Chauvin v. State Farm Fire & Casualty Co.

United States Court of Appeals
Fifth Circuit
F I L E D
UNITED STATES COURT OF APPEALS
For the Fifth Circuit August 6, 2007

Charles R. Fulbruge III
Clerk
No. 06-30946

DARYL CHAUVIN,

Plaintiff

v.

STATE FARM FIRE & CASUALTY CO.,

Defendant

*************************************************************

CARITHA WILLIAMS, individually and on behalf of all

others similarly situated;

Plaintiff - Appellant

v.

STATE FARM FIRE & CASUALTY CO.,

Defendant - Appellee

**************************************************************

DORIS L HUNTLEY, individually and on behalf of all

others similarly situated;
 Plaintiff - Appellant

v.

ALLSTATE INDEMNITY COMPANY,

Defendant - Appellee

***************************************************************

DANI BABINEAUX, individually and on behalf of all

others similarly situated;

Plaintiff - Appellant

v.

LIBERTY MUTUAL FIRE INSURANCE COMPANY,

Defendant - Appellee

****************************************************************

DONALD J. HAYDEL, SR., individually and on behalf of all

others similarly situated;

Plaintiff - Appellant

v.

HARTFORD INSURANCE COMPANY OF THE MIDWEST,

Defendant - Appellee

2
****************************************************************

RICHARD GANUCHEAU, individually and on behalf of all

others similarly situated;

Plaintiff - Appellant

v.

LEXINGTON INSURANCE COMPANY

Defendant - Appellee

*****************************************************************

JOSEPH MONIZ; MARIE MONIZ; LAURENCE TREIGLE;

EDITH TREIGLE; SCOTTY LOPEZ; BRANDI LOPEZ; KEITH DWYER;

MICHAEL COLLONGUES; RANDALL MCCANTS; DEBRA MCCANTS; JAMIE

LAURERIRO; TRUDY LAURERIRO; SIMEON DELACRUZ; CAROL DELACRUZ;

Plaintiffs - Appellants

v.

STATE FARM FIRE & CASUALTY CO

Defendant - Appellee

****************************************************************

DARYL CHAUVIN; CATHY CHAUVIN, Individually and on behalf of

3
all others similarly situated; MICHAEL GARNETT, SR; MICHELLE

GARNETT, Individually and on behalf of all others similarly

situated; LEE SUCHERMAN; ELLEN SUCHERMAN, Individually and on

behalf of all others similarly situated; JOHN BERRYMAN;

CATHERINE BERRYMAN, Individually and on behalf of all others

similarly situated; GERALD COOPER; BETTY COOPER, Individually

and on behalf of all others similarly situated; ANTHONY SMITH;

ADA SMITH, Individually and on behalf of all others similarly

situated; LATOYA WILLIAMS, Individually and on behalf of all

others similarly situated; TERRY SAMPIA, Individually and on

behalf of all others similarly situated; JANET LABIN,

Individually and on behalf of all others similarly situated;

Plaintiffs - Appellants

v.

STATE FARM FIRE & CASUALTY CO; HARTFORD INSURANCE COMPANY

OF THE MIDWEST; ALLSTATE INSURANCE CO; METROPOLITAN

PROPERTY AND CASUALTY INSURANCE CO; ENCOMPASS PROPERTY AND

CASUALTY COMPANY; UNITED SERVICES AUTOMOBILE ASSOCIATION;

STANDARD FIRE INSURANCE CO, One of the Travelers Property

Casualty Companies; AUTO CLUB FAMILY INSURANCE COMPANY;

MASSACHUSETTS BAY INSURANCE

Defendants - Appellees

4
*****************************************************************

KIMBERLY BORNE

Plaintiff - Appellant

v.

ALLSTATE INDEMNITY CO.,

Defendant - Appellee

*****************************************************************
_____________________________

No. 07-30033
_____________________________

RICHARD MAZIARZ,

Plaintiff - Appellant

v.

