, Auto-Owners argues that
“Plaintiffs' bad faith, fraudulent concealment, and
punitive damages claims have failed to state causes of action
for which relief can be granted; and that Plaintiffs'
class allegations should be stricken to the extent they
relate to the bad faith claim and to the extent Plaintiffs
seek to define a class period that extends beyond the
one-year contractual limitations period contained in
Auto-Owners' policies.” (Doc. No. 86 at 1). Leaving
aside the alleged procedural deficiencies claimed by
Plaintiffs, the Court agrees with many of the points raised
by Auto-Owners, but its request for dismissal or to strike is
survive a motion to dismiss, a claim must be plausible after
the complaint is construed in plaintiff's favor and the
well-pleaded factional allegations are accepted as true.
Ohio Pub. Employees Ret. Sys. v. Fed. Home Loan Mortg.
Corp., 830 F.3d 376, 383 (6th Cir. 2016). “A claim
has facial plausibility when the plaintiff pleads factual
content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct
alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S.
544, 570 (2007)). In order to determine whether a claim is
plausible, however, there must be a claim to examine.
operative Second Amended Complaint does not contain a claim
for “fraudulent concealment.” Nowhere in the
complaint is that phrase even mentioned. The word
“fraud” and the derivatives thereof only appear
twice in a single paragraph where Plaintiffs assert that the
actions Auto-Owners took, or did not take, entitle them and
the class members to punitive damages. (Doc. No. 83, Second
Amended Complaint ¶ 45).
true that the Second Amended Complaint contains allegations
that Auto-Owners concealed from Plaintiffs and the putative
class members its practice of depreciating labor cost, such
as by manipulating the settings in
Xactimate®. It is also true that the Second Amended
Complaint suggests this concealment could not have harmed the
named Plaintiffs because they were informed of the labor
depreciation practice in such a fashion that they could file
suit within the one-year limitations period set forth in
their policies. And it is true that “as goes the claim
of the named plaintiff, so goes the claim of the
class.” Sprague v. Gen. Motors Corp., 133 F.3d
388, 399 (6th Cir. 1998). But none of this changes that the
Court cannot dismiss a claim that hasn't been pled.
Govea v. Monrovia Unified Sch. Dist., No.
CV1703093ABMRWX, 2017 WL 10526059, at *2 (C.D. Cal. July 7,
2017) (noting that “as defense counsel surely knows,
the Court cannot dismiss claims that do not exist” even
where the request to dismiss is made “in an apparent
effort to preemptively dismiss claims that might be brought
at some later time”); Chimenti v. Pa. Dept' of
Corr., No. CV 15-3333, 2016 WL 1125580, at *15 (E.D. Pa.
Mar. 21, 2016) (“[W]e cannot dismiss a claim that does
not exist[.]”). In so ruling, the Court recognizes Rule
23's requirement that a court decide whether to certify a
class “[a]t an early practicable time after a person
sues or is sued as a class representative, ”
Fed.R.Civ.P. 23(c)(1), but it is impossible for the Court to
know at this point whether Plaintiffs claims are typical and
whether the insured they seek to represent are similarly
situated: maybe there are a number of putative class members
claims barred by the statute of limitations, maybe not. This
is better addressed in the context of a motion to certify
class under Rule 23 after discovery has been conducted.
See Bartels v. Hudson Ins. Co., No. CIV. A. 05-3890
JLL, 2008 WL 5070660, at *2 (D.N.J. Nov. 24, 2008)
(“the issue of whether or not [plaintiff] satisfies the
typicality prong of the class certification analysis [while]
interesting . . . it is not directly relevant on a motion to
dismiss”); Morris v. City of Charlottesville,
No. CIV. A. 300CV00029, 2001 WL 743771, at *7 (W.D. Va. July
3, 2001) (refusing to decide defendants' 12(b)(6) motion
as premature because it was “related to the issue of
class certification, ” and court would “not
decide the certification issue until relevant discovery is
assertion that Plaintiffs may seek to rely on a theory of
fraudulent concealment to toll a statute of limitations
defense only underscores the prematurity of its motion. An
answer has yet to be filed, a statute of limitations defense
has not been interposed, and plaintiffs ordinarily are not
required to plead around an affirmative defense.
Nat'l Credit Union Admin. Bd. v. Jurcevic, 867
F.3d 616, 624 (6th Cir. 2017); Schmidt v. Skolas,
770 F.3d 241, 252 (3d Cir. 2014); see also,
Pfeil v. State St. Bank & Trust Co., 671 F.3d
585, 599 (6th Cir.2012) (“Courts generally cannot grant
motions to dismiss on the basis of an affirmative defense
unless the plaintiff has anticipated the defense and
explicitly addressed it in the
pleadings.”). Moreover, “affirmative defenses
“frequently turn on facts not before the court at [the
pleading] stage.” Hyson USA, Inc. v. Hyson 2U,
Ltd., 821 F.3d 935, 939 (7th Cir. 2016) (bracket in
original) (citation omitted).
Auto-Owners argues that the answer provided by the Tennessee
Supreme Court to the certified question disposes of
Plaintiffs' bad faith claim and request for punitive
damages. It does not, at least not entirely. What it does is
make clear that the issue of whether a portion of the cost of
labor to repair damaged property could be deducted from the
total replacement cost when calculating actual cash value
was, to-then, an open question in Tennessee and that cases in
other jurisdictions were split on the issue. This Court's
underlying opinion was the same - Tennessee law was unsettled
and, “the answer to the question of whether labor costs
can be depreciated has resulted in decidedly mixed results in
other jurisdictions.” 286 F.Supp.3d at 926. Indeed, it
was for this reason that the Court chose to certify the
issue, and it was for this reason that the Tennessee Supreme
Court found both parties' interpretation of the policy
language “plausible.” 572 S.W.3d at 178.
both parties' position was “plausible, ” it
necessarily follows that a bad faith claim or punitive
damages request based upon Auto-Owners' refusal to pay
full labor costs is “implausible” for purposes of
Rule 12(b)(6), Iqbal, and Twombly. After
all, bad faith requires a plaintiff “to demonstrate
there was no legitimate grounds for disagreement about
coverage, ” Fulton-Bellows, LLC v. Fed. Ins.
Co., 662 F.Supp.2d 976, 996 (E.D. Tenn. 2009), and
punitive damages are generally unavailable in breach of
contract cases, except in the most “egregious” of
cases. Rogers v. Louisville Land Co., 367 S.W.3d
196, 212 n.14 (Tenn. 2012). As a consequence, the Tennessee
Supreme Court's opinion ...