Nanika Wilkerson v. Am. Family Ins. Co.

RECOMMENDED FOR PUBLICATION
Pursuant to Sixth Circuit I.O.P. 32.1(b)
File Name: 21a0105p.06

UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT

┐
NANIKA WILKERSON, individually and on behalf of all
│
others similarly situated,
│
Plaintiff-Appellant, > No. 20-4113
│
│
v. │
│
AMERICAN FAMILY INSURANCE COMPANY, │
Defendant-Appellee. │
┘

Appeal from the United States District Court
for the Northern District of Ohio at Cleveland.
No. 1:19-cv-02425—Christopher A. Boyko, District Judge.

Decided and Filed: May 13, 2021

Before: GUY, DONALD, and MURPHY, Circuit Judges.
_________________

COUNSEL

ON BRIEF: Jacob L. Phillips, NORMAND PLLC, Orlando, Florida, for Appellant. Adam
Arceneaux, Jenny R. Buchheit, ICE MILLER LLP, Indianapolis, Indiana, John P. Gilligan,
Steven D. Forry, ICE MILLER LLP, Columbus, Ohio, for Appellee.

MURPHY, J., delivered the opinion of the court in which GUY, J., joined. DONALD, J.
(pp. 11–16), delivered a separate dissenting opinion.
_________________

OPINION
_________________

MURPHY, Circuit Judge. When an insured motorist gets into a car accident, American
Family Insurance Company caps the amount it will pay for damage to the car. American
Family’s standard insurance policy indicates that it will pay no more than the lesser of the car’s
 No. 20-4113 Wilkerson v. Am. Family Ins. Co Page 2

“actual cash value” or “the amount necessary to repair or replace” it. If the car is a total loss, the
insured typically must pay various taxes and fees when buying a replacement. This appeal
addresses how these expenses fit within American Family’s payment obligations. Should the
taxes and fees be included in the estimate of the damaged car’s “actual cash value” if American
Family opts to pay that amount? Or are they included only if American Family decides to pay
the “amount necessary to . . . replace” the car? After Nanika Wilkerson got into a car accident,
American Family took the latter position and refused to add these taxes and fees to its estimate of
the “actual cash value” of Wilkerson’s damaged car. Wilkerson brought this breach-of-contract
suit on behalf of a class of individuals who also were not paid these expenses. The district court
dismissed her complaint, reasoning that the “actual cash value” of a damaged car under
American Family’s policy unambiguously excludes the taxes and fees necessary to buy a
replacement. We agree and affirm.

I

American Family insured Wilkerson’s Chevrolet Impala. Wilkerson was in a car
accident. She filed a claim.

American Family’s insurance policy notes that it will pay for “loss of or damage to your
insured car and its equipment, less the deductible[.]” Policy, R.1-1, PageID#25. But the policy
does not cover all losses in unlimited amounts. In a “Limits of Liability” section, it adds that
American Family will pay no more than the lesser of “the actual cash value of the stolen or
damaged property” or “the amount necessary to repair or replace the property.” Id., PageID#26.

In Wilkerson’s case, American Family concluded that the cost to “repair or replace” her
Impala exceeded its pre-accident “actual cash value.” It thus found the Impala to be a “total
loss.” American Family contracted with a third party, AudaExplore North America, to calculate
the Impala’s value. AudaExplore estimated the Impala’s market value based on its location
(northeast Ohio), its mileage (45,683), its condition (minor wear), and the recent advertised
prices of other 2010 Impalas in the area (ranging from $8,218 to $10,033). AudaExplore
ultimately valued Wilkerson’s car at $9,979. American Family subtracted Wilkerson’s $500
deductible and paid her $9,479.
 No. 20-4113 Wilkerson v. Am. Family Ins. Co Page 3

Wilkerson brought suit under the Class Action Fairness Act. See 28 U.S.C. § 1332(d).
She interpreted the phrase “actual cash value” in American Family’s insurance policy to include
various sales taxes and fees that a party typically must incur when buying a replacement car
(whether or not a party actually incurs those expenses in a given case). And she claimed that
American Family breached the contract because AudaExplore’s valuation, and American
Family’s payout, did not include these taxes and fees. She sought $673.58 for the taxes
(an amount representing the state and local sales taxes that would have been imposed for a car
priced at the Impala’s value). She also sought $19.50 for the fees charged in Ohio to transfer a
car’s title and registration. She sued on behalf of herself and a class of individuals who likewise
did not receive payment for these taxes and fees.

