insurance policy and third why age is not a proxy for obsolescence or physical deterioration but first an introduction american family is systematically underpaying actual cash value on personal property  claims by not following what the policies require actual cash value which we have called a c v is a defined term in insurance policies the policy says that a c v equals replacement cost minus depreciation for obsolescence we've had three cases addressing the same insurance company in the exact same policy language the three cases are lanes barren and sparks in lanes judge who now are looked at this language and said that american family was not allowed to depreciate based on age and that american factor the american factory erred by taking age into consideration when calculating depreciation in sparks which was issued by judge settled the same judge our trial judge below after briefing closed on this case on appeal judge several held that american family looking at the same policy language can not depreciate based on age alone the court in that case said that american family can only depreciate based on actual physical deterioration and obsolescence the order below and barron unfortunately did not include that language it did not include the language that it was improper for american family to take the prescience in based on age alone and because that language is not there that is a reason why the plaintiff appellant sought an interlocutory appeal because we were afraid that american family would take the order the judge subtle entered in there and our case and then argue that the that the american family policy language that open the door to take depreciation based on physical deterioration o age and in fact that is one of the arguments american family made in sparks and they just settle said no that is not what i meant and barony the first major point i'd like to address is the significance of this issue american families depreciation based on age and that is all it is looking at is incompatible with an insurance company's obligation to conduct a full and fair investigation of all material aspects of the insurance claim instead of looking to do an investigation about whether personal property items were actually physically deteriorated and obsolete american family is just taking the age and subtracting value based on age alone both lanes and sparks and these are the only two district judges who have looked at this policy language both counsel let me let me just look at the history of this case twenty seventeen which  to appeal and a lot of tory appeal and and the hook there was the inconsistency of the opinions but wasn't the language the consideration record i think yes your honor and we saw and the u a d in that language that was going to potentially cause us problems when we were arguing classification right because he did not say so directly that it was improper for american famil supreme court that is no your honor touched on this language know your honor and one of the reasons may be that there may be differing policy language i know that i found language from american family policies in the that in this was a link that was provided to the district court said that the find actual cash value as including the precision based on wear and tear and age so that policy language was different and allowed the kind of depreciation that american family is taking sort of on a large scale way here in washington but we have different policy language but i have a question we all knew that physical objects such as that carpet have a predictable life depending  the experience is that the carpet may have a twenty year life why can't the insurance company say at ten years the actual cancer value is fifty percent common experiences that they happen over an axis of time absolutely it is also true that just like to push ation happens over time appreciation happens over time i have a rug in my living room that i paid a lot of money for and it was made in  eighty and it is also true that things can become more useful over time and so the example of the book that we have given is a good example so even in our are examples of books that are one or two year old solution the insurance company can't use any tables of depreciation on obsolescence which consider age i it is our position that the insurance company has to actually investigate the actual condition of the item in question and you can do this in a lot of different ways including asking the insured what the condition of these items were and its experience when did you buy it absolutely you could ask but what american family is doing here is only looking at the age and not looking at the condition and he's  they're using straight line depreciation but the formula that they're using is a complete secret sauce that no one knows and in sparks if when we read sparks there's an admission in there from american family saying that they don't know what the secret sauce is so this is fundamentally incompatible with insurance companies obligation to accurately determine a c v that's whack to eighty four thirty three eighty seven so your argument that the policy just doesn't allow for consideration of it or that the we have here is very clear language saying the kinds of depreciation that can be taken to appreciate in for physical deterioration and obsolescence and we look at that as i've said those things do happen over span of time and so i think but that does not the to the conclusion that american family is drawing which is that you can apply some from as far as we know out of thin air straight line depreciation based on purely on these and again we've talked we're talking about one or two year old books that are that american family says has zero value and if the policy requires there to have been physical deterioration or obsolescence how can you make that determination i have a book at home that my assistant gave me five years ago it's a book about the princess bride i have never cracked it open it is in mint condition it's the same as a one of barnes and noble it's entertainment value is exactly the same if my house burns down american family will sign that zero dollar values that's the mischief that is created and to come back to the first point that i was making which was why it's significant is because number one it's incompatible with the insurance companies obligation to investigate that's what they're supposed to do and number two is that these claims they add up and so there are thousands of personal property items in one inventory of course hundreds and thousands of claims in washington every year and we know the practical effect is we know my partners are in the room right now we know that most policyholders do not come back to make an r c b claim that is that they take the actual cast value payment and they never come back to collect the depreciation from the insurance company and so the insurance company and we have information in the record to back that up what is happening is that the insurance company