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Allstate Insurance Co. v. Pennant

United States District Court, W.D. Washington

April 27, 2018

ALLSTATE INSURANCE COMPANY, an insurance company, Plaintiff,
v.
RICHARD PENNANT and SANDIE PENNANT, husband and wife, Defendants.

          ORDER GRANTING SUMMARY JUDGMENT RE ACTUAL CASH VALUE

          Ronald B. Leighton, United States District Judge.

         THIS MATTER is before the Court on Plaintiff Allstate's Motion for Summary Judgment. [Dkt. # 14]. In March 2016, Defendants Richard and Sandie Pennant purchased from Allstate an Actual Cash Value (AVC) homeowner's insurance policy for their rental Property[1] in Hoquiam, Washington. The policy's limit of liability is $144, 281. The Pennants had tried to purchase a “replacement cost” policy, but Allstate would not issue such a policy for this specific property. The Pennants own several other properties similarly covered by Allstate ACV policies.

         On November 24, 2016, an electrical fire caused significant damage to the Property. The Pennants submitted a fire loss claim the next day. Allstate accepted coverage and processed the claim. The Property's value was submitted to appraisal, and that process returned two possible valuations: $158, 288.23 for “replacement cost less depreciation, ” and $64, 500 for “fair market value” at the time of the loss. The Pennants claim they are entitled to the higher number under their policy. Allstate seeks judgment as a matter of law that the Pennants are entitled to only $58, 500[2], what it claims is the fair market value of the property, less the Pennants' $500 deductible.

         The ACV policy provides coverage for the smallest of three possible scenarios: (1) the actual cash value of the damaged, destroyed or stolen property at the time of loss; (2) the amount necessary to repair or replace the damaged, destroyed or stolen property with other of the like kind and quality; or (3) the policy's limit of liability. [Dkt. # 14, p. 3].

         The only issue is the meaning of “actual cash value” under the policy.

         I. LEGAL STANDARD

         Summary judgment is proper “if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(c). In determining whether an issue of fact exists, the Court must view all evidence in the light most favorable to the nonmoving party and draw all reasonable inferences in that party's favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-50 (1986); Bagdadi v. Nazar, 84 F.3d 1194, 1197 (9th Cir. 1996). A genuine issue of material fact exists where there is sufficient evidence for a reasonable factfinder to find for the nonmoving party. Anderson, 477 U.S. at 248. The inquiry is “whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.” Id. At 251-52. The moving party bears the initial burden of showing that there is no evidence which supports an element essential to the nonmovant's claim. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). Once the movant has met this burden, the nonmoving party then must show that there is a genuine issue for trial. Anderson, 477 U.S. at 250. If the nonmoving party fails to establish the existence of a genuine issue of material fact, “the moving party is entitled to judgment as a matter of law.” Celotex, 477 U.S. at 323-24.

         II. ANALYSIS

         The Court's task in interpreting an insurance contract is well-settled: it looks to the whole contract, giving it a fair, reasonable, and sensible construction. Holden v. Farmers Ins. Co., 169 Wn.2d 750, 755-56 (2010). Washington law provides that an “[i]nsurance contract should be given a practical and reasonable, rather than a literal, interpretation, and should not be given a construction which would lead to an absurd conclusion or render the policy nonsensical or ineffective.” Wash. Pub. Util. Dists.' Utils. Sys. v. Pub. Util. Dist. No. 1 of Clallam Cnty., 112 Wn.2d 1, 11 (1989). Put another way, a court “may not give an insurance contract a strained or forced construction which would lead to an extension or restriction of the policy beyond what is fairly within its terms.” McAllister v. Agora Syndicate, Inc., 103 Wn.App. 106, 109 (2000) (quoting Tewell, Thorpe, & Findlay, Inc. v. Cont'l Cas. Co., 64 Wn.App. 571, 576 (1992)). The rule that ambiguous contract language is to be construed in favor of the insured and most strongly against the insurer should not be permitted to have the effect of making a plain agreement ambiguous. McAllister, 103 Wn.App. At 110 (citing West Am. Ins. Co. v. State Farm Mut. Auto. Ins. Co., 80 Wn.2d 38, 44 (1971).

         A. To define actual cash value as anything but fair market value undermines the force and effect of the policy.

         The Pennants argue that because the ACV policy language includes a reference to “deprecation” it necessarily follows that “actual cash value” means “replacement cost less depreciation.” But the policy provides only that depreciation may play a role, not that it necessarily will:

         Loss to property . . . will be settled on an actual cash value basis. This means there may be a deduction for depreciation. Payment will not exceed the smallest of:

a) the actual cash value of the damaged, destroyed or stolen property at the time of the loss;
b) the amount necessary to repair or replace the damaged, destroyed or stolen property with other of like ...

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