challenging the adequacy of actual cash value insurance payments they received from state farm exactly a year ago yesterday this court reversed an order of class certification and in re state farm fire and casualty company that's seventy two f thirty five sixty seven and i'll refer to that case here today as the law prior case the court held in live right here that predominance failed in a case like this one because every single insurance claim was going to be subject to a property evaluation process you could not know whether or not a single insured was properly paid actual cash value for their property without doing such an individualized valuation we submit that the same problem applies in this case as well and the predominant fails for the same reason here using the court language from the prior there are no predominant issues of fact in this case but it wasn't in the briar you had to get to the fair market value which is a different valuation then what is asserted here which is simply it's a formulaic assessment of what amount was the labor depreciation on a given claim you're correct you're out of there are t important differences i think that the plaintiffs rely on heavily in this case the first one is that in arkansas there were two separate state supreme court decisions that you have to apply retroactively that announced in two thousand and thirteen and twenty fifteen that a company could not apply labor depreciation to calculate actual cash value so that's one difference there is a different standard there the second difference that they point to is that in this case we have a definition of  method that we will use to calculate actual cash value the policy that we will the actual cash value is calculated as the amount it would cost to repair or replace property less depreciation so those are the two things that the plaintiffs hang their hats on to try liberal or but those are not actually material distinctions here for a very important reason the plaintiffs are picking and choosing the parts of the contract that they are reading and they're overstating what adams and good  court actually held adamson good nor talked about the fact that in their view to get actual cash value you should receive a payment that pays you the full amount of the labor you need to repair your property on one hand and then the depreciated value of materials that's an equation and it's the equation that we now use for actual cash value calculations in arkansas but you could have an inflated replacement cost estimate that overstates what it's really going to cost someone to do repairs and when you have that overstatement of replacement cost in the estimate itself even if you apply a labor depreciation you may very well have paid that insured the right amount of monday even under arkansas law for their actual cash value and let me just use ms hood's claim as an illustration here if you start with mr she had a water heater week and her carpet got wet and she had some damage to her flooring when state farm did it we were going to have to remove that carpet take off the baseboard from the wall put all that stuff back repaint all the walls etc when we went out to look at that property a second time when this lawsuit was filed we had an expert general contractor who said i'm looking at the carpet now all it needed to help with cleaning but even if we repair replace that carpeting we didn't need to pull of the baseboard or repaint the walls because of the way that the carpet w installed so there was a substantial inflation of the original replacement cost estimate for their property what would have happened in that situation then does she did she get her money upfront and then have to give something back to state farm state farm did not ask for money back as part of this process to stay from generally doesn't so there's no claw back so as a matter of course state farm does a club back if they think they overpaid an individual claimant so let me  some instances there are agreements that we overstated something in an estimate and we and the policyholder will agree that the money we've already paid for one thing will be applied to the next set of invoices that they might submit for replacement cost benefits i don't know that state farm doesn't have a right to ask an insurer of a big mistake has been made on an estimate and we find that out that we couldn't ask for that money back but what's going on here is we're not asking for that money back we don't do it as a rule and here what's really a issue is not do we want money back it's about insurance who want more than they already have and to to really illustrate the extreme position that the plaintiffs take here i want to talk about mr stewart can i follow up on just on that thought a little bit but i if everybody sort of agrees that whether it's a general practice or a part of a contractual agreement that once you assess the value and you pay the claimant whether that's high or whether that that is the number that sort of percentage and original value that everybody really sort of agreed on right or wrong way but everybody agreed and why isn't that something bad is easy to calculate for purposes of the class because the contract  here at the contract language is materially different than a lot of the contracts that the plaintiffs try to allude it to so if you look at the contract itself there are no fewer than three places where the contract specifically says this is a replacement cost policy state farm starts out it's lost that on the provision with the statement we will pay the cost to repair or replace your damaged property with similar construction subject to the following until repair is done we will pay the actual cash value capped by the policy limits or the cost to repair after repair is over we will pay only the additional amount that insured actually incurred for repairs so at the start at the a c v stage and at the replacement cost stage we make clear we are not going to pay more than it actually costs you to repair or replace your property and that that that limitation