1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA
9 Brendan Dahl, No. CV-23-08584-PCT-DLR
10 Plaintiff, ORDER
11 v.
12 American Bankers Insurance Company of Florida, 13 Defendant. 14 15 16 Before the Court is Defendant American Bankers Insurance Company of Florida’s 17 motion to deny class certification. (Doc. 14.) The motion is fully briefed, and the Court 18 heard oral arguments from the parties on December 10, 2024. For the following reasons, 19 the Court denies the motion. 20 I. Background1 21 This dispute arises from actual cash value (“ACV”) payments American Bankers, 22 an insurer, made to Plaintiff Brendan Dahl, an insured, and a putative class of similarly 23 situated insureds to compensate for losses to property covered by their policies. Dahl 24 alleges that American Bankers calculated its ACV payments to him and the putative class 25 members using a “replacement cost less depreciation” (“RCLD”) methodology.2 (Doc. 11 26 1 This background is derived from the First Amended Complaint (“FAC”), which 27 the Court accepts as true for the purposes of this motion. 2 American Bankers uses a commercially available software called Xactimate to 28 estimate the ACV. (Doc. 11 ¶ 46.) Xactimate software exclusively uses the RCLD methodology to calculate the ACV of property damage. (Id. ¶ 48.) 1 ¶ 43.) When American Bankers calculated those ACV benefits, it “withheld costs for both 2 materials and future repair labor . . . as depreciation.” (Id. ¶ 53.) Dahl alleges that, in so 3 doing, American Bankers breached the policy by paying him less than he was entitled to 4 receive. (Id. ¶ 61.) 5 Dahl’s policy, which he maintains is “materially identical” to the policies of the 6 putative class members, contains an appraisal provision. It provides that “[i]f settlement 7 cannot be agreed to, then both [the insured] and [American Bankers] have the right to select 8 a competent appraiser within 20 days from the date of disagreement.” (Doc. 8-1 at 6). The 9 policy also contains a no-action provision that states that no action shall apply against 10 American Bankers unless “[t]here has been full compliance with all the terms of this 11 policy[.]” (Id. at 18.) American Bankers attempted to invoke its right to appraisal after Dahl 12 filed suit. (Doc. 11 ¶ 68.) Dahl alleges that the invocation was untimely and American 13 Bankers therefore lost its right to appraisal as to his claim.3 (Id. ¶ 70.) Dahl does not include 14 any class-wide allegation about the appraisal provision’s applicability other than his 15 allegation on behalf of the class that all “conditions precedent to coverage had occurred or 16 been performed.” (Id. ¶ 33.) 17 American Bankers filed a motion to dismiss the case for failure to state a claim (Doc. 18 13) contemporaneously with the motion at issue here. The Court denied the motion to 19 dismiss. (Doc. 32.) It found that Dahl has plausibly stated a claim for breach of contract 20 because, in Walker v. Auto-Owners Insurance Co., 517 P.3d 617 (Ariz. 2022), the Arizona 21 Supreme Court held that an insurer may not depreciate the cost of future repair labor when 22 determining ACV using the RCLD methodology. (Id. at 3–4.) 23 II. Legal Standard 24 “[D]ismissal of class allegations at the pleading stage should be done
25 3 No party directs the Court to any language in the policy that defines “date of disagreement,” but the parties seem to agree that, at least as to individual claims, it is the 26 date that the insured notifies American Bankers that it does not agree with American Bankers’s valuation of the loss. Thus, American Bankers asserts that the policy contains 27 an implicit requirement that the insured notify American Bankers of its dispute. Here, the FAC’s allegations state that American Bankers executed a waiver of service on January 8, 28 2024 (Doc. 7) and attempted to invoke the appraisal provision more than 20 days later, on February 14, 2024 (Doc. 11 ¶ 70). 1 rarely . . . [T]he better course is to deny such a motion because the shape and form of a 2 class action evolves only through the process of discovery.” In re Wal-Mart Stores, Inc. 3 Wage & Hour Litig., 505 F. Supp. 2d 609, 615 (N.D. Cal. 2007) (quotations and citation 4 omitted). Still, American Bankers’s preemptive motion to deny class certification is 5 procedurally permissible. Vinole v. Countrywide Home Loans, Inc., 571 F.3d 935, 939 (9th 6 Cir. 2009); Lawson v. Grubhub, Inc., 13 F.4th 908, 913 (9th Cir. 2021) (“Rule 23 allows a 7 preemptive motion by a defendant to deny class certification.”).4 At the pleadings stage, 8 such a motion is considered the functional equivalent of a motion to strike class allegations. 9 Bates v. Bankers Life and Cas. Co., 848 F.3d 1236, 1238 (9th Cir. 2017). 10 The burden varies based on the motion’s timing . . . When a motion to deny class certification is brought early in a case— 11 before discovery is substantially complete—a Rule 12(b)(6)-type standard is employed, so the defendant must 12 demonstrate that it would be impossible for the plaintiff to certify a class based on the allegations set forth in the 13 complaint. 14 Otto v. Abbott Lab’ys, Inc., No. 5:12-CV-01411-SVW-DTB, 2015 WL 12776591, at *2 15 (C.D. Cal. Jan. 28, 2015) (citation omitted). 16 III. Analysis 17 American Bankers asserts that the dispute here is one of valuation, falling squarely 18 within the policy’s appraisal provision, and when a putative class includes a significant 19 number of members who have agreed to appraise their claims, certification should be 20 denied. (Docs. 14 at 1–2; 26 at 3.) Dahl responds that the appraisal provision is inapplicable 21 to the putative class members’ claims because this is not a valuation dispute but rather a 22 legal question that the Court, not an appraiser, must decide. (Doc. 18 at 3.) This is a close 23 question. At the pleadings stage, the Court cannot say it will be impossible for Dahl to 24 demonstrate that the appraisal provision does not apply to the class members’ disputes. 25 In Lawson¸ the Ninth Circuit held that a putative class cannot be certified when that 26 class includes a significant number of members who have agreed to arbitrate their claims. 27 13 F.4th 908, 913 (9th Cir. 221). “In Arizona, appraisal provisions are analogous to
28 4 The Court has considered the supplemental authorities submitted by the parties (Docs. 27 & 29) and cases cited to the Court during oral argument. 1 arbitration provisions and are governed by arbitration principles.” Casitas Del Sol Condo. 2 Owners Ass’n v. State Farm Fire & Cas. Co., No. CV-22-00685-PHX-DGC, 2022 WL 3 3082528, at *2 (D. Ariz. Aug. 2, 2022). Courts are limited in their power to refuse to 4 compel appraisal. Id. Thus, it follows that a putative class cannot be certified where a 5 significant number of members are required to submit their disputes to an appraiser. 6 But the question remains whether this dispute is one for appraisal. This question 7 hinges on whether the dispute is one about valuation or one about coverage. In Enger v. 8 Allstate Insurance Co., 407 F. App’x 191 (9th Cir. 2010), an unpublished decision from 9 the Ninth Circuit, dismissal of the plaintiff’s suit against her insurer was appropriate 10 because the plaintiff failed to submit the claim to appraisal after her insurer invoked the 11 provision. 407 F. App’x at 192–93. The appraisal provision stated that, if the parties to the 12 insurance contract failed to agree on the ACV of the loss, either party could invoke the 13 provision. See id. at 193.
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1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA
9 Brendan Dahl, No. CV-23-08584-PCT-DLR
10 Plaintiff, ORDER
11 v.