AUTO CLUB FAMILY INSURANCE COMPANY (AAA),

Defendant - Appellee

Appeals from the United States District Court For the Eastern
District of Louisiana, New Orleans Division

5
Before HIGGINBOTHAM, DAVIS and BARKSDALE, Circuit Judges.

W. EUGENE DAVIS, Circuit Judge:

Plaintiffs are homeowners who sued their insurers, alleging

that their homes were totally destroyed in Hurricanes Katrina

and/or Rita. They appeal the district court’s order granting the

defendant-insurers’ motions to dismiss and/or motions for judgment

on the pleadings, concluding that Louisiana’s Value Policy Law does

not apply when a total loss does not result from a covered peril.

For the following reasons, we AFFIRM the order of the district

court dismissing the homeowners’ claims.

I. BACKGROUND1

Plaintiffs (the “homeowners”), both individuals and putative

class representatives, are homeowners who allege that Hurricanes

Katrina and/or Rita rendered their homes total losses. When their

homeowner’s insurers (the “insurers”) refused to reimburse them for

the full value of their homes as stated in their policies (the

“agreed face value”), the homeowners filed suit against the

insurers, alleging that they were entitled to the agreed face value

pursuant to La. Rev. Stat. Ann. § 22:695, Louisiana’s Valued Policy

Law (“VPL”).2 All of the insurance policies cover damage caused by

1
Many of the cases involved in this appeal were transferred to Section
“R” of the Eastern District of Louisiana for disposition of the issues
relating to the interpretation and application of Louisiana’s Valued Policy
Law.
2
The operative provision of Louisiana’s VPL provides:

A. Under any fire insurance policy insuring inanimate, immovable
property in this state, if the insurer places a valuation upon the

6
wind and rain, but contain a clause excluding coverage for damage

caused by flood.3

The insurers filed Fed. R. Civ. Proc. 12(b)(6) motions to

dismiss and Fed. R. Civ. Proc. 12(c) motions for judgment on the

pleadings, arguing, inter alia, that (1) the VPL applies only to a

total loss resulting from fire; and (2) even if the VPL extends to

perils other than fire, the VPL does not allow full recovery when

the total loss is not caused by a covered peril. In response, the

homeowners argued that the VPL does apply to non-fire perils and

that the VPL requires an insurer to pay the agreed face value when

(1) the property is rendered a “total loss,” even if the “total

loss” is due to an excluded peril; so long as (2) a covered peril

causes some damage, no matter how small, to the property.4

covered property and uses such valuation for purposes of determining
the premium charge to be made under the policy, in the case of total
loss the insurer shall compute and indemnify or compensate any
covered loss of, or damage to, such property which occurs during the
term of the policy at such valuation without deduction or offset,
unless a different method is to be used in the computation of loss,
in which latter case, the policy, and any application therefor,
shall set forth in type of equal size, the actual method of such
loss computation by the insurer. Coverage may be voided under said
contract in the event of criminal fault on the part of the insured
or the assigns of the insured.
3
The exclusion found in Allstate’s policy is typical. It reads:

We do not cover loss to the property described in Coverage A -
Dwelling Protection or Coverage B - Other Structures Protection
consisting of or caused by:
1. Flood, including but not limited to surface water, waves, tidal
water or overflow of any body of water, or spray from any of these,
whether or not driven by wind.
4
At the hearing on the insurers’ motions to dismiss, the homeowners
conceded that, if the court did not adopt their interpretation of the VPL,
then their claims fail. In particular, the following exchange occurred
between the court and counsel for the homeowners (more specifically, counsel

7
 In a well-reasoned opinion, the district court granted the

insurers’ motions. Assuming without deciding that the VPL applied

to non-fire perils, the district court first held that, regardless

of whether the statutory language of the VPL is considered

ambiguous, the homeowners’ interpretation would lead to absurd

for homeowners in the consolidated cases of Chauvin, Garnett, Sucherman,
Berryman, Cooper, and Smith, among others):

[The Court]: . . . . Let me ask you this. I’m trying to
figure out what I’m ruling on. If I agree
with you, then I can see how that scenario
spins out. If I disagree with you, where
are we? Does that mean that the plaintiffs
have no claim?

