Mills v. Foremost Ins. Co.

Decision Date04 January 2008
Docket NumberNo. 06-16458.,06-16458.
Citation511 F.3d 1300
PartiesDale J. MILLS, C. Diane Mills, Plaintiffs-Appellants, v. FOREMOST INSURANCE COMPANY, a Michigan corporation, Defendant-Appellee.
CourtU.S. Court of Appeals — Eleventh Circuit

Robert M. Giroux, Jr., Fieger, Fieger, Kennedy, Johnson & Giroux, Southfield, MI, Richard Michael Beckish, Jr., Liberis & Associates, Pensacola, FL, for Plaintiffs-Appellants.

Nancy A. Copperthwaite, Marcy Levine Aldrich, Akerman Senterfitt, Miami, FL, for Defendant-Appellee.

Appeal from the United States District Court for the Middle District of Florida.

Before BLACK, HULL and FAY, Circuit Judges.

HULL, Circuit Judge:

Plaintiffs Dale J. Mills and C. Diane Mills (the "Millses") appeal the district court's order granting Defendant Foremost Insurance Company's ("Foremost's") motion to dismiss their class action complaint. After review and oral argument, we reverse the district court's order and remand for further proceedings.

I. BACKGROUND
A. The Complaint's Allegations

In February 2006, the Millses filed a class action complaint against Foremost in Florida state court. According to the complaint, the Millses are Florida residents who own a mobile home that was insured by Foremost under a "Mobile Home Insurance Policy" (the "Policy").1 In September 2004, Hurricane Frances damaged the Millses' home and personal property covered under the Policy. The Millses submitted a claim to Foremost under the Policy and received a loss payment that was less than they were entitled to. Specifically, Foremost failed to compensate the Millses for contractors' overhead and profit charges, and for state and local sales taxes on materials, incurred by the Millses in having their hurricane-damaged property repaired or replaced.2 The complaint also alleges that Foremost knowingly and unlawfully failed to pay overhead, profit, and taxes in Foremost's estimates of hurricane-damaged losses and failed to inform the Millses about Foremost's intention not to pay overhead, profit, and taxes under the Policy. We will refer to the unpaid overhead, profit, and taxes collectively as the "Withheld Payments."

The complaint alleges that Foremost (1) breached the terms of the Policy by failing to compensate the Millses for the Withheld Payments, and (2) unlawfully failed to inform them, before they purchased or renewed the Policy, of Foremost's intention not to pay the Withheld Payments.3 The complaint seeks damages and declaratory and injunctive relief, both for the Millses themselves and on behalf of a class. The complaint defines the class as all of Foremost's mobile home insurance policyholders in Florida who, from August 1, 2004 onward, submitted to Foremost claims for hurricane damage to their mobile home or personal property caused by or arising from four hurricanes that struck Florida in August and September 2004 (Hurricanes Charlie, Frances, Ivan, and Jeanne).

B. Foremost's Rule 12(b)(6) Motion

Foremost removed the case to federal court and filed a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). Neither party filed a motion regarding class certification under Federal Rule of Civil Procedure 23. However, Foremost's Rule 12(b)(6) motion argued that class action treatment was inappropriate because common legal or factual questions would not predominate over individual issues.

In a November 15, 2006 order, the district court granted Foremost's 12(b)(6) motion. First, the district court held that the Millses lacked standing to bring their claims, either individually or as class representatives. It based this standing decision on its interpretation of the Policy. The court concluded that, to receive the Withheld Payments, the Millses must satisfy these preconditions in the Policy: (1) they must complete the repairs or replacement of the damaged property; (2) they must actually incur overhead, profit, and sales tax in connection with the repairs or replacement; and (3) they must make a further claim for any "additional costs" (including overhead, profit, and sales tax) incurred in repairing or replacing the damaged property. The district court concluded that (1) the Millses failed to allege that they had completed the repairs or replacement and made a claim for such repair or replacement costs, and (2) thus "they do not have standing to maintain individual claims, let alone class claims." Mills v. Foremost Ins. Co., No. 8:06-CV-986-T-17, 2006 WL 3313945, at *2 (M.D.Fla. Nov. 15, 2006).

Second, the district court held that in any event the Millses' claims were inappropriate for class action treatment because "the individual inquiry of the facts surrounding the property damage claims of thousands of Foremost policy holders under thousands of separate insurance policies would predominate and overwhelm any common issue." Id. The district court dismissed the Millses' complaint and closed the case.4 This appeal followed.

