Opinion
Civil Action No. 00-2045, Section: "I" (R)
January 25, 2001
ORDER AND REASONS
Before the Court is defendant USAA Casualty Insurance Company's motion to dismiss plaintiff Susan R. Gauthreaux's complaint. For the following reasons, the Court grants in part and denies in part defendant's motion.
I. Background
On January 26, 2000, Plaintiff Susan R. Gauthreaux struck a tractor-trailer. She was insured by USAA Casualty Insurance Company. After inspecting her vehicle, USAA's adjuster determined her automobile to be a total loss.
To establish the actual cash value of her car, USAA used a real-time database that evaluated nine similar vehicles in the local area (within an hour's drive of Franklinton, Louisiana) All nine vehicles were 1996 or 1997 model year, two-door, Ford Mustangs (like plaintiff's). Their mileage ranged from 38,000 to 75,000 miles, while the mileage on plaintiff's car was 89,247 miles. USAA calculated values for these local vehicles ranging from $6,857 to $8,913. Based on these numbers, USAA determined that the actual cash value of plaintiff's vehicle was $8,265. It then paid off the remaining amount plaintiff owed on her car and gave her the balance of $984.30. USAA asserts that it invited plaintiff to supply documents supporting a higher value, but claims she never offered any additional documentation.
On July 11, 2000, plaintiff filed a class action complaint against USAA seeking damages, statutory penalties, and attorneys' fees, which she amended on October 10, 2000. She alleges that for several years USAA has engaged in a systematic pattern of undervaluing "total loss" claims by using valuation software created and marketed by CCC Information Services Group, Inc. She claims that USAA used this software to determine "actual cash value" instead of the retail value listed in the National Automobile Dealers Association's Official Used Car Guide. She asserts that the policy term "actual cash value" is ambiguous and that under Louisiana law that ambiguity must be construed against USAA. Accordingly, she claims that USAA's failure to use the NADA guide values is both a breach of the insurance contract and bad faith adjusting under Louisiana Revised Statutes sections 22:658 and 22:1220.
USAA dnow moves to dismiss plaintiff's complaint. It argues that Louisiana law does not ordain the NADA guide as the final arbiter of a vehicle's actual cash value. It further argues that the term "actual cash value" is not ambiguous.
II. Discussion
A. Legal Standard: Rule 12(b)(6)
In a motion to dismiss for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6), the Court must accept all well-pleaded facts as true and view the facts in the light most favorable to the plaintiff. See Baker v. Putnal, 75 F.3d 190, 196 (5th Cir. 1996); American Waste Pollution Control Co. v. Browning-Ferris, Inc., 949 F.2d 1384, 1386 (5th Cir. 1991). Dismissal is warranted if "it appears certain that the plaintiff cannot prove any set of facts in support of his claim that would entitle him to relief." Piotrowski v. City of Houston, 51 F.3d 512, 514 (5th Cir. 1995) (quoting Leffall v. Dallas Indep. Sch. Dist., 28 F.3d 521, 524 (5th Cir. 1994)). In deciding whether dismissal is warranted, the Court will not accept conclusory allegations in the complaint as true. See Kaiser Aluminum Chem. Sales, Inc. v. Avondale Shipyards, Inc., 677 F.2d 1045, 1050 (5th Cir. 1982)
When deciding a Rule 12(b)(6) motion, the Court will not consider matters outside the pleadings, except those matters of which the Court takes judicial notice. See FED. R. Civ. P . 12(b); FED R. EVID. 201. See also Cinel v. Connick, 15 F.3d 1338, 1343 n. 6 (5th Cir. 1994) ("In deciding a 12(b)(6) motion to dismiss, a court may permissibly refer to matters of public record."); In re Ford Motor Co. Bronco II Prods. Liab. Litig., 909 F. Supp. 400, 403 (E.D. La. 1995) (" [T]he Court may take judicial notice of matters of public record."); Chadwick v. Layrisson, 1999 WL 717628, at *2 (E.D. La. Sept. 13, 1999) (same). Here, USAA asks the Court to take judicial notice of Directive Number 18, Valuation of Automobiles When Adjusting Losses, promulgated by the Louisiana Commissioner of Insurance on January 10, 1974 and a disclaimer published on NADA's website at http://www.nada.com/ b2b/FAQ/faq.htm. Although not technically a regulation, Directive Number 18 is directed to all insurance companies operating in Louisiana, and compliance with its provisions is mandatory. See La. Ins. Directive No. 18 (Jan. 10, 1974). Accordingly, the Court takes judicial notice of Directive Number 18 as a matter of public record and as a governing quasi-regulation. See Roemer v. Board of Pub. Works of Md., 426 U.S. 736, 742 n. 4, 96 S. Ct. 2337, 2343 n. 4 (1976) (taking judicial notice of certain state rules and regulations); H. B. Zachry Co. v. Waller Creek, Ltd. (In re Waller Creek, Ltd.), 867 F.2d 228, 238 n. 14 (5th Cir. 1989) (taking judicial notice of city ordinance, a legislative fact); United States v. Schmitt, 748 F.2d 249, 255 (5th Cir. 1984) ("The law of any State of the Union . . . is a matter of which the courts of the United States are bound to take judicial notice . . . ." (quoting Lamar v. Micou, 114 U.S. 218, 223, 5 S. Ct. 857, 859 (1885))). As the Court does not consider the website disclaimer, the Court will not take judicial notice of it.
B. Directive Number 18
The crux of plaintiff's complaint is that USAA has systematically undervalued "total loss" claims by using CCC's valuation software to determine "actual cash value" instead of the retail value listed in the NADA guide. To buttress this contention, she presents four arguments. First, the NADA guide provides the benchmark valuation because, pursuant to Directive Number 18, other sources may be consulted to determine a car's actual market value only if there is a dispute over the NADA valuation. Second, Louisiana Revised Statutes section 32:702 (11) equates a vehicle's value to the NADA guide value. Third, the Louisiana Supreme Court has opined that the NADA guide "is dispositive of a vehicle's value in this state." (Pl.'s Mem. Opp'n Def.'s Mot. Dismiss at 3-4). Fourth, the software used by USAA was not developed by an objective appraisal service.
Directive Number 18 appears to be designed to prevent insurers from using published values such as those in the NADA guide or Kelley's Blue Book as the sole determinant of the value of used cars. The directive provides:
It has come to my attention that certain insurance companies writing vehicle insurance are adjusting automobile total losses solely on the basis of values published by trade organizations. Further, certain adjusters have represented to claimants and insureds that the so-called "Blue Books" are the final arbiter of values of used cars.
Under Louisiana law and the automobile policy contract, the measure of damages where the amount of damages exceeds the value of the automobile is the value of the automobile at the time of loss. While published values of used cars may be a helpful tool in determining a settlement value, the automobile insurance company is obligated to determine the actual value of the particular car involved in the loss. Average values do not apply to particular cases. The ultimate answer must be determined by the actual market value of the particular automobile involved in the area where it is garaged. Where a dispute arises over the value of the automobile, the company must use all available sources of information over and above the published values to attempt to determine the actual market value.
All companies are hereby directed to comply with the above directive and shall advise all of their claim personnel and independent adjusters to report the details of the determination of the actual cash value of automobile total loss settlements.
La. Ins. Directive No. 18 (Jan. 10, 1974) (emphasis added). The Court is unable to locate any opinions by Louisiana courts explicitly interpreting this directive. A review of Louisiana case law reveals that while a number of courts have addressed the importance and applicability of the NADA guide, they stop short of mandating its use in all cases. For example, in State Farm Mutual Automobile Insurance Company v. Berthelot, the Louisiana Supreme Court noted the "industry-wide use" of the NADA guide. State Farm Mut. Auto. Ins. Co. v. Berthelot, 732 So.2d 1230, 1235 (La. 1999). In Hayes v. Allstate Insurance Company, the Third Circuit Court of Appeal of Louisiana required Allstate to use a NADA value because the insurer told plaintiff that it would use that figure. Hayes v. Allstate Ins. Co., 758 So.2d 900, 904 (La.App. 3d Cir.), writ denied, 766 So.2d 1280 (La. 2000). While the court also noted "with interest" that, by statute, the determination whether a motor vehicle is a total loss is determined using the NADA guide, it further observed: "[W]e do not hold that a trial court is always required to use only the NADA value" to calculate a vehicle's actual cash value. Id. See also LA. REV. STAT . § 32:702 (11). The Third Circuit's hesitation to require insurance companies to use only the NADA guide to calculate actual cash value accords with the conclusions reached by other Louisiana circuit courts. See, e.g., Bonner v. Louisiana Indem. Co., 607 So.2d 915, 917-18 (La.App. 2d Cir. 1992) (accepting valuation made without using the NADA guide); Brown v. Morgan, 449 So.2d 606, 609 (La.App. 1st Cir. 1984) (accepting valuation higher than NADA value); Usand v. New Orleans Pub. Serv., Inc., 438 So.2d 258, 260 (La.App. 4th Cir. 1983) (adjusting NADA value).
