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Reddick v. Allstate New Jersey Insurance Company

2011 WL 6339688 (U.S. Dist. Ct. D. N.J. 2011) (Unpublished)

CONTRACTS; INTERPRETATION — Just because a contract could have included more language to reiterate an already-clear meaning does not mean that it must do so, so long as the contract language is clear, a draftsperson need not always use the same formulation of words simply because it chose to use that formulation in another context.

A homeowner filed a class action complaint against her insurance company, alleging that the insurance company had “engaged in a practice of refusing to pay replacement costs if an insured party has not completed repairs on or replaced damaged property within 180 days of actual cash value payment.” She contended that “this practice violate[d] the terms of [the insurance company’s] standard contract with its customers and [ran] afoul [of] New Jersey law.” The policy in question provided that if the insured did “not repair or replace the damaged, destroyed or stolen property, payment [would] be on actual cash value basis.” The policy also further provided, as follows: “You may make claim for additional payment as described in paragraph c, and paragraph d if applicable, if you repair or replace the damaged, destroyed or stolen property within 180 days of the actual cash value payment.”

Paragraph c of the policy read as follows: “We will make additional payment to reimburse you for costs in excess of actual cash value if you repair, rebuild or replace the damaged, destroyed or stolen covered property within 180 days of the actual cash value payment.” Paragraph d read as follows: “[W]e will make additional payment to reimburse you for costs in excess of actual cash value if you repair, rebuild or replace damaged, destroyed or stolen covered personal property or wall-to-wall carpeting within 180 days of the actual cash value payment.”

The policyholder incurred damage to her home and some of her personal property. The insurance company paid “the actual cash value of the loss, but because she only undertook and did not complete repair and replacement within 180 days of actually receiving cash value payment, [the insurance company] did not pay her the full replacement value.”

In response to the suit, the insurance company argued that the policyholder had “failed to state a claim for breach of contract because the contract’s plain language indicate[d] that a claimant is not entitled to the ‘additional payment’ unless [the claimant] fully repairs or replaces the covered property within” the 180 day period. In response, the homeowner argued that “[a]t the least, said language is ambiguous” and argued that the policy should be read consistently with her “reasonable interpretation that repair and replacement must only be undertaken within 180 days of the payment ... to qualify.” Basically, she argued that absent the word “complete,” the policy should be interpreted in her favor. The Court rejected that particular argument as “a legal conclusion masquerading as a fact.” It also rejected her argument with respect to “the absence of the word ‘complete.’” According to the Court, “just because the policy could have included more language to reiterate an already-clear meaning [did] not mean that the policy must do so.” The woman also argued that in a number of places in the policy the insurance company had paired the phrase “repair or replacement” with the word “completed,” and that meant that where the insurance company had not done so, “completion” was not necessary. The Court rejected this argument, holding that the insurance company need not always use the same formulation and, “so long as the language is clear, [the insurance company was not] bound by some specific formulation simply because [it had] chosen to use that formulation in other context.”

The homeowner argued that New Jersey insurance law imposed more favorable standards than the actual policy because the applicable statute contained no language requiring completion of repairs within 180 days. The Court rejected this argument, holding that the applicable statute simply sets a ceiling on the amount the policy must cover. In effect, once the policy covers “actual cash value,” there is no provision that would eliminate the insurance company’s right to require completion within 180 days.

As to the policyholder’s claim under the New Jersey Consumer Fraud Act, the Court merely held that the allegations did not establish an unconscionable practice because the insurance company’s practices were consistent with the language in the policy and the insurance company’ decision to abide by those terms did not constitute an unconscionable practice.


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