The district court dismissed her complaint. We review its decision de novo. See Nixon v.
Wilmington Tr. Co., 543 F.3d 354, 356 (6th Cir. 2008).

II

A

Both parties agree that Ohio contract law applies to Wilkerson’s claim. See Masco Corp.
v. Wojcik, 795 F. App’x 424, 427 (6th Cir. 2019). “Under Ohio law, ‘[i]f a contract is clear and
unambiguous, then its interpretation is a matter of law’” for the court. Id. (quoting Nationwide
Mut. Fire Ins. Co. v. Guman Bros. Farm, 652 N.E.2d 684, 686 (Ohio 1995)). If, however, the
contract is facially ambiguous, the court may resort to evidence outside the contract to determine
its meaning. See Westfield Ins. Co. v. Galatis, 797 N.E.2d 1256, 1261 (Ohio 2003). And if the
reading favoring the insured is a reasonable way to resolve any ambiguity, the court generally
must adopt that reading because insurance contracts are construed against their drafters
(normally, the insurers). See id. at 1262; Perry v. Allstate Indem. Co., 953 F.3d 417, 421 (6th
Cir. 2020).

This appeal thus turns on whether the phrase “actual cash value of the stolen or damaged
property” in American Family’s insurance policy unambiguously excludes the taxes and fees
typically incurred to buy replacement property. Policy, R.1-1, PageID#26. When deciding
whether a contract is unambiguous, Ohio courts presume that its language takes its ordinary
 No. 20-4113 Wilkerson v. Am. Family Ins. Co Page 4

meaning. Ohio N. Univ. v. Charles Constr. Servs., Inc., 120 N.E.3d 762, 766 (Ohio 2018);
Nationwide, 652 N.E.2d at 686. If answered from this perspective, the question in this case
would be easy. The ordinary insured motorist (and ordinary speaker of the English language)
would not say that the taxes and fees incurred to buy a replacement car are part of the “actual
cash value” of the damaged car. The word “value” has a plain meaning: “The material or
monetary worth of something; the amount at which something may be estimated in terms of a
medium of exchange, as money or goods, or some other similar standard.” Oxford English
Dictionary (online ed.) (last visited May 3, 2021). The modifiers (“actual cash”) next suggest
that the policy picks dollars as the standard of measurement. And the ensuing prepositional
phrase (“of the . . . damaged property”) identifies the item whose worth is being measured.
Putting these phrases together, the clause directs the parties to estimate the damaged car’s
monetary worth. And its “worth” does not include these taxes and fees.

But things are not so simple. Ohio courts only presume that a contract’s words bear their
ordinary meaning. The context sometimes shows that the parties instead intended for a special
meaning, such as when a phrase has developed a technical usage over time. See Laboy v.
Grange Indem. Ins. Co., 41 N.E.3d 1224, 1227 (Ohio 2015); Gomolka v. State Auto. Mut. Ins.
Co., 436 N.E.2d 1347, 1351 (Ohio 1982). And here, the phrase “actual cash value” has become
a legal term of art in this insurance context. See Black’s Law Dictionary 1784 (10th ed. 2014);
J.A. Tyler, Annotation, Test or Criterion of “Actual Cash Value” under Insurance Policy
Insuring to Extent of Actual Cash Value at Time of Loss, 61 A.L.R.2d 711, Westlaw (database
updated 2021).

Analyzing the question from this special-meaning perspective adds some complexity to
our answer. On the one hand, the phrase “actual cash value” still largely tracks its ordinary
meaning even in this insurance setting. As one authority notes: “Ordinarily, the measure of
damages for the loss or destruction of personal property is its market value, if it has a market
value[.]” Tyler, supra, 61 A.L.R.2d 711 § 3. As another says: “In physical damage
coverage . . . the phrase is generally considered to be the fair market value[.]” 6 Andrew
Janquitto, New Appleman on Insurance Law Library Edition § 62.08[1][b][i], Lexis (database
updated 2020). Many state courts (such as Texas) thus view fair market value as the default
 No. 20-4113 Wilkerson v. Am. Family Ins. Co Page 5

definition of “actual cash value.” See, e.g., Singleton v. Elephant Ins. Co., 953 F.3d 334, 337–38
(5th Cir. 2020) (per curiam); Clark v. Clarendon Ins. Co., 841 So. 2d 1039, 1046 (La. Ct. App.
2003). And definitions of “fair market value” or “market value” generally resemble the
definition of value: “The price that a seller is willing to accept and a buyer is willing to pay on
the open market and in an arm’s length transaction.” Black’s Law Dictionary, supra, at 1785.
So if “actual cash value” in American Family’s policy adopted this definition, it would again
unambiguously exclude the taxes and fees required to buy a replacement car. See Williams-
Diggins v. Permanent Gen. Assurance Corp., 157 N.E.3d 220, 225 (Ohio Ct. App. 2020) (citing
cases). As we ourselves have reasoned, “negotiating parties may consider taxes and fees when
agreeing on a price, but that is because they are factors that influence market value, not because
they ‘should be added to the price when calculating market value.’” Pieczonka v. Progressive
Select Ins. Co., 840 F. App’x 856, 858 (6th Cir. 2021) (quoting Singleton, 953 F.3d at 338).

On the other hand, the phrase “actual cash value” in this insurance setting also can mean
“[r]eplacement cost minus normal depreciation” for the damaged car. Black’s Law Dictionary,
supra, at 1784. Some state courts (such as Florida) have adopted this replacement-cost-minus-
depreciation definition as their default rule. See Janquitto, supra, § 62.08[1][b][i]; Tyler, supra,
61 A.L.R.2d 711 § 4; Singleton, 953 F.3d at 337 n.3. And if “actual cash value” in American
Family’s policy adopted this idiosyncratic definition, the policy might well include the taxes and
fees that Wilkerson seeks because those expenses are likely part of the typical “replacement
costs.” See, e.g., Ostendorf v. Grange Indem. Ins. Co., 2020 WL 134169, at *3 (S.D. Ohio Jan.
13, 2020); Sos v. State Farm Mut. Auto. Ins. Co., 396 F. Supp. 3d 1074, 1080–81 (M.D. Fla.
2019).

The choice between these dueling definitions is thus critical to resolving this case.
Although many state courts have chosen one of the definitions as their “background rule,”
Singleton, 953 F.3d at 337 n.3, the Ohio Supreme Court has yet to identify a default definition
that parties may contract around. Ohio’s appellate courts have not either. They have recognized
the “conflict” between other state courts on the issue. Florea v. Nationwide Mut. Fire Ins. Co.,
1983 WL 5030, at *3 (Ohio Ct. App. Jan. 28, 1983); see Burden v. N.H. Ins. Co., 1981 WL 3817,
at *2 (Ohio Ct. App. Jan. 1, 1981) (per curiam). But they have suggested that the phrase can take
 No. 20-4113 Wilkerson v. Am. Family Ins. Co Page 6

either definition depending on the contract’s language. See Williams-Diggins, 157 N.E.3d at
225; Modesty v. Scottsdale Surplus Lines, 2006 WL 2374311, at *2 (Ohio Ct. App. Aug. 17,
2006); Jones v. Auto-Owners Mut. Ins. Co., 1999 WL 435103, at *4–5 (Ohio Ct. App. June 30,
1999); Asmaro v. Jefferson Ins. Co. of N.Y., 574 N.E.2d 1118, 1122 (Ohio Ct. App. 1989). Until
the Ohio Supreme Court offers additional guidance, then, “actual cash value” presumptively
could mean either “fair market value” or “replacement costs minus depreciation” in Ohio.

Does this conclusion require us to assume that the phrase is ambiguous in American
Family’s specific policy? Not at all. When a phrase can bear two meanings, Ohio courts expand
their horizons by looking at the contract as whole to see if one clear meaning best fits the
context. See Dominish v. Nationwide Ins. Co., 953 N.E.2d 820, 822 (Ohio 2011); Foster
Wheeler Enviresponse, Inc. v. Franklin Cnty. Convention Facilities Auth., 678 N.E.2d 519, 526
(Ohio 1997). That is the case here. To be sure, unlike many insurance policies, American
Family’s policy does not include an express definition of “actual cash value” one way or the
other. Compare Williams-Diggins, 157 N.E.3d at 226–27 (market value), with Desai v. GEICO
Cas. Co., 478 F. Supp. 3d 609, 613 (N.D. Ohio 2020) (replacement costs); Davis v. GEICO Cas.
Co., 2020 WL 68573 at *1 (S.D. Ohio Jan. 7, 2020) (same). But a broader look at American
Family’s insurance policy leaves no doubt that it uses “actual cash value” to mean market value.

