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Eldon Carl BRANCH, Plaintiff-Appellant, v. FARMERS INSURANCE COMPANY, INC., and Farmers Group, Inc., Defendants-Appellees.
Appellant Branch owned rental property insured against various hazards including hail by Appellee Farmers Insurance Company, Inc. Appellant's roof suffered hail damage during the Fall of 1998. Appellant, unsatisfied with the method Appellees employed in determining the amount of payment due Appellant, brought suit in the United States District Court for the Western District of Oklahoma. The district court granted summary judgment to Appellees.
Appellant contests the method of calculating losses under the Actual Cash Value provision of his dwelling policy. The policy defines “Actual Cash Value” to mean “replacement cost of the property at the time of loss less depreciation.” Aplt.App. at 165. The district court held that the cost to tear off damaged shingles and the labor cost to install new shingles were both subject to depreciation. Finding that Appellees had correctly adjusted Appellant's damages within the policy's provisions, the district court granted summary judgment to Appellees on Appellant's fraud and bad faith claims.
Appellant Branch appealed the district court's decision. The issues on appeal are whether the cost to tear off damaged shingles is subject to depreciation, whether the labor cost of installing shingles is subject to depreciation, and whether the district court erred in granting summary judgment on Appellant's fraud and bad faith claim.
At the time of appeal, a conflict existed in the Western District of Oklahoma regarding the proper application of depreciation to roof replacement claims under an actual cash value policy provision. Furthermore, there was no relevant state case law to assist us in determining these issues consistent with Oklahoma state law. Accordingly, we certified three questions to the Oklahoma Supreme Court and held this case in abatement pending a response. On March 12, 2002, the Oklahoma Supreme Court issued its response. On September 10, 2002, the Oklahoma Supreme Court denied Appellant's Petition for Rehearing. We now issue this opinion consistent with the direction given to us. The Oklahoma Supreme Court opinion is attached hereto and by reference made a part of this opinion.
We reverse the district court's holding that the labor cost to remove damaged shingles is depreciable. We affirm the district court's holding that the labor to install new shingles is subject to depreciation. Because Farmer's interpretation of the actual cash value provision was a reasonable position taken in litigation of a legitimate coverage dispute, we affirm the district court's grant of summary judgment against Appellant's fraud and bad faith claims. See Thompson v. Shelter Mut. Ins., 875 F.2d 1460, 1462 (10th Cir.1989) (holding no breach of good faith duty occurs when insurer litigates a legitimate coverage dispute based on a reasonable interpretation of an insurance policy provision).
We AFFIRM in part, REVERSE in part, and REMAND this proceeding to the district court for entry of judgment consistent with this opinion.
ATTACHMENT
McKAY, Circuit Judge.
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Docket No: No. 00-6385.
Decided: November 20, 2002
Court: United States Court of Appeals,Tenth Circuit.
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