[Counsel]: Well, the claim that we made on behalf of
our clients is under the Valued Policy Law.
If you find that the Valued Policy Law does
not mean what we say it means, then I guess
our claims are not there. There may be
some others who have made different claims
on ambiguity of the policy and what may be
covered and what may not be covered, but we
have alleged . . . that this is a valued
policy, that we alleged that we suffered
total loss, and that we had covered loss of
the damage to the property. Now, we
haven’t specified what it is, but if the
Court were to rule that only total covered
damage is payable under the Valued Policy
Law . . . then there may be some people in
the group that might recover.

. . . .

[The Court]: You’re telling me that it is essential to your
claim that there be a determination that any
covered loss, however small, in conjunction with
a total loss, triggers the policy, that that is
the crux of your claim? I just need to know.

[Counsel]: Your Honor, it triggers the application of the
statute.

As a result, the only issue before the district court was whether, as a
matter of law, any amount of damage caused by a covered loss, however small,
triggered the VPL, even though the total loss was the result of a non-covered
peril.

8
consequences. The court concluded that the focus of the VPL was on

establishing the value of the property in the event of a total

loss, and was not intended to expand coverage to excluded perils.

Thus, the court determined that the VPL does not apply when a total

loss does not result from a covered peril.

The homeowners then filed the instant appeal. While this

appeal was pending, the homeowners filed a motion asking us to

certify the questions regarding the construction of the VPL to the

Louisiana Supreme Court, which we denied.5 The homeowners also

filed a motion requesting that we stay our decision in this case

pending the appeal of two Louisiana state court decisions, which we

also denied.

II. DISCUSSION

We review de novo a district court’s dismissal pursuant to

Fed. R. Civ. Proc. 12(b)(6) and 12(c).6 The standard for dismissal

under Rule 12(c) is the same as that for dismissal for failure to

state a claim under Rule 12(b)(6).7 We accept the plaintiff’s

well-pleaded facts as true and view them in the light most

favorable to the plaintiff.8 The motion to dismiss should not be

granted unless the plaintiff would not be entitled to relief under

5
To the extent that the homeowners once again ask us to certify the
questions before us to the Louisiana Supreme Court, we decline to do so.
6
Ballard v. Wall, 413 F.3d 510, 514 (5th Cir. 2005); Johnson v. Johnson,
385 F.3d 503, 529 (5th Cir. 2004).
7
Johnson, 385 F.3d at 529.
8
Ballard, 413 F.3d at 514.

9
any set of facts that he could prove consistent with the

complaint.9

We also review a district court’s determination of state law

de novo.10 In the absence of a final decision by the state’s

highest court on the issue at hand, it is our duty to determine, in

our best judgment, how the highest court of the state would resolve

the issue.11

Because we conclude that the VPL does not apply to a total

loss not caused by a covered peril, we assume for purposes of this

opinion that the VPL applies to non-fire perils.

A. THE LANGUAGE OF LOUISIANA’S VALUED POLICY LAW

The homeowners maintain that they are entitled to the agreed

face value of their policy under the VPL because their homes

sustained some damage from wind, a covered peril, even though the

total loss resulted from flooding, a non-covered peril. On the

other hand, the insurers contend that the VPL does not require them

to pay the agreed face value of the policy because the total loss

was not caused by a covered peril.

In determining which interpretation of the VPL the Louisiana

Supreme Court would likely adopt, we begin with the language of the

statute and the rules of construction provided in the Louisiana

9
Id.
10
Salve Regina College v. Russell, 499 U.S. 225, 231 (1991).
11
Transcon. Gas Pipe Line Corp. v. Transp. Ins. Co., 953 F.2d 985, 988
(5th Cir. 1992).

