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Sparks v. American Family Mutual Insurance Co.

United States District Court, W.D. Washington, Tacoma

May 10, 2018

TOM SPARKS, Plaintiff,



         This matter comes before the Court on Defendant American Family Mutual Insurance Company's (“American Family”) motion for summary judgment (Dkt. 7) and Plaintiff Tom Sparks's (“Sparks”) cross-motion for summary judgment (Dkt. 9). Also before the Court is Sparks's motion for Rule 11 sanctions. Dkt. 17. The Court has considered the pleadings filed in support of and in opposition to the motions and the remainder of the file and for the reasons stated below (1) denies American Family's motion for summary judgment, (2) denies Sparks's motion for sanctions, and (3) grants in part and denies in part Sparks's motion for summary judgment.

         I. BACKGROUND

         On November 27, 2015, a fire significantly damaged Sparks's home in Bonney Lake, Washington. Dkt. 1-2 at 2. The fire also destroyed his personal property in the home. Id.

         Sparks made a claim for his covered property under the “Gold Star Homeowners Policy” he purchased through American Family, which provided dwelling, personal property, and loss of use coverage. Dkt. 8-1 at 5-6. The policy allowed Sparks to recover the “Actual Cash Value” of his damaged or destroyed personal property under the following settlement provision:

1. REPLACEMENT COST. Except for property listed in 2. or 3. below the following applies:
a. until you make the actual repair or replacement, we will pay only the actual cash value of the damaged property;
b. After you complete repair or replacement, we will pay the difference between the actual cash value of the damaged property and the cost to repair or replace such property;
c. If property is not repaired or replaced within two years after the date of loss, we will pay only the actual cash value of the damaged property.

Dkt. 8-1 at 30. The policy defines “Actual Cash Value” as follows: “Actual Cash Value means the amount it costs to repair or replace property with property of like kind and quality less depreciation for physical deterioration and obsolescence.” Dkt. 8-1 at 3.

         The policy also requires that, after a loss, claimants submit to American Family “a detailed inventory of the damaged property, showing the quantities, when and where acquired, original cost, current value and the amount of loss, ” attaching “to the inventory bills, receipts and related documents that substantiate all amounts.” Dkt. 8-1 at 13.

         A public adjuster compiled an inventory of personal property on behalf of Sparks and transmitted the inventory to American Family. Dkt. 10-1 at 34-75. The inventory included the room in which the personal property was located; a description of the property including brand, type, and model if known; the source or URL of the website from which the items were available or purchased; prices; taxes and shipping; and miscellaneous notes that sometimes detailed information such as whether an item was “new, ” “hand made, ” “no longer made.” Id. The inventory estimated the replacement cost total of Sparks's destroyed property at $108, 783.23. Id. at 34.

         On July 6, 2016, American Family responded to the public adjuster and confirmed that it had received the inventory. Dkt. 10-1 at 77. American Family also noted that the inventory did not reference the age of the listed property. Id. therefore, American Family requested that the adjuster “[p]lease add an additional column to [the] worksheet and provide the age of each item.” Id.

         On January 16, 2017, American Family returned its own estimate of Plaintiff's loss. Dkt. 10-2. American Family estimated the replacement cost value as $89, 452.90. Id. at 2. American Family also estimated that Sparks's personal property had sustained $52, 111.75 in depreciation, resulting in an estimated actual cash value of $36, 007.70. Id. American Family's inventory included a description of each item, unit prices, estimated replacement cost, estimated depreciation, and estimated actual cash value. Id. at 7-137. The depreciation estimate also included a notation of the age of the covered item and a generic estimate of the items' expected lifespan. Id. Accordingly, a sample of American Family's estimate appears as follows:

         (Table Omitted.)

         Dkt. 10-2 at 137.

         Notably, a review of the estimate shows that American Family's depreciation estimate was obtained simply by dividing the item's price by the number of years for its estimated lifespan, multiplying that number by the item's estimated age, and then subtracting that number from the item's price. The formula can be expressed as Replacement Cost - Age x (Replacement Cost / Estimated Lifespan) = Actual Cash Value. For instance, in regards to Sparks's Werner 24' Aluminum Extension Ladder, the total replacement cost estimate of $172.99, divided by the estimated lifespan of 20 years, yields a value of $8.6495. Because the ladder was only one year old, the price of $172.99 less the total of $8.6495 multiplied by one year, equals American Family's estimated actual cash value of $164.3405. Similarly, the estimated total replacement cost of Sparks's assorted potting containers ($81.60) divided by their expected lifespan (10 years), multiplied by the containers' age (4 years), and then subtracted from the estimated replacement cost value ($81.60), yields American Family's estimated actual cash value ($48.96).

         On January 17, 2017, the public adjuster responded via email to American Family's estimate. Dkt. 10-3 at 3-4. The public adjuster noted that there was a “significant depreciation taken on a number of items, including 100% depreciation taken on several items.” Id. Accordingly, the public adjuster requested that American Family explain the formula it used to calculate depreciation. Id. at 4.

         On January 20, 2017, American Family responded via email, stating that its depreciation calculations were “based on [the items'] age over their expected lifespan.” Dkt. 10-3 at 2-3. Additionally, American Family's email stated that in response to the public adjuster's email they had “changed the depreciation from 100% to 90% to give some value to those” items that American Family had deemed worthless based on their age. Id. at 3. On February 8, 2017, the adjuster replied by email to state, “I don't see anywhere in your policy that states age is a consideration in determining depreciation or Actual Cash Value of the personal property.” Id. at 2. The adjuster also noted that, in a case before the Western District of Washington, the court had recently found that American Family's use of age to calculate depreciation was improper. Id. Accordingly, the adjuster requested that American Family confirm whether its depreciation calculation was “solely age dependent.” Id.

         On April 26, 2017, the public adjuster again responded to American Family's communications. Dkt. 10-3 at 7-8. The public adjuster stated that American Family had calculated “an unreasonably high depreciation amount” and stated that American Family's use of age as the “sole consideration in American Family's application of depreciation . . . runs contrary to the clear and unambiguous language in the policy that depreciation can be determined by physical deterioration and obsolescence.” Id. at 7 (emphasis added).

         By December 21, 2017, American Family had not changed its position regarding its depreciation calculations, so Sparks commenced this action by filing his complaint in Pierce County Superior Court. Dkt. 1-2. Sparks alleges that American Family's depreciation calculation constitutes (1) a breach of the applicable policy's terms, (2) bad faith, and (3) a violation of Washington State's Consumer Protection Act (“CPA”). Id. On January 17, 2018, American Family removed the case to federal court pursuant to 28 U.S.C. § 1332 and 28 U.S.C. § 1441. Dkt. 1.

         On February 7, 2018, American Family filed its present motion for summary judgment. Dkt. 7. On February 26, 2018, Sparks filed his response and the present cross-motion for summary judgment. Dkt. 9.

         On March 2, 2018, American Family replied on its motion for summary judgment and filed an answer to the complaint. Dkts. 11, 12. On March 19, 2018, American Family filed its response to Sparks's cross-motion for summary judgment. Dkt. ...

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