12 American Bankers Insurance Company of Florida, 13 Defendant. 14 15 16 Before the Court is Defendant American Bankers Insurance Company of Florida’s 17 motion to deny class certification. (Doc. 14.) The motion is fully briefed, and the Court 18 heard oral arguments from the parties on December 10, 2024. For the following reasons, 19 the Court denies the motion. 20 I. Background1 21 This dispute arises from actual cash value (“ACV”) payments American Bankers, 22 an insurer, made to Plaintiff Brendan Dahl, an insured, and a putative class of similarly 23 situated insureds to compensate for losses to property covered by their policies. Dahl 24 alleges that American Bankers calculated its ACV payments to him and the putative class 25 members using a “replacement cost less depreciation” (“RCLD”) methodology.2 (Doc. 11 26 1 This background is derived from the First Amended Complaint (“FAC”), which 27 the Court accepts as true for the purposes of this motion. 2 American Bankers uses a commercially available software called Xactimate to 28 estimate the ACV. (Doc. 11 ¶ 46.) Xactimate software exclusively uses the RCLD methodology to calculate the ACV of property damage. (Id. ¶ 48.) 1 ¶ 43.) When American Bankers calculated those ACV benefits, it “withheld costs for both 2 materials and future repair labor . . . as depreciation.” (Id. ¶ 53.) Dahl alleges that, in so 3 doing, American Bankers breached the policy by paying him less than he was entitled to 4 receive. (Id. ¶ 61.) 5 Dahl’s policy, which he maintains is “materially identical” to the policies of the 6 putative class members, contains an appraisal provision. It provides that “[i]f settlement 7 cannot be agreed to, then both [the insured] and [American Bankers] have the right to select 8 a competent appraiser within 20 days from the date of disagreement.” (Doc. 8-1 at 6). The 9 policy also contains a no-action provision that states that no action shall apply against 10 American Bankers unless “[t]here has been full compliance with all the terms of this 11 policy[.]” (Id. at 18.) American Bankers attempted to invoke its right to appraisal after Dahl 12 filed suit. (Doc. 11 ¶ 68.) Dahl alleges that the invocation was untimely and American 13 Bankers therefore lost its right to appraisal as to his claim.3 (Id. ¶ 70.) Dahl does not include 14 any class-wide allegation about the appraisal provision’s applicability other than his 15 allegation on behalf of the class that all “conditions precedent to coverage had occurred or 16 been performed.” (Id. ¶ 33.) 17 American Bankers filed a motion to dismiss the case for failure to state a claim (Doc. 18 13) contemporaneously with the motion at issue here. The Court denied the motion to 19 dismiss. (Doc. 32.) It found that Dahl has plausibly stated a claim for breach of contract 20 because, in Walker v. Auto-Owners Insurance Co., 517 P.3d 617 (Ariz. 2022), the Arizona 21 Supreme Court held that an insurer may not depreciate the cost of future repair labor when 22 determining ACV using the RCLD methodology. (Id. at 3–4.) 23 II. Legal Standard 24 “[D]ismissal of class allegations at the pleading stage should be done
25 3 No party directs the Court to any language in the policy that defines “date of disagreement,” but the parties seem to agree that, at least as to individual claims, it is the 26 date that the insured notifies American Bankers that it does not agree with American Bankers’s valuation of the loss. Thus, American Bankers asserts that the policy contains 27 an implicit requirement that the insured notify American Bankers of its dispute. Here, the FAC’s allegations state that American Bankers executed a waiver of service on January 8, 28 2024 (Doc. 7) and attempted to invoke the appraisal provision more than 20 days later, on February 14, 2024 (Doc. 11 ¶ 70). 