United States District Court, D. Colorado
ORDER ON MOTION TO CERTIFY
S. Krieger, Chief United States District Judge
MATTER comes before the Court on Defendant, State Farm Fire
& Casualty Co.'s (State Farm), Motion to Certify (#
19), Plaintiff, Zachary McFarland's, Response (# 24), and
State Farm's Reply (# 34). Also before the Court is Mr.
McFarland's Motion for a Ruling (# 48) on State
Farm's Motion to Certify (which, in substance, is a
motion to certify a question that varies slightly from that
proposed by State Farm) and State Farm's Response (# 49).
purposes of these motions, the material facts are limited.
Mr. McFarland's residence was insured under a policy (the
Policy) issued by State Farm. See Doc. 37-1.
Described as a Replacement Cost Policy, it provided that in
the event that Mr. McFarland's home sustained covered
damage, State Farm would pay “the cost to repair or
replace with similar construction and for the same use on the
premises . . . the damaged part of the property.”
See Policy at “Section I - Loss Settlement,
Coverage A - Dwelling, ” Doc. 37-1 at 36. That section
also provides that in the event of covered damage, State Farm
would make a payment prior to completion of repairs in the
amount of the actual cash value of the damaged part of the
property. The Policy states:
[U]ntil actual repair or replacement is completed, [State
Farm] will pay only the actual cash value at the time of the
loss of the damaged part of the property, up to the
applicable limit of liability shown in the Declarations, not
to exceed the cost to repair or replace the damaged part of
Doc. 37-1 at 36. The Policy does not otherwise define the
phrase “actual cash value.” In 2014, Mr.
McFarland's roof was damaged in a hail storm. After he
filed a claim, State Farm paid him the actual cash value of
his roof, $6, 885.79. The Explanation of Benefits (EOB)
reflects that State Farm determined the actual cash value by
taking the replacement cost of the roof, $9, 766.43, and
reducing it by $2, 487.34 in “depreciation.” Doc.
McFarland brought this suit as a class action in state court.
State Farm removed the matter to this Court pursuant to the
Class Action Fairness Act, 28 U.S.C. § 1332(d) (CAFA).
Amended Complaint identifies the purported class of
plaintiffs as persons or entities that received “actual
cash value” payments from State Farm for loss or damage
to a structure in Colorado for the last twelve years where
the cost of labor was depreciated. Three claims are asserted:
(1) breach of contract; (2) violation of the Colorado
Consumer Protection Act; and (3) statutory bad faith. The
basis of all of the claims is that in calculating
“actual cash value, ” State Farm improperly
included labor costs as part of “depreciation.”
parties, by separate motions, ask this Court to certify a
question to Colorado Supreme Court. State Farm proposes the
Where a homeowners insurance policy provides for payment of
the actual cash value (“ACV”) of the damaged part
of the insured property at the time of the loss, and the
insurer calculates ACV by estimating the total cost to repair
or replace the damaged property minus any depreciation, does
Colorado law require the insurer to exclude labor costs from
the calculation of depreciation in order to arrive at the ACV
Doc. 19 at 8. Mr. McFarland seeks certification of the
following question: “Where a homeowner's insurance
policy provides for ‘actual cash value' coverage
without defining ‘actual cash value' or
‘depreciation' may the insurer depreciate the labor
that is necessary to accomplish repairs?” Doc. 48 at 1.
Colorado Appellate Rule 21.1 permits the federal district
court to certify any “questions of law of this state
which may be determinative of the cause then pending in the
certifying court and as to which it appears to the certifying
court there is no controlling precedent in the decisions of
the Supreme Court.” But certification is discretionary
and “is not to be routinely invoked whenever a federal
court is presented with an unsettled question of state
law.” Armijo v. Ex Cam Inc., 843 F.2d 406, 407
(10th Cir. 1988).
Court declines to certify either of the questions identified
by the parties, finding that the dispositive issue in this
case can be resolved by applying Colorado law to the terms of
the policy. Under Colorado law, an insurance policy
constitutes a contract, which courts construe using general
principles of contractual interpretation. Allstate Ins.
Co. v. Huizar, 52 P.3d 816, 819 (Colo. 2002) (en banc).
Clear and unambiguous contractual provisions “should be
given their plain meaning.” Id. “To
ascertain whether a provision is ambiguous, ” the Court
construes it “in harmony with the plain, popular, and
generally accepted meaning of the words employed.”
Wota v. Blue Cross & Blue Shield, 831 P.2d 1307,
1309 (Colo. 1992) (en banc).
parties characterize their dispute as whether State Farm may
depreciate both labor and materials' costs to determine
the “actual cash value.” But calculation of
deprecation is not addressed in the Policy, nor does the
Policy link depreciation and actual cash value. Indeed,
depreciation is not mentioned in the Policy at all. In
reality, the heart of the instant dispute is not the meaning
of depreciation and what it includes, but instead the meaning
of “actual cash value” under the terms of the
Policy. Using “general principles of contractual
interpretation, ” the Court is convinced that enough
context exists to determine what the Policy means by
“actual cash value, ” particularly considering
its “popular” and “generally accepted
meaning.” See Wota, 831 P.2d at 1309.
clear that “actual cash value” stands for a
specific concept in insurance law where the insured is paid
only what the asset is worth at the time of loss, a theory of
coverage distinct from “replacement cost, ” where
the insured receives the amount to replace the asset. See
Graves v. Am. Family Mutual Ins. Co., __ F.App'x __,
2017 WL 1416278 at *2-3 (10th Cir. Apr. 21, 2017). The Tenth
Circuit has recently declined to certify the parties'
proposed issue and the Oklahoma Supreme Court has decided the
issue outright. See id. at *2; Redcorn v. State
Farm Fire & Cas. Co., 55 P.3d 1017, 1020 (Okla.
these circumstances, this matter can be resolved without
certification to the Colorado Supreme Court. Accordingly,
both Motions to Certify (# 19) (# 48) are DENIED. Mr.
McFarland shall have 30 days from the date of this Order to
file a Motion to Certify the Class. (quoting Doc. 37-1 at
18). The Court disregards this reference for multiple
reasons. First, the primary rule of contract interpretation
is to begin with the terms of the contract - here, the
Policy. Second the summary expressly states that it cannot be
considered in interpreting or augmenting the terms of the
Policy. It states that it “does not replace any policy
provision”, that “coverage is subject to the
terms, conditions, special ...