is in there for exactly this reason they want more money for those insurance even though they're they're fully reimbursed for their loss they make it absolutely clear mr stewart situation is even more extreme we didn't a c v estimate for him we paid him initially his start submitting his receipts for his hot springs property we know we overstated just one line out of it as in his replacement cost estimate by about fifteen hundred dollars for repair of some flooring he gives us  receives we pay everything he has admitted under oath we fully paid him for his loss they want him to be paid eight hundred dollars in addition to that because of labor depreciation and remember the whole purpose have a problem where we have to go out and figure out what was the right valuation for they have property at the time and when you have that kind of a situation you have to look at that because merely because you have a methodology or a practice that you think might have caused injury to some people if you can't figure out which of the engineered and which ones aren't you have a predominance problem because you have an injury and causation problem both of those in our view are part of the louisiana after hurricane katrina we had insured who said i want to do on behalf of everybody because state farm is improperly paying general contractor overhead and profit they're paying too low over rate the district court there refused to certify the class because even though state farm said this claim and this claim and this claim on their estimates would get an allowance for general contractor and horror head and profit the court said state farm has an absolute right to come back and challenge whether or not that general contractor of feet was really even going to be necessary on this claim that is something they're entitled to prove that means we don't have predominance and you can't certify the class we had a similar situation in cartman a decision out of the seventh circuit the plaintiffs complained you have a bad methodology that you're using to evaluate hail damage claims and the courts of i can't certify that state farm has an absolute right to challenge whether or not it appropriately paid each and every one of those losses that but the a here here we have the labor depreciation what's the status and that's just not proper so we do have an improper methodology cracked we have a statement that you can't apply a labor depreciation but again if you if you don't know what the right starting value is ok for your so take it so let's will take that for purposes of this question is there is there a spreadsheet out there that actually identifies the persons purposes here but let's talk about that spreadsheet we generated a spreadsheet it takes data from the last as to what we are prepared for every claim there is a calculation of labor depreciation taken from the last uploaded estimate that last uploaded estimate may not reflect all the depreciation we've paid back it is not what the original depreciation was that we initially assessed for a lot of yes a lot of the claims for some it will be for others that won't because for a lot of claims there's multiple estimates they build on each other we also have estimates that are generated where no payment to govern even based on it so it is not reliable evidence even of what labor depreciat still outstanding at the end of a claim for example so that's a problem then besides that you have to be able to match up what do we actually pay to the insured either for a c p u or for a later replacement cost benefits you can't do that based on the spreadsheet playing test on expert says we have to start this case out in the district court recognized we have to start the case out by looking at all the files to figure out who even got to be payment with labor depreciation then we have to look at the timing of what happened with those labor depreciation payments then we have to go from there to actually see whether or not someone could still ask for a penalty for a late payment then we have to look at it for damages but i'm here to tell you you have to look at it in order to determine liability as well and we know from our file sampling that these are real problems that we have thousands and thousands of potential class numbers who were fully paid replacement cost right from the very beginning and don't have a claim here and there is no timing requirement on this i think what i want to reserve some of my time for can i just want to requestion i'm not sure i understand fully what the all the arguments are but i do think that there's a claim that's being asserted that period of time then let the policy holder know whether you're going to cover that claim and if you can't do it that fast you have to tell them why there is nothing in there about a company not being able to go in reevaluating what really happened with lost in fact it happens all the time in individual cases if we tried this is individual cases we didn't expect every property we'd have expert evidence of our own we would not be tied to our estimate from the time of last thank you i'll reserve the rest of my time be a farm in reaching its decision the district court had before it not one but two cases from the arkansas supreme court which held that the different appreciation of labor was unlawful in arkansas law it also had state farm's admission that  depreciated labor as a matter of practice and calculating actual cash value during the entire class period it also had the spreadsheet the judge kelly you responded to an excerpt of which is in the record in the appendix i just fourteen thirty one to fourteen forty four that spreadsheet identifies the amount of labor depreciation that was hit with held from each and every class member and that was not paid as it should have been according to arkansas law based on this information the district court properly found that every single class member was damaged by state farm's uniform practice of depreciating labor and the class members damages had already already been calculated to the penny the truck or certification was issued in strict compliance with  gets money is that you want to get what will he do to his property so you are with respect to stewart i think he would fall we have a an equation that we proposed to the district court that the district court accepted and put in her order that the damages a class member were c is the withheld labor depreciation modest the recovered labor depreciation plus twelve percent towns the withheld labor depreciation so mr stewart received all of the rubber depreciation it was initially withheld but he would still be entitled to a penalty on or they breached their contract with him so this is a breach of contract action basically it is a breach of contract actually are ninety eight percent of the policyholders and what they were entitled to under the policy should be you are that the amount that they initially with wrongfully withheld from each i c b payment would trigger the penalty under arkansas law there's no goodbye to exception there they are required to pay that penalty when they don't pay tom lee the amount they were required to under law i think you are with respect to le bron this will this this is what state farm hanks is has had on in this case and respectfully i don't believe it has any application to this case on two bases both of which were specific to missouri of missouri law and both of which are significantly different in our case first held that under missouri law acb means the fair market value immediately before and liberals decide it was that this court found that missouri would not prohibit the depreciation of life or both of those are fundamentally different in our case we have a we have a policy that defines actual cash value as the replacement cost the estimated replacement cost less depreciation it's a formula that applies to every single class member and judge kelly as you observed the replacement cost has already been estimated in sue are overpaid that seems to be state farm's and look there are some people they get their full replacement cost value and if you just add on this labor depreciation without going back and doing an assessment you can be paying them more than what they contract  obligation that they did not pay a c v timely in accordance with the policy and arkansas law the second part of that answer that question i believe is this readjustment they want to come back in and go readjust claims that they have already adjusted and i think it's important broader to look at what that regulation requires with respect to the forty five day rule it requires that they complete their investigation accounts for state farm told you that means determine whether or not the coverage but that's not how investigation is defined in that regulation is defined as all activities of an insurer related to determining settlement outcome under coverage afforded by a policy they've got to complete that investigation within forty five days if they need more time there's a procedure under the regulations where they can extend that time period that time has long since run for all class members here and i'd submit that they are bound by their place by cost estimates that they have prepared is there a procedure for going back to re evaluate is this happen just as a matter of standard operating procedure that once once that estimate is made and there's a reassessment and shifting of money back and forth  to make sure the right amount is paid out under the policy i can't speak to whether that's ever happened or are but a mock him up reading of this regulation that would be inconsistent with arkansas insurance regulations unfair time some approx is act requires of a complete that investigation within forty five days and they're stuck with their investigation they've now come back on this hoods climb as we as was discussed momentary a moment ago and say well a lot of the things we said needed to be done don't actually need to be done i submit to the court that they can't do that they're stuck with the by the regulations promulgated by the arkansas insurance department and they were required to complete their investigation within forty five days the owner of another significant part of state farm's argument in this appeal is this cost of repair two separate obligations we know from atoms but you can't depreciate labor to arrive at a c v most importantly we know from shelter vs good or that even if you have a provision in your policy that allows you to depreciate labor it is still unlawful and that provision is not effective under arkansas law and shelter they had a provision in their policy that said we get to depreciate labor it was clear and unambiguous and the arkansas supreme court said that provision violates arkansas law like the stablished principles and identity and we will not recognize it as a valid like was here state farm is arguing that it is allowed to depreciate labor based upon a provision in its contract which it claims kept its exposure at the actual cost of repair this argument is inconsistent with our stock supreme court's opinion and goodness simply put an insurance company cannot rely upon language in its policies that is inconsistent with arkansas law now that that's a very important point with respect to that cost of repair argument your honor we sided on page thirty four through thirty six of our brief nine cases from a cough across the country including a case from the six arkan a case from the eleventh circuit which all hold that the actual cost of repair is irrelevant to the calculation of actual cash value and just earlier this week another federal district court in the northern district  says and i quote the issue is not whether the actual cash value payment made by the state farm were reasonable or sufficient but rather whether state farm was entitled to deduct labor depreciation the first place and quote that is exactly what we have here your honor the question is whether or not they were allowed to depreciate labor in the first instance i submit to you that pursuant to arkansas all law they were not and each