Most notably, the phrase “actual cash value” sits within the “Limits of Liability” section
of the policy. In that section, American Family has limited its liability to the lesser of two
amounts: (1) “the actual cash value of the stolen or damaged property” or (2) “the amount
necessary to repair or replace the property.” Policy, R.1-1, PageID#26 (emphases added). The
policy thus already incorporates a liability limit tied to the costs of a replacement car that is
separate from the liability limit tied to the damaged car’s actual cash value. Interpreting “actual
cash value” to mean replacement costs minus depreciation renders these complimentary clauses
incoherent. Why would American Family limit its liability to the lesser of “replacement cost
minus depreciation” or “the amount necessary to . . . replace the property”? This reading
effectively nullifies the second clause by interpreting both to address the same thing:
replacement costs. Ohio courts refuse to read a clause out of the contract in this way when an
alternative reading would give both clauses real effect. See Sunoco, Inc. (R & M) v. Toledo
 No. 20-4113 Wilkerson v. Am. Family Ins. Co Page 7

Edison Co., 953 N.E.2d 285, 295 (Ohio 2011). Such an alternative reading exists here.
Interpreting actual cash value to mean what it “[o]rdinarily” means—market value—sensibly
gives both of these limits-of-liability clauses effect. Tyler, supra, 61 A.L.R.2d 711 § 3; see New
Appleman, supra, § 62.08[1][b][i]. One clause considers the value of the damaged property; the
other clause considers the cost of replacing it.

Several courts have made an identical point when interpreting similar contracts. One
court rejected a claim like Wilkerson’s because the “policy set[] off the cost of replacement as an
alternative and different way to measure the limit of the amount due”; the policy did not “define
actual cash value to be interchangeable with the replacement cost of the vehicle[.]” Pappas v.
Auto Club Ins. Ass’n, 2020 WL 3303004, at *4 (N.D. Ill. June 18, 2020). Another rejected such
a claim because actual cash value was “distinguished from replacement costs” and the insurer
was “obligated to pay the lesser of the two amounts.” Lett v. Wausau Underwriters Ins. Co.,
2021 WL 613841, at *3 (D.N.J. Feb. 17, 2021); Thompson v. Progressive Universal Ins. Co.,
420 F. Supp. 3d 867, 870 (W.D. Wis. 2019); cf. Nicolaou v. Vt. Mut. Ins. Co., 931 A.2d 1265,
1271 (N.H. 2007).

Other provisions in American Family’s policy confirm that “actual cash value” is best
read to refer to market value, not replacement costs less depreciation. The policy, for example,
elsewhere indicates that “[a]n adjustment for depreciation and physical condition will be made in
determining actual cash value[.]” Policy, R.1-1, PageID#26. This provision would serve no
purpose if actual cash value already meant “replacement costs minus normal depreciation.”
Black’s Law Dictionary, supra, at 1784. If actual cash value means “market value,” by contrast,
the provision clarifies that the damaged car’s market value must consider the reduction in its
worth from the pre-accident wear and tear. In that respect, this provision is analogous to clauses
indicating that market value must be assessed based on the “age” and “condition” of the vehicle
at the time of the accident. See Singleton, 953 F.3d at 337. Furthermore, the policy places a duty
on the insured to report “the actual cash value and amount of loss” of the damaged property.
Policy, R.1-1, PageID#21. It also allows either party to demand an appraisal using two
appraisers and notes that “[e]ach appraiser will state separately the actual cash value and the
 No. 20-4113 Wilkerson v. Am. Family Ins. Co Page 8

amount of loss.” Id., PageID#27. These other uses of the phrase “actual cash value” likewise
naturally refer to the market value of the damaged car rather than the costs of replacing it.

For these reasons, the phrase “actual cash value” is “clear and unambiguous” when
interpreted in the full context of American Family’s policy: It refers to the market value of the
damaged car. See Covitt v. Bass Chevrolet, Inc., 1989 WL 73051, at *4–5 (Ohio Ct. App. June
29, 1989). It thus unambiguously excludes the taxes and fees that Wilkerson seeks in this suit.