After reviewing Directive Number 18, section 32:702 (11), and the applicable case law, the Court finds that Louisiana law does not ordain the NADA guide as the final arbiter of a car's actual cash value. While Directive Number 18 requires insurers such as USAA to determine a vehicle's actual market value in the area where the vehicle is garaged, the directive does not mandate the utilization of any particular reference. Indeed, the opening paragraph expresses concern that insurance companies were adjusting total loss solely on the basis of values published by trade organizations. Although the Commissioner of Insurance recognized that published values, available in references such as Kelley's Blue Book or NADA's guide, may be "helpful tools" in determining a settlement value, he ordered insurance companies to determine "the actual value of the particular car involved in the loss." La. Ins. Directive No. 18 (Jan. 10, 1974). In the event of a dispute over the calculation of that actual market value, the Commissioner further ordered the insurance companies to use "all available sources of information" beyond the published values upon which they were apparently relying. Id. Accordingly, despite plaintiff's assertion to the contrary, Directive Number 18 does not ordain any particular reference, let alone the NADA guide, as the sine qua non of a vehicle's actual market value.
Equally unavailing is plaintiff's argument that Directive Number 18 is no longer authoritative because section 32:702 (11) defines "total loss" by reference to the NADA guide. Section 32:702 (11) defines "total loss" as "a motor vehicle which has sustained damages equivalent to seventy-five percent or more of the market value as determined by the most current National Automobile Dealers Association Handbook." LA. REV. STAT. § 31:702 (11). This section does not define "actual cash value," the term at issue here. Further, the Court finds that Directive Number 18 and section 32:702 (11) can be interpreted consistently. While section 32:702 (11) requires insurance companies to use the NADA guide to determine whether a vehicle is a total loss, Directive Number 18 addresses how to calculate the actual market value of that vehicle once it is determined to be a total loss. Furthermore, as already explained, the Court finds that the Louisiana state court opinions do not mandate the NADA guide as the benchmark for valuing a vehicle.
Notwithstanding the absence of a NADA guide mandate, Directive Number 18 requires USAA to use all available sources of information in the event of a dispute over the value of the automobile. Although "all available sources" clearly includes the NADA guide, consideration of the NADA guide does not oblige USAA to disregard more persuasive determinants. Accordingly, whether a NADA valuation is superior to another calculation is a question of fact that must be examined on a case-by-case basis. Here, plaintiff challenges USAA's calculation. To the extent she claims USAA must use only the NADA guide to determine "actual cash value," the Court finds that she does not state a claim. To the extent she claims that USAA failed to accurately calculate the actual cash value of her vehicle, the Court finds that she states a claim. In sum, there is no per se rule that the NADA guide is the only measure of actual cash value.
C. Ambiguity
Plaintiff also argues that the ambiguity of the policy term "actual cash value" requires USAA to use only the NADA guide. Despite plaintiff's characterization of the term, "actual cash value" is not ambiguous. Indeed, there is established Louisiana case law giving meaning to the term in the context of insurance contracts. For example, the Louisiana Second Circuit Court of Appeal found in Bingham v. St. Paul Insurance Company that "in determining actual cash value, the court should consider original cost, possible appreciation and depreciation, the nature of the property lost and the current replacement cost." Bingham v. St. Paul Ins. Co., 503 So.2d 1043, 1045 (La.App. 2d Cir. 1987). See also Mamou Farm Servs., Inc. v. Hudson Ins. Co., 488 So.2d 259, 262 (La.App. 3d Cir. 1986) ("Generally, it may be said that the proper test or criterion of actual cash value in a particular case depends upon the nature of the property insured, its condition, and other circumstances existing at the time of the loss." (quoting Mercer v. St. Paul Fire Marine Ins. Co., 318 So.2d 111, 114-15 (La.App. 2d 1975))). Furthermore, even assuming that the term is ambiguous, plaintiff fails to provide the Court with any persuasive authority that such ambiguity compels the use of only the NADA guide to determine actual cash value.
III. Conclusion
For the foregoing reasons, the Court grants in part and denies in part defendant USAA Casualty Insurance Company's motion to dismiss.