and every class member was damaged when they received an actual cash value agree that this policy caps the r c b payment at the actual cost of repair but it does not cap the a c v payment at the actual cost of repair and we know that based upon the plain language of the policy there are two law settlement provisions in the policy the first one deals with the a c v payment the second one deals with the r c b payment in both of those provisions they reference the cost of repair but only in one of those provisions do they say the actual cost of repair state farm knows how to craft their language so to make it clear that they're talking about the actual cost of repair and i don't use actual or actually to modify the cost of repair in the a c v last i won't presume provision and that just makes sense or are because at the time the acb payment is made we don't know the actual cost of repair we're all going off of estimates the state farm has prepared so it can't be referring to the actual cost of repair because we don't know that and how another why we know it's not the actual cost of repairs as counsel for state farm just told you they don't ever come back and ask for any overpayment so if i paid the acb i'm out and the insured is ultimately able to get the repairs done for less than that amount under their theory that you think that they would come back and ask for the extra money back they don't because they know that that cost of repair limitation is not referencing actual cost of repair it's referencing the estimated cost it's prepared on their estimates by their adjuster know we believe that that provision is clear and unambiguous and the trial court so found however if this court were to fond of the trial court was to find that it is ambiguous that it would be strictly construed against any form and would be allowed to bring in extra days of government such as course of conduct such as the fact that they don't ever seek to recover any alleged overpaid amounts as proof that the policy should be construed in favor of the construction we propose without any injury without any cash i don't think so you are i think even the the class members who were ultimately repaid the initially withheld labor to bring depreciation were still damaged they were damaged by the t value of money which is a recognized element of damage and they were damaged pursuant to the statute which provides for a twelve percent penalty so even those class members who ultimately were repaid the amount that was wrongfully withheld on the front end would be easily distinguished in the we're calling this pressure he had the documentation available it is your are that state park and tell us to their records how much labor depreciation was initially withheld and how much the not injured for one reason or another group would be entitled to the garage value of their money so here are the way we define our our our class would only include those persons who received a cd payments from which labor was depreciated so if you if you have a loss and you go to state farm and you already got your repairs done for example this happened sometimes or a special smaller clients they might pay you your entire amount up front if they did that person is not in our class there was no labor depreciation applied in that klein they're honest adams and good nurse say absolutely nothing about whether or not someone is allowed to get payment for more than their replacement cost when we define actual cash value as replacement cost less depreciation v is lower there is nothing in adam's or good or that requires payment of more than insurance actual cost of repair simply wasn't part of the decision second i've heard a lot about the penalty here these are insurance who did not preserve their rights to ask for a penalty the penalty statute that you have to pay with and pay an amount due when it is due under the policy our policies say that any disputed songs are due within sixty days sworn proof of loss to submit it the vast majority of the class members including both named plaintiffs never did a proof of loss so the statute can't even be employed for them in addition you'd have to show a recovery of twenty percent and all that so that doesn't apply  as far as the contract language is concerned here it's critically important to understand that the cases that the plaintiffs are pointing to have materially different language our policy does not say that you can ignore the replacement cost provision that fountains and if you look at the serious case cited in our brief they make clear that when you have a policy like ours as presently structured today as soon as you have paid replacement cost that's actual the estimate is irrelevant you would look to see what the actual incurred cost was to figure out whether someone was damaged and then finally if i could just very quickly we're not talking about readjusting claims here we're talking about figure out who has been damaged and i have to emphasize that the spreadsheet does not tell you the information that the plaintiffs say that it does the way that you have to figure out labor depreciation is opened up asked on it and rejigger every single one of them to recalculate it one by one then you've got to look through our claim files to conf information but most critically important there is repair information that is not in our files that our insurance never had to submit we know from our file analysis that our expert did that thirty three percent of the two hundred fifty claim files that he reviewed that our replacement cost estimate overstated actual repair cost that's thirty three percent just of two hundred fifty claims that were examined that is a strong indication that there are a lot of folks that got every penny that they were owed from their very first check whether it was given to them as an e c v payment or replacement cost payment and you can't figure out who those folks are unless we get to do discovery question them get their repair records and demonstrate that we did actually make an adequate payment thank you ro