Diminished Value Claims Under Homeowners Coverage Certified in Georgia Class Action

Alerts / March 14, 2016

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 Thompson court 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.

If you have any questions about this alert, please contact Paul G. Karlsgodt at or 303.764.4013 or any member of BakerHostetler's Class Action Defense team.

Authorship Credit: Damon M. Durbin

Baker & Hostetler LLP publications are intended to inform our clients and other friends of the firm about current legal developments of general interest. They should not be construed as legal advice, and readers should not act upon the information contained in these publications without professional counsel. The hiring of a lawyer is an important decision that should not be based solely upon advertisements. Before you decide, ask us to send you written information about our qualifications and experience.

Related Services


In The Blogs

Previous Next
Class Action Lawsuit Defense
The Top 10 Class-Action-Related Developments of 2017
January 10, 2018
2017 was a relatively quiet year for major class action news, especially in the Supreme Court, which addressed only a handful of cases that might have an impact on class actions and reached decisions only in a couple of those cases...
Class Action Lawsuit Defense
Kentucky Federal Court Brushes Aside Pre-emptive Attack on Class Allegations in Phishing Case, Rejects Out-of-the-Box Defense Strategy
By David M. McMillan
December 28, 2017
Brushing aside apparent flaws in a proposed class definition, a federal court in Kentucky declined to dismiss class allegations against North Carolina-based pharmacy services provider Pharm-Save Inc. (Pharm-Save) stemming from a W-2...
Class Action Lawsuit Defense
Seventh Circuit Ties Class Counsel’s Recovery of Attorneys’ Fees to Amount Claimed by Class, in Context of a Judgment
November 20, 2017
On November 14, 2017, the Seventh Circuit issued its third opinion ending a class action that was almost a decade old. Holtzman v. Turza, No. 17-2330, 2017 WL 5450484 (7th Cir. Nov. 14, 2017). The class action alleged that the defendant...
Class Action Lawsuit Defense
TCPA Class Denied Certification Due to Binding Authority of Yaakov and Proof of Individualized Issues of Consent
November 13, 2017
A recent order from the Northern District of Illinois granted a defendant’s motion to deny class certification regarding “unsolicited” fax advertisements allegedly sent in violation of the Telephone Consumer Protection Act (TCPA). The...
Class Action Lawsuit Defense
Eleventh Circuit Outlines the Key to an Individual Arbitration Agreement
By Gretchen L. Jewell
October 10, 2017
The Eleventh Circuit recently upheld an arbitration agreement in a consumer class action involving checking overdraft fees. In Johnson v. KeyBank N.A., 11th Cir. No. 15-10779 (Sept. 26, 2017), the plaintiffs brought a putative class action...