1 rarely . . . [T]he better course is to deny such a motion because the shape and form of a 2 class action evolves only through the process of discovery.” In re Wal-Mart Stores, Inc. 3 Wage & Hour Litig., 505 F. Supp. 2d 609, 615 (N.D. Cal. 2007) (quotations and citation 4 omitted). Still, American Bankers’s preemptive motion to deny class certification is 5 procedurally permissible. Vinole v. Countrywide Home Loans, Inc., 571 F.3d 935, 939 (9th 6 Cir. 2009); Lawson v. Grubhub, Inc., 13 F.4th 908, 913 (9th Cir. 2021) (“Rule 23 allows a 7 preemptive motion by a defendant to deny class certification.”).4 At the pleadings stage, 8 such a motion is considered the functional equivalent of a motion to strike class allegations. 9 Bates v. Bankers Life and Cas. Co., 848 F.3d 1236, 1238 (9th Cir. 2017). 10 The burden varies based on the motion’s timing . . . When a motion to deny class certification is brought early in a case— 11 before discovery is substantially complete—a Rule 12(b)(6)-type standard is employed, so the defendant must 12 demonstrate that it would be impossible for the plaintiff to certify a class based on the allegations set forth in the 13 complaint. 14 Otto v. Abbott Lab’ys, Inc., No. 5:12-CV-01411-SVW-DTB, 2015 WL 12776591, at *2 15 (C.D. Cal. Jan. 28, 2015) (citation omitted). 16 III. Analysis 17 American Bankers asserts that the dispute here is one of valuation, falling squarely 18 within the policy’s appraisal provision, and when a putative class includes a significant 19 number of members who have agreed to appraise their claims, certification should be 20 denied. (Docs. 14 at 1–2; 26 at 3.) Dahl responds that the appraisal provision is inapplicable 21 to the putative class members’ claims because this is not a valuation dispute but rather a 22 legal question that the Court, not an appraiser, must decide. (Doc. 18 at 3.) This is a close 23 question. At the pleadings stage, the Court cannot say it will be impossible for Dahl to 24 demonstrate that the appraisal provision does not apply to the class members’ disputes. 25 In Lawson¸ the Ninth Circuit held that a putative class cannot be certified when that 26 class includes a significant number of members who have agreed to arbitrate their claims. 27 13 F.4th 908, 913 (9th Cir. 221). “In Arizona, appraisal provisions are analogous to
28 4 The Court has considered the supplemental authorities submitted by the parties (Docs. 27 & 29) and cases cited to the Court during oral argument. 1 arbitration provisions and are governed by arbitration principles.” Casitas Del Sol Condo. 2 Owners Ass’n v. State Farm Fire & Cas. Co., No. CV-22-00685-PHX-DGC, 2022 WL 3 3082528, at *2 (D. Ariz. Aug. 2, 2022). Courts are limited in their power to refuse to 4 compel appraisal. Id. Thus, it follows that a putative class cannot be certified where a 5 significant number of members are required to submit their disputes to an appraiser. 6 But the question remains whether this dispute is one for appraisal. This question 7 hinges on whether the dispute is one about valuation or one about coverage. In Enger v. 8 Allstate Insurance Co., 407 F. App’x 191 (9th Cir. 2010), an unpublished decision from 9 the Ninth Circuit, dismissal of the plaintiff’s suit against her insurer was appropriate 10 because the plaintiff failed to submit the claim to appraisal after her insurer invoked the 11 provision. 407 F. App’x at 192–93. The appraisal provision stated that, if the parties to the 12 insurance contract failed to agree on the ACV of the loss, either party could invoke the 13 provision. See id. at 193. The appraisal provision applied even though the insurer allegedly 14 used an improper valuation method in its adjustment because the policy made “no 15 exception where the source of the dispute is the valuation method used.” Id. 16 The appraisal provision in Dahl’s insurance policy is like the provision in Enger. It 17 provides that if “settlement cannot be agreed to, then both you and we have the right to 18 select a competent and disinterested appraiser within 20 days from the date of 19 disagreement.” (Doc. 8-1 at 6.) Further, no action may be brought against American 20 Bankers unless “[t]here has been full compliance with all the terms of this policy.” (Id. at 21 18.) It makes no exception for a dispute about the valuation method used, and inclusion of 22 future repair labor in depreciation conceivably could be considered part of the valuation 23 method. Enger can thus be read to include disputes like those of the putative class. 