Kenneth Toney v. State Farm Lloyds

Case: 14-40914 Document: 00513676745 Page: 1 Date Filed: 09/13/2016
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 14-40914 United States Court of Appeals
Fifth Circuit
FILED
KENNETH TONEY, September 13, 2016
Lyle W. Cayce
Plaintiff–Appellant, Clerk
v.
STATE FARM LLOYDS; ROLANDO RENTERIA,
Defendants–Appellees.
Appeal from the United States District Court
for the Southern District of Texas
USDC No. 7:13-CV-183
Before HIGGINBOTHAM, OWEN, and ELROD, Circuit Judges.
PER CURIAM:*
Kenneth Toney sued his insurer, State Farm Lloyds (State Farm), after
it declined to pay a portion of the claim he filed after a storm damaged his roof.
He sought damages for breach of contract and violations of various provisions
of the Texas Insurance Code and Texas Deceptive Trade Practices Act. The
district court entered summary judgment for State Farm, concluding as a
* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
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No. 14-40914
matter of law that Toney’s policy did not provide coverage for the repair at
issue. We affirm.
I
The roof on Kenneth Toney’s home was damaged by hail when a storm
swept through Mission, Texas in March 2012. Toney filed a claim with his
homeowner’s insurance carrier, State Farm, but the parties could not agree on
the extent of the damage or the costs of repair. He invoked his policy’s
appraisal provision, and the appraisers valued the claim at $67,431.47.
Toney’s roof was constructed using spaced decking—slats of plywood,
spaced several inches apart, to which wooden shingles were nailed. The
decking itself was not damaged by the storm, but Toney believed the relevant
building ordinances required him to replace the slats with solid sheathing, and
the appraisers’ assessment allocated funds for him to do so.
Residential construction and repairs in Mission are governed by the
International Residential Code (IRC), which was drafted by the International
Code Council (ICC). Texas adopted the IRC as it existed on May 1, 2001, and
it “applies to all construction, alteration, remodeling, enlargement, and repair
of residential structures in a municipality.” 1 Texas law allows municipalities
to “establish procedures (1) to adopt local amendments to the International
Residential Code; and (2) for the administration and enforcement of the
International Residential Code.” 2
After the storm, the City of Mission issued two letters related to roof
decking, both signed by “Joe Hernandez, Building Inspector” and addressed
“To Whom It May Concern.” The first, dated October 24, 2012, stated:
It has been confirmed by the ICC that the City of Mission,
Texas require[s] diaphragm bracing for all wood frame
1 TEX. LOC. GOV’T CODE ANN. § 214.212(b).
2 Id. § 214.212(c).
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construction as per IRC. (Reference AJ301.1 & 301.2.1.1 IRC.)
The minimum requirement for roof deck is 7/16” OSB sheathing;
this includes roof decks under cedar shakes.
According to the ICC, 1” x 4” spaced decking does not provide
the necessary sheer strength to withstand hurricane strength
wind loads in Hidalgo County.
The second letter, issued on January 22, 2013, “retract[ed]” the first:
After further inquiry and discussion with the International
Code Council, the City of Mission is retracting the previous letter
dated October 24, 2012 in relation to the requirement of “OSB
sheathing requirements for roof decks under cedar shakes” for re-
roofs.
The ICC has confirmed that in new construction “wood
shingles shall be installed on solid sheathing” as required by
Chapter 9 of the International Residential Code. The ICC also
stated that if we were dealing with a re-roof, it is considered as a
repair and if the underlying sheathing is discovered to be damaged
only that portion is to be repaired. In other words, if the roof has
pre-existing spaced sheathing, the code does not require solid
sheathing to be placed for a re-roofing project.
State Farm accepted the bulk of Toney’s claim but provisionally withheld
$9,076.63, the portion of the award allocated for replacement of the roof
decking. In doing so, it cited a “coverage question” as to whether Toney’s policy
“require[d] payment for the cost of solid decking when replacing a wood shake
roof.” The policy provided that, when the covered dwelling is damaged by an
insured loss, State Farm would pay for
the legally required changes to the undamaged portion of the
dwelling caused by the enforcement of a building, zoning or land
use ordinance or law if the enforcement is directly caused by the
same Loss Insured and the requirement is in effect at the time the
Loss Insured occurs.
A similar provision applied to the “increased cost to repair or rebuild” portions
of the covered dwelling actually damaged by an insured loss:
When the dwelling covered under COVERAGE A -
DWELLING is damaged by a Loss Insured we will pay for the
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increased cost to repair or rebuild the physically damaged portion
of the dwelling caused by the enforcement of a building, zoning or
land use ordinance or law if the enforcement is directly caused by
the same Loss Insured and the requirement is in effect at the time
the Loss Insured occurs.
State Farm ultimately denied the portion of Toney’s claim that relied on
the ordinance or law provision, citing the January 2013 letter from the building
inspector and concluding that the applicable building code did not require that
the spaced decking of Toney’s roof be replaced with solid decking. At some
point, Toney completed his roof using inexpensive composition shingles to
prevent further damage to his home.
Toney sued State Farm and a State Farm adjuster, Rolando Renteria, in
Texas state court. He asserted claims for breach of contract, failure to
promptly pay an insurance claim or deny coverage, and violations of bad-faith
provisions of the Texas Insurance Code and the Texas Deceptive Trade
Practices Act. Although both Toney and Renteria were citizens of Texas, State
Farm removed the case to federal court, asserting that Renteria was
improperly joined and therefore that his co-citizenship with Toney did not
deprive the court of subject-matter jurisdiction. The district court ultimately
dismissed the claim against Renteria and granted summary judgment in favor
of State Farm. Toney now appeals.
II
We must satisfy ourselves not only of our own jurisdiction, but also of
that of the district court. 3 This case was removed to federal court even though
Toney and a defendant named in the complaint, State Farm adjuster Rolando
Renteria, are both citizens of Texas. The complaint alleged Renteria “was
assigned as an individual adjuster on the claim” and was liable on certain
3 Mitchell v. Maurer, 293 U.S. 237, 244 (1934).
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extra-contractual claims. Since this case presents no federal questions, the
district court had jurisdiction only if there was diversity of citizenship.
The district court concluded that Renteria was improperly joined and
that his presence did not destroy diversity jurisdiction. To establish improper
joinder, the party seeking a federal forum must demonstrate that there is
either “actual fraud in the pleading of jurisdictional facts” or “no reasonable
basis for the district court to predict that the plaintiff might be able to recover”
against the nondiverse defendant. 4 The district court may “pierce the
pleadings” in appropriate circumstances to determine whether such a
reasonable basis exists. 5 Here, the defendants argued in their Motion for
Summary Judgment, as they did in their Notice of Removal, that Renteria “was
not involved in [Toney’s] claim.” 6 Toney has not contradicted this assertion nor
pointed to any evidence in this regard. We therefore conclude that the district
court had no “reasonable basis” to predict that Toney might be able to recover
against Renteria. Renteria was improperly joined.
The amount in controversy is measured as of the time of removal. 7 In
addition to actual damages and attorney fees, it also includes any statutory
damages and punitive damages sought. 8 Toney’s demand letter, attached to
4 Smallwood v. Ill. