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Lundquist v. First National Insurance Company of America

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

June 13, 2018

CAMERON LUNDQUIST, an individual, on behalf of himself and all others similarly situated, Plaintiff,
FIRST NATIONAL INSURANCE COMPANY OF AMERICA, a New Hampshire Corporation, Defendant.



         This matter comes before the Court on the Defendant First National Insurance Company of America's (“First National”) Motion to Dismiss Plaintiff's Complaint pursuant to Fed.R.Civ.P. 12 (b)(6). Dkt. 25. Oral argument has been requested, but is unnecessary to decide the motion. The Court has considered the pleadings filed in support of and in opposition to the motion and the file herein.

         In this putative class action, the Plaintiff asserts that First National's practice of using unexplained and unjustified condition adjustments to comparable vehicles when valuing a total loss claim for a vehicle, violates the Washington Administrative Code (“WAC”), and so constitutes: (1) breach of contract, (2) breach of the implied covenant of good faith and fair dealing, and (3) violation of Washington's Consumer Protection Act, RCW 19.86., et seq. (“CPA”). Dkt. 1. First National now moves for dismissal of the complaint for failure to state a claim under Fed.R.Civ.P. 12 (b)(6). Dkt. 25. For the reasons provided below, the motion (Dkt. 25) should be denied.


         When ruling on a Rule 12 (b)(6) motion to dismiss, “courts must consider the complaint in its entirety, as well as other sources, . . . in particular, documents incorporated into the complaint by reference, and matters of which a court may take judicial notice.” Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322 (2007). Accordingly, the following facts are taken from the Complaint, or from documents referenced therein, the authenticity of which is not in dispute.

         In 2017, Plaintiff Cameron Lundquist owned a 1998 Dodge Ram 2500 Quad Cab that was in an accident that was so severe that the truck was considered a total loss. Dkt. 1, at 6. At the time, Plaintiff had a vehicle insurance contract with First National, which provided that First National's limit of liability for a total loss was lowest of either the “actual cash value” or the amount necessary to repair or replace the vehicle. Dkt. 25-4, at 22. (Parties do not dispute that the “actual cash value” was the lower than the cost of repair or replacement.) The insurance contract further provided that “[a]n adjustment for depreciation and physical condition may be made based upon the physical condition and wear and tear of the property . . . at the time of the loss.” Dkt. 25-4, at 22.

         According to the Complaint, “[t]o calculate its offer and payment” on a total loss, First National obtains a Market Valuation Report (“report”) “from a third-party company called CCC Information Services, Inc. (“CCC”).” Dkt. 1, at 5. The Complaint alleges that “First National instructs CCC as to what specific data to include in the report as the basis for the valuation, including whether to include condition adjustments to comparable vehicles.” Id., at 6. “These reports purport to contain values for comparable used vehicles recently sold or for sale in the geographic area of the insured.” Id., at 5. The report also calculates a “purported valuation for the loss vehicle.” Id., at 5-6. The Complaint asserts that while the reports reduce the estimated value of the comparable vehicles for “condition adjustments, ” the reports fail to “itemize or explain” the basis for these adjustments. Id., at 6. Further, the Complaint alleges that “even though each comparable vehicle has unique characteristics, the reports reduce the value of multiple comparable vehicles by the same amount . . . without any itemization or explanation for the amount, ” thereby artificially reducing the valuation of the loss vehicle. Id., at 6.

         After Plaintiff made a claim for the total loss of his truck, First National obtained a report from CCC, and based an offer of settlement of $18, 406.12 on the valuation report. Dkt. 1, at 6. Plaintiff accepted the offer. Id.

         The “Comparable Vehicles” portion of the report lists three comparable trucks: 1998 Dodge Ram 2500 Quad Cab with 127, 664 miles, a 1999 Dodge Ram 2500 Quad Cab with 130, 017 miles, and a 1999 Dodge Ram 3500 Quad Cab with 201, 150 miles; each listed for sale with car dealers. Dkt. 25-2, at 9-10. This section of the report contains a line “Condition, ” that reduces the value of all three comparable vehicles by $936. Dkt. 25-2, at 9-10. This line includes a footnote that provides: “[t]he Condition Adjustment sets that comparable vehicle to Normal Wear condition which the loss vehicle is also compared to in the Vehicle Condition Section.” Dkt. 25-2, at 10. The “Vehicle Condition” portion of the report lists the following conditions: seats, carpets, dashboard, headliner, sheet metal, trim, paint, glass, engine, transmission, front tires, and rear tires. Dkt. 25-2, at 8. Plaintiff's truck was given an upward adjustment as being in “dealer ready” condition for the dashboard and engine (in the amount of $51 each, for a total of $102) and was listed as “normal wear” for the other conditions. Id. A note on the side of this page states:

First National Insurance Company of America uses condition inspection guidelines to determine the condition of key components of the loss vehicle prior to the loss. The guidelines describe physical characteristics for these key components, for the condition selected based upon age. Inspection Notes reflect observations from the appraiser regarding the loss vehicle's condition.
CCC makes dollar adjustments that reflect the impact the reported condition has on the value of the loss vehicle as compared to Normal Wear condition. These dollar adjustments are based upon interviews with dealerships across the United States.

Id. The Complaint alleges that by reducing the comparable vehicles by $936, without regard to any of the individual characteristics of those comparable vehicles (and without any explanation), First National's settlement offer was arbitrary, unjustified, and resulted in an underpayment to Plaintiff. Dkt. 1, at 6-7. The Complaint maintains that First National is violating provisions of the Washington Administrative Code (“WAC”) which regulate the “Methods and Standards of Practice for Settlement of Total Loss Vehicle Claims, ” WAC 284-30-391. Id. Based on alleged violations of the WAC, specifically WAC 284-30-391 (4)(b) and (5)(d), the Complaint makes claims for breach of contract, breach of the duty of good faith and fair dealing, and for violation of the CPA. Id. The Complaint seeks damages, declaratory and injunctive relief. Id.

         In the pending motion to dismiss, First National argues that it complied with all applicable provisions of WAC, particularly WAC 284-30-391 (4)(b) and (5)(d). Dkt. 25. It asserts that Subsection (4)(b) does not impose any disclosure obligation and Subsection (5)(b) does not apply to comparable vehicles. Id. It argues that even if subsection (4)(b) did require disclosure and subsection (5)(d) did apply to condition adjustments made to comparable vehicles, First National fully complied with the regulations. Id. First National asserts all Plaintiff's claims rise and fall on its compliance with WAC 284-30-391, and so, the Complaint should be dismissed. Id.

         Plaintiff opposes the motion, and argues that WAC 284-30-391 prohibits un-itemized and unexplained condition adjustments, whether to the loss vehicle or a comparable vehicle. Dkt. 26. He points out that the valuation of the loss vehicle is found by averaging the actual cash values of the comparable vehicles. Id. Accordingly, whether an insurer makes a condition adjustment to the loss vehicle or a comparable vehicle, the adjustment results in an “addition or deduction from the actual cash value” and so must be explained and itemized under Subsection 5 (d). Id. Plaintiff asserts that First National did not do so here. Id. Plaintiff also argues that Subsection (4)(b) requires that when an insurer relies on comparable vehicles listed for sale, as it has here, the ...

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