B

Wilkerson’s contrary arguments do not suffice to show an ambiguity in the policy. First,
Wilkerson argues that our resolution of the contract’s meaning is “premature at the pleading
stage” because she should be permitted to gather extrinsic evidence in support of her reading.
Appellant’s Br. 12. But “[w]hether a contract is unambiguous is a question of law that turns on a
review of its language”; a party cannot use extrinsic evidence to create an ambiguity that does
not exist in the language itself. See Masco, 795 F. App’x at 430–31. If a court finds that the
contract’s language has one unambiguous meaning, therefore, the court may properly grant a
motion to dismiss a breach-of-contract claim. Id. at 431; see also, e.g., Richelson v. Liberty Ins.
Co., 796 F. App’x 277, 280–82 (6th Cir. 2020) (affirming dismissal); Singleton, 953 F.3d at 339
(same).

Second, Wilkerson argues that “actual cash value” is ambiguous—and so must be
construed against the drafter (American Family)—because it can mean either fair market value
or replacement costs minus depreciation in the abstract. But just because the phrase may be
used in two different ways when read in isolation does not mean that all uses of the phrase are
reasonably susceptible to both understandings. Ohio courts, for example, would not invoke the
rule that ambiguities must be resolved in the insured’s favor if the phrase “actual cash value” had
an express market-value definition in the contract itself. See Williams-Diggins, 157 N.E.3d at
226–27. As the Ohio Supreme Court has noted, “[t]his rule . . . will not be applied so as to
provide an unreasonable interpretation of the words of the policy.” Laboy, 41 N.E.3d at 1227
(quoting Cincinnati Ins. Co. v. CPS Holdings, Inc., 875 N.E.2d 31, 34 (Ohio 2007)). And in
 No. 20-4113 Wilkerson v. Am. Family Ins. Co Page 9

American Family’s policy, it would be unreasonable to interpret “fair market value” to mean
replacement costs when the very next clause separately includes the amount tied to those costs.

Third, Wilkerson turns to the specific use of “actual cash value” in the Limits of Liability
section of American Family’s policy. She offers two reasons why her reading of the phrase
“actual cash value” in the section’s first clause does not render its second clause meaningless.
Wilkerson initially notes that she interprets “actual cash value” in the first clause to mean
“replacement costs minus depreciation,” whereas the second clause (“the amount necessary to
. . . replace the property”) does not contain a similar depreciation reduction. So what? Just
because the two clauses might not completely overlap does not mean that Wilkerson’s reading
gives each independent effect. Under her reading, the first clause (replacement costs minus
depreciation) will always provide a lesser value than the second one (replacement costs alone).
Her view thus nullifies the second clause all the same. Wilkerson also admits that her
interpretation of actual cash value as containing a depreciation component makes “superfluous”
the policy’s separate provision requiring the actual cash value to be adjusted for depreciation.
Reply Br. 12. Interpreting actual cash value to mean market value, by comparison, sensibly
gives “meaning and purpose” to all of these policy provisions. Sunoco, 953 N.E.2d at 295.

Wilkerson next claims that the two clauses in the Limits of Liability section address two
different factual scenarios. She asserts that the first clause (“the actual cash value of the stolen or
damaged property”) applies only when the car is a total loss and cannot be economically
repaired. And she asserts that the second clause (“the amount necessary to repair or replace the
property”) applies only when the car is a partial loss and can be repaired. This reading conflicts
with the contract’s text. The second clause cannot reasonably be limited to cars that are partial
losses because it covers amounts necessary to replace cars (not just repair them). Wilkerson’s
response to this textual problem merely creates another: She says that, when the second clause
uses the word “property,” it means the damaged car part (like a bumper or mirror) that must be
replaced, not the car itself. Yet both clauses use this same word (“property”) when delineating
their scope. And Wilkerson concedes that the first clause’s use of the word “property” refers to
the car as a whole. We cannot reasonably read this word to be a chameleon, changing meanings
across two provisions sitting right next to each other and serving complimentary purposes.
 No. 20-4113 Wilkerson v. Am. Family Ins. Co Page 10

Rather than mangle the contract language to make “actual cash value” mean replacement costs
minus depreciation, we find it far simpler (and more coherent) to read “actual cash value” to
mean market value.