10
Civil Code. Louisiana’s VPL provides, in relevant part:

A. Under any fire insurance policy insuring inanimate,
immovable property in this state, if the insurer places
a valuation upon the covered property and uses such
valuation for purposes of determining the premium charge
to be made under the policy, in the case of total loss
the insurer shall compute and indemnify or compensate any
covered loss of, or damage to, such property which occurs
during the term of the policy at such valuation without
deduction or offset, unless a different method is to be
used in the computation of loss, in which latter case,
the policy, and any application therefor, shall set forth
in type of equal size, the actual method of such loss
computation by the insurer . . . .12

The statutory interpretation articles in the Louisiana Civil

Code provide that “[w]hen a law is clear and unambiguous and its

application does not lead to absurd consequences, the law shall be

applied as written and no further interpretation may be made in

search of the intent of the legislature.”13 However, “[w]hen the

language of the law is susceptible of different meanings, it must

be interpreted as having the meaning that best conforms to the

purpose of the law.”14 When interpreting a statute, “[t]he words

of a law must be given their generally prevailing meaning,”15 and

“[w]hen the words of a law are ambiguous, their meaning must be

sought by examining the context in which they occur and the text of

12
La. Rev. Stat. Ann. § 22:695(A) (emphasis added). The parties do not
dispute that the homeowner’s policies involved in this suit are “valued
policies” within the meaning of the VPL.
13
La. Civ. Code art. 9.
14
Id. at art. 10.
15
Id. at art. 11.

11
the law as a whole.”16

We agree with the district court that the language of the VPL

is not clear and unambiguous.17 In particular, the critical

language in the statute providing that “in the case of a total loss

the insurer shall compute and indemnify or compensate any covered

loss of, or damage to, such property”18 is susceptible of two

possible meanings: (1) in the event of a total loss, an insurer is

required to pay the homeowner the agreed full value of a policy as

long as a covered loss causes some damage to the property, even if

a non-covered peril renders the property a total loss; or (2) an

insurer is only required to pay the homeowner the agreed face value

of a policy when the property is rendered a total loss by a covered

loss. We therefore must interpret the statute in a manner that

best conforms to the purpose of the law.19

The VPL was enacted to fix the value of the insured property

in the event of a total loss and thus, operates as a form of

16
Id. at art. 12. The homeowners’ argument that any ambiguity in the
VPL must be construed in their favor is meritless. Unlike ambiguities in
insurance contracts, which are construed in favor of the insured and against
the insurer, a statute is “interpreted according to the principles of
statutory construction, without leaning to one side or the other.” Compare
Pareti v. Sentry Indem. Co., 536 So. 2d 417, 420 (La. 1988) with P.O.P.
Constr. Co. v. State Farm Fire & Cas. Co., 328 So. 2d 105, 107 (La. 1976).
17
We note that even if we were to hold that the language of the VPL was
clear and unambiguous, we would still reject the interpretation offered by the
homeowners because such interpretation would lead to “absurd consequences.”
See La. Civ. Code art. 9.
18
La. Rev. Stat. Ann. § 22:695(A).
19
See La. Civ. Code art. 10.

12
liquidated damages.20 As stated by the Louisiana Fourth Circuit

Court of Appeal:

Valued policy laws or so-called total losses statutes
dealing with Fire Ins. policies were enacted by many
states in the late 1800's and early 1900's principally as
a protective measure for insureds. In general, these
valued policy laws require that in case of total loss to
an insured's property from certain specified perils, the
amount stated in the policy declarations is considered
the value of the structure at the time of loss and is
payable in full. In other words, if the value of property
is less than the amount of insurance on a policy covering
a building in a state having such a law, the insurer is
precluded in most states from arguing that a lesser sum
be paid, i.e., actual cash value . . . .

The legislative intent of these laws was to prevent over-
insurance and other abuses, that is, to keep insurers and
their representatives from writing insurance on property
for more than it is actually worth.

A second reason for valued policy laws is to encourage
insurers and producers to inspect risks and assist
prospective insureds in determining insurable value of
properties . . . . It follows that failure of an insurer
to inspect a risk for valuation purposes can lead to
over-insurance and can produce a moral hazard as well. In
other words, if a building is insured for more than its
actual worth, an insured might be indifferent about loss
prevention. This situation might even give an insured an
incentive to intentionally cause damage to his
21
structure.

In other words, according to the Louisiana courts, the VPL was

adopted for two main purposes: (1) to keep insurers from writing

insurance on property for more than it was actually worth,

20
See Hart v. N. British & Mercantile Ins. Co., 162 So. 177, 181 (La.
1935); The Forge, Inc. v. Peerless Cas. Co., 131 So. 2d 838, 840 (La. Ct. App.
2d Cir. 1961).
21
Atlas Lubricant Corp. v. Fed. Ins. Co. Of New Jersey, 293 So. 2d 550,
556 (La. Ct. App. 4th Cir. 1974).

13
collecting premiums based on that overvaluation, and later arguing

that the property was worth less than the face value when the

property was destroyed; and (2) to discourage intentional

destruction of property by insureds when they are permitted to over

insure their property.22

B. APPLYING THE VPL TO CLAIM OF TOTAL LOSS CAUSED BY A NON-
COVERED PERIL

After considering the purposes of the VPL, we are convinced

that the insurers’ construction of the VPL best conforms with its

legislative purpose and thus, the VPL only requires an insurer to

pay the agreed face value of the insured property if the property

is rendered a total loss from a covered peril.23

As the district court observed, the homeowners’ interpretation

does nothing to further the purpose of the VPL. In particular, a

finding that the statute requires insurers to pay the agreed face

value of the property, even if an excluded peril (flooding) causes

the total loss, runs counter to the VPL’s effort to link insurance

recoveries to premiums paid. Such an interpretation of the statute

would force the insurer to pay for damage resulting from a non-

covered peril for which it did not charge a premium. Also, because

22
See id.; Harvey v. Gen. Guar. Ins. Co., 201 So. 2d 689, 692 (La. Ct.
App. 3d Cir. 1967); S. Produce Co. v. Am. Ins. Co., 166 So. 2d 59, 61 (La. Ct.
App. 4th Cir. 1964).
23
None of the homeowners assert claims for wind damage outside of their
total loss claims under the VPL. As such, we only hold that a total loss
resulting from a non-covered peril does not trigger the VPL. Our decision has
no bearing on the insurers’ potential liability for incidental damage to the
homeowners’ property by wind or any other peril covered by the relevant
insurance policies.

14
the focus of the VPL is on valuation (to set the amount payable

when there is a total loss), not on coverage, the statute signals

no intent to expand coverage to excluded perils.

Contrary to the homeowners’ assertion, the insurers’

construction of the VPL does not render the statute meaningless.

In the case of a total loss resulting from a covered peril, the VPL

continues to function as a liquidated damages clause by preventing

insurers from challenging the value of the insured property and

guaranteeing that the homeowners receive payment corresponding to

the valuation of the property that was used to calculate their

premiums. In addition, the homeowners’ interpretation would lead

to absurd results. As the district court stated:

If the VPL has the meaning plaintiffs ascribe to it, an
insured holding a valued homeowner’s policy that covered
wind damage but specifically excluded flood losses could
recover the full value of his policy if he lost 20
shingles in a windstorm and was simultaneously flooded
under 10 feet of water. The insurer would thus have to
compensate the covered loss of a few shingles at the
value of the entire house. In effect, the insurer would
be required to pay for damage not covered by the policy
and for which it did not charge a premium. Such a result
would be well outside the boundaries of any party’s
reasonable expectation of the operation of an insurance
contract.

Moreover, we find the cases cited by the homeowners in support

of their interpretation of the VPL unpersuasive. Hart v. North

British & Mercantile Insurance Company24 and Briede v. Commercial

24
162 So. 177.