is selling a replacement cost insurance policy depreciating based purely on age paying zero in actual cash value for a lot of items and for many other items depreciating without any evidence or basis of physical deterioration or obsolescence and then they're sparks makes this point does that has made this point in his recent sparks this is and which is that even after lane's american family kept doing that and we have that e mail in the record in our record and even after baron american family kept doing it and that led to sparks and so it calls for attention from an appellate panel because at the same time again we can address it absolutely on our barke our decision is only binding on district court judges an interesting point that american family is making in their brief it's like one of their arguments is that one district court opinion doesn't bind another district court and in fact is not even buying that same district oh so he calls out for an author order to authority to the decision and one and one of the arguments that american family has made is that this doesn't involve any changes in in the rules about how one interprets an insurance policy but but that is true and we think that application of those principles leads to the conclusion that we're asking for but is it is also it please the court michael mccarthy would figure bigger daniels of with my co counsel rory lead appearing on behalf of american family mutual insurance company a critical threshold observation here is what the scope of this appeal entails the scope of this trial ninety two interlocutory appeal your honor relates to the very narrow question of whether judge settle properly concluded as a matter of law that there is no merit to the central plaintiff's complaint namely that american family can never never take into account age in calculating depreciation there has been talk in the brief cers been talk here an oral argument your honor about whether american family always takes age into consideration with respect to thinking about i've been thinking about the position you're now you're  and certified it's twenty seventeen it's april orders resolving both across motions for summary judgment for appeal would you agree with that i believe so your honor but i think the specific question i don't have i don't have the the permissive order in front of me but the order of the question that we have briefed in our papers is specifically whether american family can ever take age into account and what the court is being presented with is a contention that this appeal turns on the assertion that american family always takes age into account  exactly your honor the record doesn't support that the record doesn't support that with respect to the named plaintiffs your honor there are four names therefore family groups that are named plaintiffs here and in what the record shows the broader record not the excerpted record but but in the documents that american family produced in discovery here with regard to the lead name plaintiff baron and with regard to hill stad more than half of the items that were included in their claims inventory were not depreciated on the basis of age they were not depreciated on the basis of the age over the useful life lanes obviously lanes isn't before us but what judge several said was that he specifically just agrees with that absolute position that was expressed in the lane's opinion and that's that's that became the grounds for the interlocutory appeal we have two differing district court opinions so that one that was the grounds for the appeal right i believe that correct you are that was part of it i also believe that there were some contentions made that there are novel questions of law that are presented here but understood your honor now counsel is it your position that some actual cash value can be determined solely on the basis without consideration of physical deterioration and obsolescence the here's the best way i can answer that question is that there will be circumstances that the facts of prove this to be the case where the only information that is available with respect to the two a claim is age and here's the best example that i can give you on that oftentimes in these cases what you have these are homeowners obviously homeowners insurance cases what you'll also often have is a total loss you'll have an insured who has their home burned to the ground and so there is there's been talk here about examined the item for example your honor it's a little bit disingenuous to say that because there's no item to examine here and so the only information that often times will be available and you know these inventories for example the hill istead inventory your honor was four thousand items long four thousand items long thousands of items in here but in a total loss situation your honor the only information that is sometimes of vailable is the age and we believe that under those circumstances in order to avoid your honor and over insurance situation as we argued in the brief under washington statute there there has to be some account taken to age because otherwise if you don't have anything to take into account then what you do is you end up having replacement cost equate with actual cash value but you have that occur even though there's no replacement th takes place and under those circumstances we think there's a there's a problem under washington state statute so your honor when he yes we're finished here the short answer to your question is yes and that we do believe that in some circumstances where there is no information other than age then is a reasonable interpretation of the policy in the common sense understanding of depreciation that you would take into account the age of an item because necessarily there will over time and the mirriam webster definition again washington state law makes clear that you can construe you can interpret a policy provision by reference to the common english language meaning of it as found in a dictionary that's exactly what judge settled did here and so you know our our motion for summary judgment was very targeted because what the plaintiffs did here was in a colloquial sense they led with their chin they sort of said you can never do this there was a there was a reason there was a litigation strategy reason for that because it would support their their motion for classification down the road but what they said is you can never take that into account all judge settled that said no neither more nor less was that the common language interpretation of obsolescence necessarily involves the passage of time and based on that consideration you can't take age into account you know what the what the court is hearing from from plaintiffs here is that obsolescence should be measured by utility or subjective value to the owner and the that would result in an in an inability to come up with any value ari would let lead you to come up with a subjective value for that for that contract is intended to indemnify but not enriching