One final point. An Ohio regulation provides “uniform minimum standards” for several
types of insurance policies, see Ohio Admin. Code § 3901-1-54(A), including
automobile insurance policies, see id. § 3901-1-54(H), and fire and extended coverage policies,
id. § 3901-1-54(I). The portion of this regulation covering automobiles lists various methods by
which insurers may calculate a car’s cash settlement value and separately indicates that the
insurers should pay the sales taxes on a replacement car only if an insured actually buys one
within 30 days of receiving the cash settlement. Id. § 3901-1-54(H)(7)(a)–(f). Wilkerson’s
complaint makes no claim that she bought a replacement car within this window. Regardless,
neither party cited this regulation or suggested that it should affect our interpretation of the
insurance policy. Cf. Davis, 2020 WL 68573 at *4–6; Ostendorf, 2020 WL 134169, at *3.
We thus need not consider the regulation.

In sum, American Family’s interpretation of its insurance policy is the only reasonable
one. We affirm the district court’s dismissal of Wilkerson’s complaint.
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_________________

DISSENT
_________________

BERNICE BOUIE DONALD, Circuit Judge, dissenting. The majority holds that, under
this policy, the term “actual cash value” is unambiguous because it only has one reasonable
meaning. Yet, the term is not defined in the policy itself, Ohio courts have applied two meanings
to the term, and the Ohio code explicitly states that an insured person such as Ms. Wilkerson
may be eligible for a reimbursement of sales taxes for her “total loss” vehicle. Because the
policy’s two provisions would not be in conflict with each other, Ms. Wilkerson’s interpretation
is a reasonable one. I disagree that the term “actual cash value” is unambiguous. Ms.
Wilkerson’s claim should have survived the motion to dismiss, because, at that pleading stage,
her claim is plausible. For this reason, I dissent.

Ohio law supports dismissal under Rule 12(b)(6) when the plain meaning of a term is
clear. See, e.g., Richelson v. Liberty Ins. Co., 796 F. App’x 277 (6th Cir. 2020); Pieczonka v.
Progressive Select Ins. Co., No. 19-CV-2965, 2020 WL 1930134, at *2 (N.D. Ohio April 21,
2020).

However, “if an insurance policy is ambiguous, the policy is construed strictly against the
insurer.” Perry v. Allstate Indem. Co., 953 F.3d 417, 421 (6th Cir. 2020) (citing Andersen v.
Highland House Co., 757 N.E.2d 329, 334 (Ohio 2001)). The entire insurance policy “must be
construed together as a whole and every provision must be given effect.” Wells Fargo Bank,
N.A. v. Allstate Ins. Co., 290 F. Supp. 3d 715, 721 (N.D. Ohio 2017) (citing Waste Management,
Inc. v. Rice Danis Indus. Corp., 257 F. Supp. 2d 1076, 1083 (S.D. Ohio 2003)). “[I]t will not
suffice for [the insurer] to demonstrate that its interpretation is more reasonable than the
policyholder's.” Andersen, 757 N.E.2d at 333 (quotation omitted). Instead, “in order to defeat
coverage, the insurer must establish not merely that the policy is capable of the construction it
favors, but rather that such an interpretation is the only one that can fairly be placed on the
language in question.” Id. at 332 (quotation omitted) (emphasis added). If the policy is
 No. 20-4113 Wilkerson v. Am. Family Ins. Co Page 12

ambiguous, and the insured’s interpretation is reasonable, the insured prevails. It is therefore the
insurer’s burden to prove that its interpretation is the only reasonable one.

Under Ohio law, the term “actual cash value” has been interpreted to mean either “market
value” or “replacement costs less depreciation for age and condition.” Williams-Diggins v.
Permanent Gen. Assurance Corp. of Ohio, 157 N.E.3d 220, ⁋ 12 (Ohio Ct. App. 2020); Modesty
v. Scottsdale Surplus Lines, No. 86912, 2006 WL 2374311, ⁋ 11 (Ohio Ct. App. Aug. 17, 2006).
The majority correctly points out that neither the Ohio Supreme Court nor Ohio’s appellate
courts have settled on a “default” definition of the term “actual cash value,” and that the lower
courts have suggested that the term can take either definition, in the absence of any specific
limiting language in the contract. Modesty at id.

