Opinion ID: 2331228
Heading Depth: 1
Heading Rank: 5

Heading: Limitations on Coverage

Text: ¶ 16 The Court of Appeals held that coverage was not limited under the policy. It recognized a division of authority on this question, which has been widely considered by other courts. [3] Moeller, 155 Wash.App. at 144 n. 10, 229 P.3d 857 (collecting cases). Here, the limits of liability clause provides that Farmers' liability for loss cannot exceed [t]he amount which it would cost to repair or replace damaged [. . .] property with other of like kind and quality, or with new property less an adjustment for physical deterioration and/or depreciation. CP at 20. In other words, argues Moeller, the clause is not an exclusion for diminished value, rather it simply cap[s] Farmers' liability at the pre-loss value of the vehicle so as to prevent financial betterment. Br. of Appellant at 9. The Court of Appeals agreed with Moeller that the term `like kind and quality' means a restoration of appearance, function, and value. Moeller, 155 Wash.App. at 145, 229 P.3d 857 (emphasis omitted). Thus, it concluded the policy requires Farmers to repair Moeller's vehicle and pay him the difference in value between his repaired vehicle and its preaccident worth. This accords with a minority view holding the meaning of repair unambiguously includes an accounting of pre- and postaccident value. See, e.g., State Farm Mut. Auto. Ins. Co. v. Mabry, 274 Ga. 498, 505-08, 556 S.E.2d 114 (2001); Gonzales v. Farmers Ins. Co. of Or., 345 Or. 382, 394, 196 P.3d 1 (2008). Other courts have held that the phrase like kind and quality is ambiguous and therefore must be construed against the insurer. See, e.g., Hyden v. Farmers Ins. Exch., 20 P.3d 1222, 1225 (Colo.App.2000). ¶ 17 Farmers claims diminished value loss is unambiguously excluded by its limits of liability and payment of loss provisions. It argues that a car is either a total loss, or it is repairable, and that an insurer meets its obligation to repair when it returns the car to good and useable condition. Pet'r's Suppl. Br. at 4-8. Farmers contends that the Court of Appeals' view reads the insurer's option to repair out of the contract. Farmers maintains that like kind and quality means if an insurer elects to repair a car and must replace parts in doing so, then the replacement parts must be of `like kind and quality,' or if the insurer elects to replace a damaged car, then the replacement must be of `like kind and quality.' Id. at 11 (citing Davis v. Farmers Ins. Co. of Ariz., 140 N.M. 249, 255, 142 P.3d 17 (Ct.App.2006)). Likewise, Farmers contends that the Court of Appeals ignored the policy's payment of loss provision, which clearly gives Farmers the option of compensating loss by either money or repair or replacementbut, does not allow a combination of the three. ¶ 18 Farmers relies on [t]he modern majority of cases [that] agree that `repair or replace' unambiguously refers to physical restoration of the vehicle. Davis, 140 N.M. at 253, 142 P.3d 17. These courts have variously found that value was not required by a repair or replace policy because repair unambiguously encompasses only a concept of tangible, physical value, see, e.g., Sims v. Allstate Ins. Co., 365 Ill.App.3d 997, 1001, 851 N.E.2d 701, 303 Ill.Dec. 514 (2006), or because a reading that encompassed value would eliminate an insurer's option to either repair or compensate with money. See, e.g., O'Brien v. Progressive N. Ins. Co., 785 A.2d 281, 287 (Del.Supr.2001); Sims, 365 Ill. App.3d at 1003-04, 303 Ill.Dec. 514, 851 N.E.2d 701; Davis, 140 N.M. at 255, 142 P.3d 17. ¶ 19 For a variety of reasons, we reject this view and conclude that the minority view on the proper interpretation of the limitations at issue is the more compelling. First and foremost, the majority view's framework ignores important presumptions in favor of the insurance consumer that are inherent in the rules of construction regarding insurance contracts. We must read an insurance contract as an average person would read it. Eurick, 108 Wash.2d at 341, 738 P.2d 251. Thus, the lens through which we view this question is from the point of view of the consumer. From this point of view, the bargain of the contract is to return