Court Opinion

ID: 2676735
Source: CourtListenerOpinion
Date Created: 2014-06-02 20:00:15.098078+00
Date Added: 2024-06-11T13:10:58.116327
License: Public Domain

NOT PRECEDENTIAL

                  UNITED STATES COURT OF APPEALS
                       FOR THE THIRD CIRCUIT
                            _____________

                                No. 13-3571
                               _____________

LOUIS PELLEGRINO; CHRISTINE PELLEGRINO, INDIVIDUALLY AND ON
          BEHALF OF ALL OTHERS SIMILARLY SITUATED,
                                     Appellants

                                      v.

 STATE FARM FIRE AND CASUALTY COMPANY, INDIVIDUALLY AND
  ON BEHALF OF ALL OTHER AFFILIATED INSURANCE COMPANIES
                      ________________

               On Appeal from the United States District Court
                     for the Eastern District of Pennsylvania
                        District Court No. 2-12-cv-02065
              District Judge: The Honorable Mitchell S. Goldberg

              Submitted Pursuant to Third Circuit L.A.R. 34.1(a)
                              March 7, 2014

        Before: RENDELL, SMITH, and HARDIMAN, Circuit Judges

                        (Opinion Filed: June 2, 2014)

                          _____________________

                                 OPINION
                          _____________________

SMITH, Circuit Judge.
      Named plaintiffs Louis and Christine Pellegrino appeal the District Court’s

order granting State Farm Fire and Casualty Company’s (“State Farm’s”) motion

to dismiss the First Amended Class Action Complaint. For the reasons that follow,

we will affirm.

                                         I.

      On March 10, 2011, the Pellegrinos suffered storm damage to their home,

including damage to small portions of their roof and three faces of siding. Prior to

this date, the Pellegrinos had obtained a homeowner’s insurance policy from State

Farm. This policy contained the following provision concerning coverage:

      1. A1 – Replacement Cost Loss Settlement – Similar Construction

      a.    We will pay the cost to repair or replace with similar
            construction . . . the damaged part of the property covered
            under [a previous provision], subject to the following:

            (1) until actual repair or replacement is completed, we will
            pay only the actual cash value at the time of the loss of the
            damaged part of the property, up to the applicable [policy] limit
            . . . , not to exceed the cost to repair or replace the damaged
            part of the property;

            (2) when the repair or replacement is actually completed, we
            will pay the covered additional amount you actually and
            necessarily spend to repair or replace the damaged part of the
            property . . . .

J.A. 142 (emphasis added). At the Pellegrinos’ request, State Farm provided an

estimate for the damage. In a section titled “Summary for Dwelling,” the estimate

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lists a “Replacement Cost Value” of $27,105.77. This value includes, inter alia,

the cost to replace the damaged portions of the Pellegrinos’ roof and siding; it does

not include the cost to replace the entire roof and siding. From this “Replacement

Cost Value,” depreciation, general contractor overhead and profit on depreciation,

and the Pellegrinos’ deductible are subtracted to produce a “Net Actual Cash Value

Payment” of $17,091.58.

      The next section, titled “Maximum Additional Amounts Available If

Incurred,” lists a “Total Amount of Claim if Incurred” of $43,711.21. This value

includes, inter alia, the cost to replace the Pellegrinos’ entire roof and three entire

faces of siding.1 The cost of full replacement is classified as a “Paid When

Incurred (PWI)” item. The term “Paid When Incurred” does not appear in the

insurance policy, but is defined on this summary page as “items, which may not be

necessary to the repair of your property damaged by a covered loss.”

      After receiving this estimate, the Pellegrinos chose not to undergo a full roof

and siding replacement and seek reimbursement from State Farm. Instead, they

filed a complaint in the Philadelphia Court of Common Pleas, alleging that State

1
        As the District Court and State Farm note, the “Total Amount of Claim if
Incurred” value does not technically include full replacement of all the shingles on the
roof. Instead, it includes the cost of an alternative and costlier method of replacing the
damaged shingles on the roof—a method that State Farm did not predict would be
necessary. For the sake of simplicity, we will use the term “full replacement” of the roof
to refer to this alternative method of replacing the damaged shingles.
                                            3
Farm was required to pay them the cost of a full roof and siding replacement as

part of the “Actual Cash Value Payment,” regardless of whether these repairs were

actually made. The complaint alleges that State Farm had determined that it was

contractually obligated to replace the entire roof and the siding on three faces of

the house because a partial repair could not be completed with “matching”

materials. Despite this determination, the Pellegrinos argued, State Farm imposed

an impermissible precondition to reimbursement by designating full-replacement

costs as “PWI” and deducting them from the “Actual Cash Value Payment.”

      State Farm removed the action to the United States District Court for the

Eastern District of Pennsylvania and moved to dismiss the complaint for failure to

state a claim. The Pellegrinos amended their complaint on May 15, 2012, alleging

that State Farm’s refusal to pay them the full actual cash value of their loss

constituted a breach of contract, bad faith, and a violation of the Unfair Trade

Practices and Consumer Protection Law (“UTPCPL”), 73 Pa. Cons. Stat. § 201–

2(4)(xxi).

      On July 29, 2013, the District Court granted State Farm’s motion to dismiss

the amended complaint, and held that “there is no duty upon State Farm, either

within the contract or derived from Pennsylvania law, to provide its insureds with

matching costs on an actual cash value basis prior to repair or replacement.” J.A.

15–16. This timely appeal followed.
                                        4
                                         II.

      The District Court had jurisdiction pursuant to 28 U.S.C. §§ 1332(d) and

1453, and pursuant to 28 U.S.C. §§ 1332(a) and 1367.             We have appellate

jurisdiction pursuant to 28 U.S.C. § 1291. We exercise plenary review of a district

court’s grant of a motion to dismiss under Federal Rule of Civil Procedure

12(b)(6). Burtch v. Milberg Factors, Inc., 662 F.3d 212, 220 (3d Cir. 2011).

                                         III.

      For substantially the reasons advanced by the District Court, we agree that

neither the contract nor state law imposes a duty upon State Farm to pay the cost of

full replacement of the Pellegrinos’ roof and siding as part of the “Actual Cash

Value Payment.” Further, we note that because State Farm has agreed to pay the

costs of these repairs once they are contracted to be completed, there is no risk that

the Pellegrinos will not be made whole or be burdened with the obligation of

paying for the repairs up front. See Kane v. State Farm Fire & Cas. Co., 841 A.2d

1038, 1050 (Pa. Super. Ct. 2003) (allowing insurer to deduct depreciation costs

from its actual cash value payment when insurer agreed to pay such costs once the

repairs were contracted to be completed).        We also agree that allowing the

Pellegrinos to recover the cost of replacing their entire roof and siding when they

had no intention of undertaking these repairs would result in a “windfall” and

produce “absurd results.” J.A. 15 & n.4.
                                           5
      Accordingly, we conclude that the District Court properly dismissed the

Pellegrinos’ breach of contract claim. Because the Pellegrinos’ bad faith and

UTPCPL claims require proof that State Farm breached its contract, we conclude

that the District Court properly dismissed these claims as well.

      For the reasons stated above, we will affirm.

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