15
Union Assurance Company25 are both constructive total loss cases and

thus, are inapplicable to the instant case, which involves claims

of total loss.26 Furthermore, we do not consider persuasive the two

Louisiana District Court cases27 cited by the homeowners, as these

unpublished cases provide no helpful analysis.28

Similarly, the out–of-state cases cited by the homeowners are

distinguishable and we decline to follow them. In particular, the

wording of the Florida VPL is different from the Louisiana VPL and,

thus, we find the Florida cases29 relied on by the homeowners

25
No. 6829, 1917 WL 1628 (La. Ct. App. Jan. 9, 1917).
26
A “constructive total loss” occurs when a covered peril renders
something economically, if not physically, useless. See Hart, 162 So. at 180
(finding a constructive total loss when building was 75% destroyed by fire,
rendering it useless, and thus, demolished by city order); Briede, 1917 WL
1628, *3 (building insured for $10,000 was gutted by fire, requiring $8,330 to
repair it to state before fire or $10,830 to repair it to pass current code,
court concluded homeowner suffered constructive total loss).
27
In both Langston v. La. Citizens Prop. Ins. Corp., No. 53-219, slip
op. (La. 25th Jud. Dist. Ct., Plaquemines Parish, Feb. 8, 2007) (unpublished),
and Landry v. La. Citizens Prop. Ins. Corp., No. 85571, slip op. (La. 15th
Jud. Dist. Ct., Vermillion Parish, Jan. 4, 2007), the court found that the
homeowners were entitled to the full face value of the policies when their
property was rendered a total loss by covered and excluded perils.
28
See State v. Williams, 830 So. 2d 984, 986 (La. 2002) (“[u]npublished
opinions and/or writ grants with orders should not be ‘cited, quoted or
referred to,’ and therefore will not be considered by this Court” (citation
omitted)); Primrose Operating Co. v. Nat’l Am. Ins. Co., 382 F.3d 546, 565
(5th Cir. 2004) (opinions that are non-precedential under state law “do not
factor into this court’s Erie guess.”).
29
See Fla. Farm Bureau Cas. Ins. Co. v. Cox, 943 So. 2d 823 (Fla. Dist.
Ct. App. 2006) (holding that insurer owed homeowners full amount of policy
when they suffered a total loss, “in not insignificant part as the result of
windstorm damage,” although an excluded peril, water, contributed to the
damage); Mierzwa v. Fla. Windstorm Underwriting Ass’n, 877 So. 2d 774, 775-76
(Fla. Dist. Ct. App. 2004) (holding that if the insurer “has any liability at
all to the owner for a building damaged by a covered peril and deemed a total
loss, that liability is for the face amount of the policy.” (citation omitted)
(emphasis in original)).

16
inapposite to the issue currently before us, which involves the

interpretation of the language of the Louisiana VPL.30

Accordingly, the district court correctly concluded that

Louisiana’s VPL does not apply when a total loss does not result

from a covered peril.31

III. CONCLUSION

For the aforementioned reasons, we AFFIRM the judgment of the

district court dismissing the homeowners’ claims.

AFFIRM.

30
Compare Fla. Stat. § 627.702(1) (2003) with La. Rev. Stat. Ann. §
22.695(A). At the time Mierzwa was decided, the Florida VPL stated, in
relevant part:

In the event of the total loss of any building, structure, mobile
home . . . located in this state and insured by any insurer as to
a covered peril, . . . the insurer’s liability, if any, under the
policy for such total loss, shall be in the amount of money for
which such property was so insured as specified in the policy and
for which a premium has been charged and paid.

Fla. Stat. § 627.702(1) (emphasis added). The Florida legislature has since
amended this statute to provide that an insurer is not responsible for damage
caused by excluded perils. See Fla. Stat. § 627.702(1)(a) (2005) (inserting
the phrase “if caused by a covered peril” into Florida’s VPL).
31
In light of our recent decision in In re Katrina Canal Breaches
Litigation, No. 07-30119 (5th Cir. Aug. 2, 2007), in which we vacated a
judgment of the district court which held that language in some insurance
policies excluding flooding was ambiguous and, thus, water damage from levee
breaches was covered by insurance policies, the homeowners’ request that we
remand this case based on that district court decision is now moot.

17