the consumer to his preaccident position with respect to the value of his car. Strictly construing the limiting language of Farmers' policy, as we must, it does not convey to the average policyholder that the value of coverage may be less if Farmers repairs a vehicle rather than replacing or totaling it. Rather, the reasonable expectation is that, following repairs, the insured will be in the same position he or she enjoyed before the accident. ¶ 20 Farmers contends that the phrase like kind and quality carries with it no concept of value but simply means any repairs will be made with parts of like kind and quality. But even Farmers' interpretation does not rule out a reading of the contract that reasonably assumes that repairs of like kind and quality will return the car to its preaccident value. Certainly, an average consumer would expect to be put in the same position whether his or her car was totaled or repaired. Moreover, under the policy, the phrase like kind and quality applies to replacement as well as repair. Farmers does not contend that in replacing a damaged car or damaged equipment, an acceptable substitute is a replacement that has suffered an accident. This would put the insured in the position he found himself in after the accident, not before. We find the limits of liability provision ambiguous at best. Because ambiguities are construed against the insurer, this clause does not relieve Farmers from covering a diminution in value between a preaccident and postrepair vehicle. Accord Hyden, 20 P.3d at 1225; Mabry, 274 Ga. at 505-08, 556 S.E.2d 114. [4] ¶ 21 Farmers claims that Moeller's reading of the limits of liability clause means Farmers loses its option to repair instead of totaling out the car. But under Moeller's reading, Farmers retains that option; it is merely that either option must result in coverage of equal value to the insured. Likewise, the plain language of the payment of loss provision also does not foreclose coverage. While the provision is phrased in the disjunctive, giving Farmers the option to either compensate by monetary payment or repair, the word or does not render the options mutually exclusive. For example, the policy recognizes that loss may be recouped when a car is damaged or stolen. Clearly, a car may be both damaged and stolen, with losses stemming from each occurrence. It is also reasonable to anticipate situations where some losses are repaired, others replaced, and some compensated with cash, as when a heavily customized car is damaged. The insurer may fix the car but replace or pay cash for the custom equipment. The plain language of the payment of loss provision does not foreclose coverage for diminished value when repairs are made. ¶ 22 As the Court of Appeals noted, some of the cases relied upon by Farmers as expressing the majority view involved contracts that explicitly gave the insurer the option of choosing between repair or cash compensation for the value of the car, the lesser of the two. Moeller, 155 Wash.App. at 144 n. 10, 229 P.3d 857; see, e.g., O'Brien, 785 A.2d at 285. Significantly, this policy includes no such language. Other cases in the majority camp also fail to address the ambiguity caused by the policy's promise to repair or replace with like kind and quality. See, e.g., id. at 288-91 (focusing its ambiguity discussion on propriety of extrinsic evidence); Bickel v. Nationwide Mut. Ins. Co., 206 Va. 419, 423-24, 143 S.E.2d 903 (1965) (omitting ambiguity discussion altogether). Still others frame much of their analysis around the notion that stigma damages are disfavored, but this is a measure of damage Moeller does not seek. See, e.g., Davis, 140 N.M. at 253-54, 142 P.3d 17 (citing a number of cases that take issue with a claim for stigma damages). ¶ 23 Because the average insurance consumer would read Farmers' policy to provide coverage of equal value when a car is repaired, replaced, or totaled, the coverage provision encompasses diminished value loss, and the limits of liability and payment of loss provisions do not unambiguously exclude it. We affirm the Court of Appeals and hold that under the terms of the policy at issue, Farmers' policy provides coverage for diminished value after a car is repaired.
