Liberty moved under the Federal Rule of Civil Procedure12(b)(6) to dismiss the case. The district court rejected Richelsons arguments for failing as a matter of law. Richelson brought the case to the appellate court.

Richelson argued two breach of contract theories; first that Liberty breached the insurance contract by using ACV rather than replacement cost in assessing the roof payout, and second, if ACV was in fact the proper method for determining payment amount, Richelson claims that Liberty still breached the contract by factoring in the $1,000 deductible in the ACV calculation.

The Sixth Circuit determined that Richelson could not state a claim for breach of contract because Liberty paid ACV for the roof damage. The relevant endorsement exempts the circumstance at issue here from the standard coverage. The language of the endorsement also explains how those issues will be treated, they will be settled at ACV at the time of the loss but not more than the amount required to repair or replace. the court said the only reasonable interpretation is that the amount of Richelson's claim for reimbursement for roof damage caused by a windstorm is calculated using the ACV, not the replacement cost of the roof.

Richelson asked the court to read the language of the policy over the endorsement, but the law requires that the insurance contract be examined as a whole. Thus, Richelson has not alleged a viable theory of breach by Liberty.

Richelson next argues that even if ACV governs the payment owed, that Liberty should not have included the $1,000 deductible when it calculated the settlement amount. The dec page of the policy provides that "losses under Section 1 are subject to a deductible of: $1,000. Richelson conceded that the loss fell under Section 1 of the policy, and the court held that the claim was explicitly subject to the deductible.

Richelson further held that the policy language was so misleading that he was fraudulently induced into signing the contract. The applicable fraud law states that the plaintiff must prove six elements: (1) a representation of fact (2) which is material (3) made either knowingly or recklessly falsely, (4) with an intent to mislead (5) with justifiable reliance thereupon and (6) resulting in an injury.

As stated above, the policy plainly stated that the kind of roof damage experienced was covered under the ACV/roof endorsement. Richelson's argument seems to be that since, in his mind, the language requiring replacement-value coverage is so clear, a reasonable person would have justifiably relied on only that section without reading the entire policy, and would never have expected the insurer to invoke language in an endorsement that changed that initial coverage. The court stated that "one cannot justifiably rely on a purportedly unclear statement in a contract when reading the contract in full would remove any lack of clarity."

The policy language was clear to a reasonable reader, so the court affirmed the judgment of the district court.

Expert Analysis: As we all know, it is vital to read and understand an insurance policy prior to bringing action against an insurer. As we all also know, courts will construe clear and unambiguous insurance policy language by giving it its ordinary and plain meaning.