We have previously concluded that “actual cash value” includes replacement costs under
Tennessee law. Parkway Assocs., LLC v. Harleysville Mut. Ins. Co., 129 F. App’x 955, 962–63
(6th Cir. 2005). Other circuits have, too. See Gilderman v. State Farm Ins. Co., 649 A.2d 941,
945 (Pa. Super. Ct. 1994) (“[r]epair or replacement costs logically and necessarily include any
costs that an insured reasonably would be expected to incur in repairing or replacing the covered
loss.”); Sos v. State Farm Mut. Auto. Ins. Co., 396 F. Supp. 3d 1074, 1082 (M.D. Fla. 2019)
(“[insurer’s] failure to pay insureds with leased-vehicle total loss claims sales tax in the amount
of 6 percent of the value of the vehicle plus applicable local taxes and title transfer fees in the
amount of $75.25 constitutes a material breach of contract.”); Lukes v. Am. Family Mut. Ins. Co.,
455 F. Supp. 2d 1010, 1016 (D. Ariz. 2006) (“The insured in this case is reasonably likely to
incur sales tax when replacing contents with material of like kind and quality, therefore,
applicable policy provision applies to include sales tax.”).

Ohio federal district courts, analyzing facts and issues similar to those presented in this
case, have also found that undefined terms of “actual cash value” are ambiguous. In Desai v.
GEICO Casualty Co., 478 F. Supp. 3d 609, 615 (N.D. Ohio 2020), a plaintiff sued the defendant
insurance company for failing to pay sales taxes, license fees, title fees, and dealer fees for her
“total loss” vehicle. The Policy defined “actual cash value” as the “replacement cost” less
depreciation or betterment but did not define “replacement cost.” Id. at 614. The court found
 No. 20-4113 Wilkerson v. Am. Family Ins. Co Page 13

that the term “actual cash value” was ambiguous because it did not define “replacement cost”
and denied the defendant’s motion dismiss.

In Ostendorf v. Grange Indem. Ins. Co., a plaintiff sued the defendant insurance company
for failing to include the cost of a title transfer, tag transfer, and 6% sales tax in the “actual cash
value” calculation under the policy for reimbursements of total losses. No. 2:19-CV-1147, 2020
WL 134169, at *2 (S.D. Ohio 2020). The policy in Ostendorf did not define loss or actual cash
value. Id. The court found that the term “actual cash value” was ambiguous and thus, could
include payment of sales taxes and various vehicle fees. Id. at *3.

Similarly, in Davis v. GEICO Cas. Co., the plaintiffs sued the defendant for failing to pay
the actual cash value sales tax, title-transfer fees, and registration fees at the time of the loss. No.
2:19-CV-2477, 2020 WL 68573, at *1 (S.D. Ohio Jan. 7, 2020). The court concluded that “there
[wa]s some question as to whether the actual cash value at the time of the loss, which is the
specific language included in the [ ] policy, actually includes sales tax, title-transfer fees, and
registration fees.” Id. at *6. Thus, the court held that the plaintiffs sufficiently pleaded a claim,
at that stage of the proceedings, for breach of contract related to sales tax, title transfer fees, and
registration fees. Id.

The majority holds that a broader look at the policy “leaves no doubt” that “actual cash
value can only mean market value.” However, the two options under the policy could
reasonably be interpreted differently, even if we adopt “replacement costs minus depreciation” as
the meaning of “actual cash value.” Under the first option, the insured receives a cash amount;
under the second option, American family pays a third-party repair shop to repair the existing
vehicle, or a third-party dealership to replace the vehicle with another one. Thus, under the
second option, the insured is never eligible to receive cash for any of the replacement costs.
American Family clarifies this in its motion to dismiss, where it states: “American family did not
pay to replace the vehicle,” acknowledging that the second option does not give the plaintiff the
option to buy her own replacement vehicle, but rather the insurer would procure the vehicle.
R. 13, Motion to Dismiss, Page ID # 104. The majority also interprets the term’s meaning of
“replacement costs minus depreciation” to have the same meaning as “replacement costs,” which
 No. 20-4113 Wilkerson v. Am. Family Ins. Co Page 14

is outlined in American Family’s policy. This subtle difference, however, means that the two
policy options are not the same.

Similarly, other insurers which have defined “actual cash value” as “replacement costs
less depreciation” have included both this meaning for actual cash value and the option to repair
or replace the damaged vehicle, without finding that the two provisions would render the policy
duplicative. Desai, 478 F. Supp. 3d at 614.