24 Still, Enger is not binding, and other courts have cut differently. See, e.g., Munoz v. 25 GEICO Gen. Ins. Co., No. 19-cv-03768, 2019 WL 6465297, at *2 (N.D. Cal. Dec. 2, 2019); 26 Hawkinson Tread Tire Serv. Co. v. Ind. Lumbermens Mut. Ins. Co., 245 S.W.2d 24, 28 27 (Mo. 1951); Ostendorf v. Grange Indem. Ins. Co., No. 2:19-CV-1147, 2020 WL 134169, 28 at *4 (S.D. Ohio Jan. 13, 2020). In Munoz, the issue was whether the insurance company 1 was “obligated by the terms of its Policy to pay [the] undisputed [sales tax] amount to 2 leased insureds just as it pays that amount to owned- or financed-vehicle insureds.” 2019 3 WL 6465297, at *2 (citation omitted). The court found that dispute was not appropriate for 4 appraisal because it presented coverage issues. Id. Valuation disputes (like the one in 5 Enger) deal with the underlying value of the damage, while coverage disputes concern 6 what the policy means. Id. Because the dispute dealt with whether a “categor[y] of cost[] 7 fell within the policies’ terms,” it was a coverage question outside the scope of appraisal. 8 Id. at *3. 9 Dahl does not allege that his or any putative class member’s property damage claim 10 was undervalued. Rather, construing the allegations in the light most favorable to Dahl, the 11 FAC alleges that a category of cost—future repair labor—falls within the policy’s 12 coverage, but he and the class were not compensated for that cost. Thus, American Bankers 13 breached the terms of the policy. The Court is not convinced that this disagreement is a 14 “valuation dispute” or that it must, as a matter of law, compel appraisal as to each of the 15 putative class members’ claims should the class be certified. 16 The Court acknowledges that Arizona (and some other states where putative class 17 members reside) have strong policies in favor of alternative dispute resolution, and 18 ambiguities should be resolved in favor of appraisal. Meineke v. Twin City Fire Ins. Co., 19 892 P.2d 1365, 1369–70 (Ariz. Ct. App. 1994); New Peublo Constructors, Inc. v. Lake 20 Patagonia Recreation Ass’n, 467 P.2d 88, 91 (Ariz Ct. App. 1970). But that policy does 21 not warrant a finding from this Court that all putative class members are barred from suit 22 until they submit their claims for appraisal, particularly when the identities of these class 23 members and the substance of their claims are yet uncertain. 24 What’s more, the FAC alleges claims on behalf of putative class members in eight 25 other states with differing law and policy. As another court observed, “exactly when an 26 issue is one for an appraiser to determine versus the court is not entirely clear cut” and 27 requires a “dispute-by-dispute analysis.” Norman v. Standard Fire Ins. Co., No. 22-CV- 28 2199, 2023 WL 6018919, at *6 (C.D. Ill. May 15, 2023). It is at least possible that the 1 || putative class could be made up of only those insureds with claims that would fall outside 2|| their appraisal provisions based on the language of those provisions and applicable state || law. Discovery is necessary to help the Court determine the propriety of a class action in 4|| this case. Therefore, it would be inappropriate to grant American Bankers’s preemptive || motion to deny class certification. See Kamm y. Cal. City Dev. Co., 509 F.2d 205, 210 (9th || Cir. 1975) (noting denial of discovery where discovery is necessary to determine propriety || of class action is an abuse of discretion). 8 IT IS ORDERED that American Bankers’ motion to deny class certification (Doc. 14) is DENIED. 10 Dated this 13th day of December, 2024. 11 12 13 {Z, 14 _- {UO 15 Soe United States District Judge 16 17 18 19 20 21 22 23 24 25 26 27 28
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