¶ 24 A trial court's decision to grant class certification is reviewed for abuse of discretion. Lacey Nursing Ctr., Inc. v. Dep't of Revenue, 128 Wash.2d 40, 47, 905 P.2d 338 (1995). Abuse of discretion occurs only when a trial court's decision is `manifestly unreasonable, or exercised on untenable grounds, or for untenable reasons.' Mayer v. Sto Indus. Inc., 156 Wash.2d 677, 684, 132 P.3d 115 (2006) (quoting Assoc. Mortg. Investors v. G.P. Kent Constr. Co., 15 Wash.App. 223, 229, 548 P.2d 558 (1976)). ¶ 25 Class certification is governed by CR 23. CR 23 is liberally interpreted because the `rule avoids multiplicity of litigation, saves members of the class the cost and trouble of filing individual suits[,] and . . . also frees the defendant from the harassment of identical future litigation.' Weston v. Emerald City Pizza, LLC, 137 Wash.App. 164, 168, 151 P.3d 1090 (2007) (alterations in original) (quoting Smith v. Behr Process Corp., 113 Wash.App. 306, 318, 54 P.3d 665 (2002) (quoting Brown v. Brown, 6 Wash.App. 249, 256-57, 492 P.2d 581 (1971))). A class is always subject to later modification or decertification by the trial court, and hence the trial court should err in favor of certifying the class. Id. ¶ 26 CR 23(a), which concerns the familiar prerequisites for certification involving numerosity, commonality, typicality, and fair and adequate protection of class interests by the class representative, is not at issue here. Instead, the challenge to certification arises from the requirements to maintain a class action under CR 23(b). A class action may be maintained under CR 23(b)(1), (2), or (3). Here, Moeller sought to maintain his class action under both CR 23(b)(2), governing actions for injunctive relief, and CR 23(b)(3), governing actions for damages. The trial court denied certification under CR 23(b)(2), finding the requested relief, as pled, is predominately a claim for damages, not equitable relief. CP at 1596. Moeller does not challenge that conclusion. The court did, however, certify the action under CR 23(b)(3), and it is that ruling that concerns us here. ¶ 27 CR 23(b)(3) requires the court to find that questions of law or fact common to the members of the class predominate over any questions affecting only individual members. CR 23(b)(3)(A)-(D) lists matters pertinent to the findings, including subsection (D), which requires the court to consider the difficulties likely to be encountered in management of a class action. ¶ 28 Farmers contends that the trial court abused its discretion in certifying the class under CR 23(b)(3) because it did not first require Moeller to prove Farmers' liability as to every member of the class. Pet'r's Suppl. Br. at 15. The court disregarded Moeller's admission that not everyone in the class suffered damage caused by Farmers' failure to tender a diminished value payment, and failed to acknowledge that this admission means Moeller cannot establish class-wide liability. Id. (footnote omitted). It is a violation of due process, argues Farmers, to allow Moeller to proceed with a plan to obtain a class-wide award of damages because it would allow damages to be awarded before individual class members prove they suffered damage by Farmers. Id. ¶ 29 Farmers exaggerates Moeller's admission. Moeller points out that the trial court took care to address Farmers' concerns regarding proof of damages and did not find them persuasive enough to bar class certification. Suppl. Br. of Resp't at 15. In addition, Moeller contends he has not actually admitted that some class members have no claim. His admission was merely a discussion of how he would arrive at a measure of class-wide damages, taking into account any hypothetical class member whose car might have been in a previous accident and thus experienced no diminution in value. Answer to Pet. for Review at 13-15. ¶ 30 Moeller is correct that the claimed admission is not particularly relevant. It arises, as Moeller states, in the context of a discussion as to how the class will provide an accurate estimate of class-wide damages. See Report of Proceedings (RP) (June 27, 2002) at 69-103. Moeller is also correct that the trial court specifically noted that class certification would not impede Farmers' ability to defend against individual claims, presumably encompassing a defense based on lack of damages. After carefully and closely considering all of these factors, my decision is that a class action is a superior, although not perfect means, for policyholders to pursue any claims they may have for inherent diminished value against Farmers. The Court finds that such an action should not, and will not, impede Farmers' ability to investigate particular class members [sic] claims, and present evidence on individual claims supporting defenses unique to each claim and defend against the nature and extent of damages, if any, in this Court. CP at 1581. ¶ 31 Farmers' due process argument relies on Sitton v. State Farm Mutual Automobile Insurance Co., 116 Wash.App. 245, 258 & n. 33, 63 P.3d 198 (2003). But Sitton is distinguishable from this case. There the trial court accepted a bifurcated trial plan that ultimately resulted in damages being determined before causation. Id. at 258-59 & n. 33, 63 P.3d 198. This proved problematic for the Sitton court, which did not reverse the trial court's certification decision under CR 23(b)(3), but did vacate the trial plan. Id. at 261, 63 P.3d 198. Here, although Moeller established his mathematical model for determining a figure for aggregate, class-wide damages, RP (June 27, 2002) at 69-104, there is no indication that damages would be proved or awarded before causation is determined. ¶ 32 The standard for class certification is abuse of discretion. The trial court heard four days of oral argument on this issue and considered extensive briefing. See CP at 1573. Nothing in the record supports the proposition that the trial court's decision is unreasonable or untenable. We hold that the trial court did not abuse its discretion in certifying the class under CR 23(b)(3).