insured and so if there's been an actual loss that's what has to be indemnified not the replacement and not the replacement cost unless there has actually been a replacement that's occurred so what i'm sorry oh no i'm just what we're what we're confronted here is a situation where if if the standards that are that the players are advocating here in terms of personal utility utility our subjective value for personal item of a book a hairbrush the various things that are cited in the brief if those are the types of standards that are employed it becomes impossible to be very difficult to rate the premium if everybody's so objective valuation of objects had to be taken with a ration exactly or an in that and that's that's exactly the point that we've tried to make in our brief here is that the the the case law says that in terms of actual cash value interpreted across a number of different insurance opinions actual cash value is seen as synonymous with fair market value there are many many cases there are cases that we've cited in the briefs that stand for that proposition and so what what the objective is when we talk about actual cash value equat replacement value less depreciation is to come up with a fair market value for that item at the time that the loss occurred course council we're dealing with with a policy that  deterioration is that your position that's what judge says a subtle rule inst in sparks right and what what we believe that means is that that age can be taken into account right but the but that age factor shouldn't be then in turn tied to subjective measures like utility or sentimental value for the item well that's down that that's down the road that's not really before us  well it's not your honor but i think those are the positions that are being argued and so actually we would this case will be well one way or the other it will go back to judge sell because it's just a partial summary judgment he didn't rule on the entire case what we want to be able to present to judge settle on a fully developed record none of the players for example in this case have been post or been no depositions taken in this case it's a very very small factual record what what we would wish to present to the trial court on a fully developed record is the notion that that age is it is embedded in obsolescence and it can indeed be taken into account because it's intrinsic in the notion of depreciat and if you have to always run age through the filter of obsolescence or or physical deterioration measured by the way we've heard it articulated here today and in the briefs then you  have a you have a condition where you have a situation where you're really as a practical matter your honor reading depreciation out of the contract because you're establishing what is it's a mission impossible in order to be able to show that depreciation this this case presents the panel with what we submit is a garden value garden variety contractual interpretation case that the circuit the circuit courts of appeal deal with in diversity cases all the time that what judge settled did when he interpreted replacement costs less depreciation for obsolescence or physical deterioration as you just read he just interpreted what the words meant and he did that primarily by reference to the miriam webster dictionary what washington state courts say state court opinion say from the washington supreme court is that using that method in order to interpret the meaning of language is entirely consistent with washington common law here so there's a a lateral to the washington supreme court wouldn't ask them to do that which this court does all the time when it handles contractual interpretation needed certainly the circuits opinions are given significant consideration you know in in arguing positions but it's it's a garden variety contract interpretation case and it's a very narrow one that  how do you just clearly understand your position and how do you since it's an interpretation case and if you were in my position how would you want me to interpret this language i would interpret the language exactly how judge subtle interpret it interpreted it in his opinion in this case in this not in the other case not not not in not in the other case i mean it there was he is he just having what's going on would just settle if he said we counsel says he says one thing here and he modified his position in another case the distinction really in sparks is that there was a there was a contention there that american family always took depreciate always to occasion the consideration and only took asian to consideration and that's not this case and it's not this case because that's not the record here i mean to just give you an example in the hilla stat file ok ok as you s at the beginning i was just going to say that the can i just have you here thank you the insured in hilla stat was asked to provide the age for several thousand additional items that were added to the list the insured said i'm not going to do that i'm frustrated with this proper process i'm not going to do that so what american family did is they didn't they didn't appreciate the items at all not at all that's what the record shows in this case ok thank you very much thank you i don't think that's what the record shows are on i'm looking at it right now starting on one seven it has the excerpts from the whole us that inventory and i would say that well over ninety percent of these items are depreciated and every item that has the based on age it's clear from the document on certification the course should absolutely certify the supreme court for two reasons one is the question that your honor asked which was can why cannot why can't based on our experience time serve as a proxy for obsolescence or physical deterioration and that goes to the heart of what it means to have a duty to fully and fairly investigate an insurance claim i'm fully and fairly investigate the twenty year lifetime carpet that was used for ten years there was totally burned in the house right out of we have never said that the insurance company how do you do that i can't do that you have to ask me mr the insurer drawn or you could start by asking the insured to see if they have any photographs of the property other insurance companies have asked for this kind of information in my experience they can have a dialogue with the insured about what the condition of the carpet was and why they were still using it and we have never taken the position that obsolescence depends on the subjective feelings of any insured obsolescence has a meaning physical deterioration has a meaning and all that we are saying is that actual cash value which is the find in the policy doesn't matter what any other case says it's the finding our policy is replacement cost minus physical deterioration and minus obsolescence that that has to be linked to actual evidence of both of those things ok thank you thank you thank you we appreciate your arguments this morning very interesting matter is submitted