Madison - St. Clair Record

Monday, September 23, 2019

Proposed class action claiming State Farm depreciated labor, materials in ACV calculation heads to Fifth District


By Record News | Mar 26, 2019

Snodgrass and Dalenberg

SPRINGFIELD – The Supreme Court has ordered the Fifth District appellate court to let State Farm appeal a decision of Madison County Circuit Judge William Mudge in a potential class action. 

The Justices entered a supervisory order on March 20, overturning the Fifth District’s denial of review. 

State Farm challenges Mudge’s denial of a motion to dismiss the action. 

Madison County resident Jarret Sproull sued State Farm in 2016, with a legal team that included partners Chris Byron and Chris Petri of Edwardsville. 

Others on the team had filed a similar action, Jenkins v. State Farm, in Cook County the previous year. 

Cook County Circuit Judge Susan Kennedy dismissed it, finding a statute of limitations barred it. 

Jenkins appealed and State Farm cross appealed, claiming Kennedy should have dismissed the action on the merits. 

Sproull’s complaint in Madison County alleged that wind damaged his home on Dec. 28, 2015. 

In calculating actual cash value according to his policy, he alleged that State Farm depreciated labor and material. 

He also alleged that the policy didn’t disclose labor depreciation and that State Farm took unfair advantage of the ambiguity in actual cash value. 

State Farm moved to stay the action pending resolution of the Jenkins action. 

At a hearing in March 2017, Mudge asked plaintiff counsel Joe Snodgrass of St. Paul, Minn., about Jenkins. 

According to a transcript of proceedings, Snodgrass said Jenkins might stay that case and opt into this one if it got certified as a class action. 

He said Jenkins could dismiss his appeal, dismiss his case, settle it, or decide not to move for class certification. 

Mudge said, “Is he just doing this for sport up there?” 

Snodgrass said he had no duties as class representative until a class is certified. 

He said Judge Kennedy found Illinois regulations don’t allow labor depreciation. 

“If a trial court ruling in Illinois doesn’t stop State Farm from continuing to do this, then your trial court ruling is not necessarily going to stop State Farm,” Snodgrass said.

Mudge asked why Sproull filed suit if the issue was already teed up. 

“Precisely because we were uncertain whether or not the Illinois court of appeals would even address it and in part also because the carriers didn’t change any activity despite judge Kennedy’s decision,” Snodgrass said 

State Farm counsel Heidi Dalenberg of Chicago said Kennedy dismissed the case and her decision wasn’t binding.

“The suggestion that we are running around purposefully violating a binding court order right now on the question of labor depreciation, I think, overstates the situation,” Dalenberg said. 

She said Sproull sought to serve individual interrogatories for every class member and estimated the cost of response at $150,000 a day for 90 days. That would equal $13.5 million. 

She said the Illinois insurance department was allowing insurers including State Farm to amend property policies. Policies would say that actual cash value means depreciation of all components of replacement cost. 

She also said it was in effect for new business and was being added at renewal time for existing insureds. She said she didn’t concede that the prior definition was ambiguous. 

Snodgrass said discovery necessary for class certification in Arkansas and Kentucky was negligible.

Mudge asked if they filed the interrogatories referenced by Dalenberg. 

Snodgrass said that “those folks didn’t need it. They moved for class certification without it.” 

Dalenberg said, “That’s not correct. In Kentucky the plaintiffs did file exactly those same interrogatories.” 

She said State Farm objected and the court hadn’t ruled. And, that State Farm didn’t hear from Sproull until he sued. 

Anyone could find the value of a 10-year old television or a 20 year old car by looking on the Internet and seeing what the marketplace charged, she said. 

“There is no marketplace for an old roof,” she said.

“We have to come up with the best approximation that we can to figure out what would the value in money of that thing have been at that second before the hailstorm hit.

“We’re going to figure out the all end cost for putting that roof back on your house as if it was all brand new, and we’re going to take that remaining percentage of life that you had left in it, and we’re going to pay you that percentage.

“If you’re putting into the actual cash value calculation full replacement cost for labor and actual cash value only for the materials, you’re doing violence to the policy language.

“We’re going to pay you the money value of the thing that you had prior to the storm, and you can use that money then to go make your down payment with your contractor to get your repairs started.

“If you show us a signed contract for repairs, we’ll consider paying you right away for all the rest of it.” 

Mudge said he’d take it under advisement, and he asked for copies of cases. 

Byron said, “Do you want us to do an order to that effect?” 

Mudge said, “That would be good. That’s going to be Mr. Byron’s contribution.” 

Mudge granted a stay in May 2017, but it didn’t last long. 

In June, First District appellate judges affirmed Kennedy in the Jenkins action in Cook County. 

Like Kennedy, they ruled on timeliness and not on merits. 

At a hearing that August, Mudge asked where the Jenkins case stood. 

Snodgrass said, “Jenkins is over. There was no appeal to the Supreme Court.” 

Mudge said, “So there’s no -” 

Snodgrass said, “You’re the only one.” 

Mudge denied State Farm’s motion last February, finding he couldn’t interpret actual cash value. 

He wrote that he couldn’t assume responsibility for defining a term State Farm had the opportunity to draft more specifically to align with its practices.

“Illinois courts have established that when there is an ambiguity in an insurance policy, all exclusions, conditions or provisions which tend to limit or defeat liability should be construed most favorably to the insured,” he wrote. 

State Farm petitioned the Fifth District for leave to appeal, and Justices Judy Cates and Melissa Chapman denied it this Jan. 10. 

Justice John Barberis would have granted it. 

State Farm asked the Supreme Court for leave to appeal, and instead the Justices opened the Fifth District door.

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