The court in Thompson v. State Farm Fire & Cas. Co., 2016 U.S. Dist. LEXIS 30308 (D. Ga. 2016), recently issued a mixed ruling on class certification regarding diminished value claims for Georgia homeowners. The plaintiffs sought certification for breach of contract claims against an insurer, as well as claims for breach of duties created by the homeowners insurance policy. The court certified a class of insureds for claims based on the insurer’s alleged breach of duty to assess damaged property for diminished value, but declined to certify a class on a separate claim for breach of duty to pay for diminished value.

In Thompson, the lead plaintiffs owned a Georgia townhouse insured by State Farm under a homeowners policy. The plaintiffs’ home suffered water damage from a burst pipe, and State Farm paid for repairs to the damaged areas. State Farm did not, however, assess whether the repaired home was diminished in value after the repairs were made, and refused to pay for any alleged diminished value. The plaintiffs filed an alleged class action of Georgia insureds, arguing that State Farm’s policy insuring “for accidental direct physical loss” created a duty for State Farm to assess and pay for diminished value.

In deciding the plaintiffs’ motion for class certification, the court substantially agreed with the plaintiffs’ reliance on two Georgia Supreme Court cases, finding that State Farm could not get around Mabry’s holding that “insurance companies have a duty to assess for diminished value and that when they fail to perform that assessment, their insureds have a remedy.” State Farm Mut. Auto. Ins. Co. v. Mabry, 556 S.E.2d 114 (2001). The Thompsoncourt also pointed toward Royal Capital Dev., LLC v. Md. Cas. Co., 728 S.E.2d 234 (2012), as extending Mabry’s holding to homeowners insurance.

The Thompson court did, however, decline to certify a class for alleged breach of duty to pay for diminished value. Unlike the alleged breach of duty to assess for diminished value, the court found that the issue of diminished property value was not a common question among insureds, but rather would require a claim-by-claim analysis. The court said, “There is only a breach if in fact a class member’s property decreased in value notwithstanding full repair,” and “even after adjudicating the issue of coverage, significant questions concerning State Farm’s liability would remain for each class member.”

This decision heightens the risk of class action litigation for homeowners claims where the insurer fails to assess for diminished value after repairs have been completed, at least in those states requiring payment of diminution in value. Thompson suggests that insurers may be subject to class action lawsuits for alleged breach of duty to assess for diminished value, even when the insurer denies that it offers such coverage. While the Thompson court denied certification for alleged breach of duty to pay for diminished value, insurers may be best served by expressly excluding coverage for diminished value under homeowners’ policies.