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Nelson v. American Family Mutual Insurance Co.

United States District Court, Eighth Circuit

October 23, 2013

Charles P. Nelson and Darlene F. Nelson, on behalf of themselves and all others similarly situated, Plaintiffs,
v.
American Family Mutual Insurance Company, Defendant.

Bert Black, Bryce M. Miller, and Lawrence P. Schaefer, Schaefer Law Firm, LLC, for Plaintiffs.

Aaron D. Van Oort, Christina C.K. Semmer, Deborah A. Ellingboe, and Amanda J. Rome, Faegre Baker Daniels LLP, for Defendant.

MEMORANDUM OPINION AND ORDER

SUSAN RICHARD NELSON, District Judge.

I. INTRODUCTION

This matter is before the undersigned United States District Court Judge for consideration of Defendant's Objections [Doc. No. 33] to United States Magistrate Judge Steven E. Rau's September 25, 2013, Report and Recommendation ("R&R") [Doc. No. 32]. The Magistrate Judge recommended that Plaintiffs' Motion to Remand [Doc. No. 15] be denied. (Sept. 25, 2013, Report and Recommendation at 30 [Doc. No. 32].) The Magistrate Judge also recommended that Defendant's Motion to Dismiss [Doc. No. 7] be denied to the extent it seeks dismissal of Count I and II, and granted to the extent it seeks dismissal of Count III. (Id. at 31.) For the reasons set forth below, the Court overrules Defendant's objections and adopts the R&R in its entirety.

II. BACKGROUND

The R&R thoroughly documents the factual and procedural background of this case, and the Court incorporates it here by reference.

A. Factual Background

Defendant American Family Mutual Insurance ("American Family"), a Wisconsin company, sells homeowners insurance policies throughout Minnesota. (Class Action Compl. ("Compl.") ¶¶ 1, 10 [Doc. No. 1-1].) Plaintiffs Charles Nelson and Darlene Nelson, residents of Minnesota, purchased a Gold Star Homeowners Insurance Policy ("Gold Star Policy" or "Policy") from American Family for their new home in 1990, which they have renewed several times and remains in effect. (Id. ¶¶ 12-13, 30.)

Under the Gold Star Policies, the Nelsons' home had the following replacement costs: $184, 000 in 2004; $415, 500 on February 1, 2007; $427, 500 on February 1, 2008; $439, 000 on February 18, 2009; $450, 900 on February 1, 2010; and $454, 500 on February 18, 2011. (Id. ¶¶ 30, 33.) The Nelsons claim that the replacement cost of their home in 2010 did not exceed $315, 000, and during the relevant time period did not exceed $348, 297. (Id. ¶ 33, 37.) After they complained in 2011 to American Family that the estimated replacement cost for their home "greatly exceeded the actual replacement cost, " American Family reduced the replacement cost to $315, 000. (Id. ¶ 35.)

In addition, American Family's estimated replacement cost of personal property contained within the dwelling increased, at 80% of the structure's replacement cost. (Compl. ¶ 34.) American Family does not ask customers who are renewing their Policies whether there have been any changes to the "existence, nature, or age of personal property." (Id. ¶ 27.) The Nelsons claim that the personal property in their home has never been worth as much as 80% of the replacement cost of their home. (Id. ¶ 34.)

The 2004 Policy and all subsequent Policies stated:

Estimated Replacement Cost. Our residential building cost guide may be used to develop an estimated replacement cost based on general information about your dwelling. It is developed from researched costs of construction materials and labor rates. This is the minimum amount for which to insure your dwelling. The actual cost to replace your dwelling may be different. We do not guarantee that this figure will represent the actual cost to replace your dwelling. You are responsible for selecting the appropriate amount of coverage. You may wish to obtain a detailed replacement cost appraisal or estimate from a contractor. You may select a coverage amount equal to that ...

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