II. STANDARD OF REVIEW

"We review de novo the district court's grant of a motion to dismiss under Rule 12(b)(6) for failure to state a claim, accepting the allegations in the complaint as true and construing them in the light most favorable to the plaintiff." Castro v. Sec'y of Homeland Sec., 472 F.3d 1334, 1336 (11th Cir.2006) (brackets omitted). "While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atl. Corp. v. Twombly, ___ U.S. ___, 127 S.Ct. 1955, 1964-65, 167 L.Ed.2d 929 (2007) (quotation marks, citations, and brackets omitted). Furthermore, the plaintiff's factual allegations, when assumed to be true, "must be enough to raise a right to relief above the speculative level ...." Id. at 1965.

A district court's decisions regarding class action suitability are reviewed for abuse of discretion. De Leon-Granados v. Eller & Sons Trees, Inc., 497 F.3d 1214, 1218 (11th Cir.2007). "A district court abuses its discretion if it applies an incorrect legal standard, follows improper procedures in [reaching its decision], or makes findings of fact that are clearly erroneous." Adams v. S. Farm Bureau Life Ins. Co., 493 F.3d 1276, 1285 (11th Cir.2007) (quotation marks and citation omitted).

III. DISCUSSION

On appeal, the Millses contend that the district court erred in interpreting the Policy and then, on that basis, dismissing their complaint for lack of standing and inability to maintain a class action. We first review Florida law governing insurance contracts and then examine the Policy provisions in issue. Finally, we consider the class action suitability issue.

A. Florida Law

Under Florida law, "[i]nsurance contracts are construed according to their plain meaning." State Farm Mut. Auto. Ins. Co. v. Reis, 926 So.2d 415, 416 (Fla. Dist.Ct.App.), review denied, 939 So.2d 94 (Fla.2006); see also Sphinx Int'l, Inc. v. Nat'l Union Fire Ins. Co., 412 F.3d 1224, 1227 (11th Cir.2005) ("Florida courts have said again and again that insurance contracts must be construed in accordance with the plain language of the policy."); Siegle v. Progressive Consumers Ins. Co., 819 So.2d 732, 735 (Fla.2002) ("When an insurance contract is not ambiguous, it must be given effect as written."). If the language lends itself to more than one reasonable interpretation, it is ambiguous and should be construed in the insured's favor and against the policy's drafter. Reis, 926 So.2d at 416. In other words, ambiguous provisions in an insurance policy should be interpreted in favor of coverage for the insured. Taurus Holdings, Inc. v. U.S. Fid. & Guar. Co., 913 So.2d 528, 532 (Fla.2005).

B. The Policy

The Millses' Policy defines "actual cash value," which is central to this dispute, as follows: "the cost to repair or replace property with new materials of like kind and quality, less allowance for physical deterioration and depreciation, including obsolescence." The Policy provides that when a policyholder suffers a partial loss to an insured mobile home,5 Foremost will pay benefits using one of two methods: replacement cost or actual cash value. As explained below, both methods reference the term "actual cash value."

Under the Policy's "Replacement Cost Payment Method," Foremost pays the lowest of: (1) the "replacement cost" of the damage to the home; (2) the "amount actually spent for necessary repair or replacement of the damaged portion" of the home; or (3) the "Amount of Insurance shown on the Declarations Page" of the Policy. The Policy further states that "[i]f the cost to repair or replace the damaged property is more than $2,500, [Foremost] will pay no more than the actual cash value of that damage until actual repair or replacement is completed." Thus, under the Replacement Cost Payment Method, Foremost pays only the actual cash value of the damage for claims over $2,500 until the actual repair or replacement is completed. In other words, Foremost will pay up front an estimate of the "actual cash value of th[e] damage" before the repairs are actually done.

The Policy also provides that the insured "may disregard the Replacement Cost Payment Method" and make a claim on simply an "Actual Cash Value Payment Method." If the policyholder elects the Actual Cash Value Payment Method, he "may make further claim within 180 days after the loss for any additional cost ... incur[red] in replacing the damaged property."6

Thus, under both payment methods, the Policy is clear that making the actual repairs first is not required in order to be paid the actual cash value of the damaged property. We see nothing in the language of the Policy that even suggests that if the Millses never repaired or replaced their property, they would not for that reason be entitled to compensation for the actual cash value of the damaged property.7 Accordingly, the proper...

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