Even if we interpret “actual cash value” to mean “market value,” several other policies
with similar provisions as American Family have included sales taxes in that calculation. See
Pieczonka, 2020 WL 1930134, at *1. Compare Progressive’s policy limiting liability with the
lowest of:

a. the actual cash value of the stolen or damaged property at the time of the loss
reduced by the applicable deductible;
b. the amount necessary to replace the stolen or damaged property reduced by the
applicable deductible;
c. the amount necessary to repair the damaged property to its pre-loss physical
condition reduced by the applicable deductible; or
d. the Stated Amount shown on the declarations page for that covered auto.

Id. Progressive’s policy stated that “actual cash value is determined by the market value, age,
and condition of the vehicle at the time the loss occurs.” Id. Even with this determination that
actual cash value meant “market value,” Progressive paid a cash amount, which included the
sales tax. Id. The policy did not include payment for title, registration, and license fees. Id.

Turning to the Ohio Administrative Code, it too provides a definition of “actual cash
value,” which makes Ms. Wilkerson’s interpretation reasonable: “The insurer shall
determine actual cash value by determining the replacement cost of property at the time of loss,
including sales tax, less any depreciation.” Ohio Admin. Code § 3901-1-54(I)(2)(a) (emphasis
added). Another section, § 3901-1-54(H)(7)(f), states:

If within thirty days of receipt by the claimant of a cash settlement for the total
loss of an automobile, the claimant purchases a replacement automobile, the
insurer shall reimburse the claimant for the applicable sales taxes incurred on
account of the claimant’s purchase of the automobile, but not to exceed the
 No. 20-4113 Wilkerson v. Am. Family Ins. Co Page 15

amount that would have been payable by the claimant for sales taxes on the
purchase of an automobile with a market value equal to the amount of the cash
settlement. If the claimant purchases an automobile with a market value less than
the amount of the cash settlement, the insurer shall reimburse only the actual
amount of the applicable sales taxes on the purchased automobile. If the claimant
cannot substantiate such purchase and the payment of such sales taxes by
submission to the insurer of appropriate documentation within thirty-three days
after receipt of the cash settlement, the insurer shall not be required to reimburse
the claimant for such sales taxes.

Ohio Admin. Code § 3901-1-54(H)(7)(f). The Ohio Code also specifies: “In settlement of
claimants’ automobile total losses on the basis of actual cash value or replacement of the
automobile with another of like kind and quality, an insurer which elects to offer a cash
settlement to claimant shall base the offer upon the actual cost to purchase a comparable
automobile less any applicable deductible amount contained in the policy, and/or deduction for
betterment.” Ohio Admin. Code § 3901-1-54(H)(7) (emphasis added). It is therefore reasonable
that even in a total loss situation, the insured would be reimbursed for the sales taxes and title
registration fees in order to be able to buy a new vehicle.

However, at that pleading stage, we should not even have to ask whose reading is “more
reasonable.” Andersen, 757 N.E.2d at 333. American Family “could have removed any
ambiguity by simply writing its policies to expressly [exclude]” sales taxes and fees when
calculating the “actual cash value.” See Hicks v. State Farm Fire & Casualty Co., 751 F. App’x
703, 709 (6th Cir. 2018). American Family failed to do so.

To prevail on a motion to dismiss, the insurer must show that the insured could never
establish that her interpretation is reasonable. See, e.g., Richelson, 796 F. App’x at 277.
American Family cannot meet this burden here. When each side to an Ohio insurance dispute
presents a reasonable reading of the policy, the dispute should move past the threshold dismissal
stage. See, e.g., Andersen, 757 N.E.2d at 332; Safe Auto Ins. Co. v. Semenov, 947 N.E.2d 1267,
1270–71 (Ohio Ct. App. 2011).

We recently clarified that “as we find ourselves at the motion-to-dismiss stage, our task is
not to decide which of the parties’ competing views has more merit. Instead, we ask whether
[the Plaintiff] has put forward a reasonable interpretation of the insurance policy. If so, we must
 No. 20-4113 Wilkerson v. Am. Family Ins. Co Page 16

reverse the district court and allow the suit to proceed.” Richelson, 795 F. App’x at 281 (citing
Andersen, 757 N.E.2d at 332). Applying the rule that ambiguities must be resolved in favor of
the insured, I would reverse the district court’s dismissal and allow the case to proceed. Ms.
Wilkerson’s claim is plausible because her interpretation of “actual cash value” is reasonable.

For the foregoing reasons, I respectfully dissent.