Barry Zalma | Zalma on Insurance | February 5, 2016
When the Supreme Court of the state of Georgia decided State Farm Mutual Automobile Insurance Co. v. Mabry, 274 Ga. 498, 556 S.E.2d 114 (Ga. 11/28/2001) it opened the door to litigation against insurers who determined actual cash value losses by determining full replacement cost and then deducting physical depreciation without consideration for the diminished value of an automobile that had been in an accident and repaired.
Since Mabry courts in Georgia and across the country are faced with claims for both the cost of repair plus diminished value. In Brewton v. Liberty Mutual Holding Company, Inc., Slip Copy, United States District Court, M.D. Georgia 2016 WL 224124 (01/19/2016) a homeowners insured attempted to create a class action out of future failure of her insurer to pay her for diminished value.
BACKGROUND
In this putative class action, Plaintiff Chandra H. Brewton seeks relief on behalf of herself and others similarly situated for the Defendants’ alleged refusal to assess and pay damages for diminution in value when claims are made under their homeowners insurance policies. Brewton’s home suffered water damage which allegedly resulted in the diminution of the fair market value of the home. Brewton alleges she “timely reported a claim for direct physical loss to her home resulting from water damage,” but “[i]n violation of Georgia law and in breach of their insurance contract” with Brewton, the Defendants failed to assess and pay damages for diminution in the value of Brewton’s property.
In Count 2, Brewton asks the Court to “issue a declaratory judgment that Liberty Mutual is obligated under the homeowners insurance policies to assess insured properties for and pay diminished value when policyholders present first-party physical damage claims arising from direct physical losses to their insured properties, which are covered events.”
Though Brewton has not yet moved for class certification, she envisions two classes: (1) the “Policyholder Class” comprised of “[a]ll persons currently insured under homeowners insurance policies issued by Liberty Mutual that provide coverage for property located in the State of Georgia,” and (2) the “Covered Loss Class” comprised of “[a]ll persons formerly or currently insured under homeowners insurance policies issued by First Liberty that provide coverage for property located in the State of Georgia” who presented claims within the past six years for loss resulting from water damage for which damages for diminution in value were not paid.
DISCUSSION
First Liberty raises three arguments in support of its motion to dismiss Count 2: (1) to the extent the claim is based on First Liberty’s prior denial of Brewton’s claim, it should be dismissed because Brewton has an adequate remedy at law; (2) to the extent the claim is based on her “ongoing relationship” with First Liberty, the claim should be dismissed because she has failed to allege an imminent threat of future harm; and (3) Brewton “may not rely on the alleged threat of harm to absent class members to sustain her declaratory judgment.
First Liberty’s first argument relies on the assumption that Brewton seeks declaratory relief regarding the denial of her claim for diminution in value. However, in her response brief, Brewton clarifies that she “seeks a declaration to define the parties’ future rights and obligations,” whereas the breach of contract claim seeks recovery of damages “incurred in the past.” Similarly, Brewton states that “she does not … rely on an alleged threat of harm to her fellow policyholder class members to confer standing.” The question is whether Brewton’s declaratory judgment claim presents an actual controversy.The Declaratory Judgment Act, “echoing the ‘case or controversy’ requirement of Article III of the Constitution, provides that a declaratory judgment may only be issued in the case of an ‘actual controversy.’
The controversy may not be conjectural, hypothetical, or contingent; it must be real and immediate, and create a definite, rather than speculative threat of future injury. There must be a substantial likelihood that the plaintiff will suffer future injury: a “perhaps” or “maybe” chance is not enough.
First Liberty contends Brewton “has not sufficiently pled that her alleged injury will continue or will be repeated in the future. On this point, Brewton alleges that “there exists an actual controversy as to the responsibilities of the parties under the homeowners insurance policies issued by Liberty Mutual to Plaintiff and the members of the Policyholder and Covered Loss Classes” and that she “and other current insureds have an ongoing relationship with Defendants.”
As stated by the Eleventh Circuit, “[t]he remote possibility that a future injury may happen is not sufficient to satisfy the “actual controversy” requirement for declaratory judgments. A plaintiff must allege facts to establish a reasonable expectation that the injury she has suffered will continue or will be repeated in the future. Because Brewton’s injury is contingent upon her home suffering damage, the practical likelihood that the contingency will occur and that the controversy is a real one is decisive in determining whether an actual controversy exists.”
Although it is possible…