Insurer’s Suit Against Provider of Vehicle Valuation Services Survives Motion to Dismiss
The Second Circuit vacated the district court's granting of a motion to dismiss the insurer's complaint against the company that provided valuation services for vehicles involved in accidents. Ameriprise Captive Ins. Co. v. Audatex N. Am., Inc., 2024 U.S. App. LEXIS 12400 (May 23, 2024).
After using Audatex's valuation services, Ameriprise was sued in a class action (Zuern) on the grounds that it undervalued its customers' vehicles when processing total-loss insurance claims, in violation of Washington state law and in breach of its insurance policies with class members. Ameriprise settled the Zuern claims and brought suit to enforce the indemnification provision in the contract with Audatex. The district court dismissed the suit with prejudice, concluding that the indemnification provision did not cover the defense of, and liabilities associated with the Zuern claims.
On appeal, Ameriprise argued that the district court ignored the indemnity provision in the contract with Audatex. The contract stated that "notwithstanding any other provision," Audatex would defend against and indemnify Ameriprise for all claims resulting from or arising out of the use of Audatex's services.
The Second Circuit concluded that the district court erred in finding that the Zuern litigation did not result from or arise out of Ameriprise's use of Audatex's services.
The parties agreed that the phrase "arising out of" meant "originating from, incident to, or having connection with." "Arising out of" required only that there be some causal relationship. From these definitions, Ameriprise was required to plead facts sufficient to establish a plausible claim that Audatex's services or Ameriprise's use thereof had some causal relationship with the Zuern class claims. In its complaint, Ameriprise alleged that Audatex provided it with a vehicle valuation tool and that Ameriprise used the tool to calculate payments on its customers' total-loss insurance claims. Ameriprise contended that the tool generated total cash values that had been reduced by a "Typical Negotiation Adjustment," which reflected the assumption that vehicle buyers typically negotiate a lower price than the price advertised by a dealer. Ameriprise also attached to its federal pleading the Zuern class action complaint, which asserted the Typical Negotiation Adjustments violated Washington state law. The Washington law, it alleged, required insurers calculating the value of a total-loss vehicle to make only appropriate deductions or additions for options, mileage, or condition when determining comparability.
Based on these allegations, the court could not say that Ameriprise failed to plausibly allege some causal relationship between Audatex's services and the Zuern claims against Ameriprise. Therefore, the district court erred in finding that the Zuern claims did not "arise out of" Audatex's valuation tool or Ameriprise's use thereof.
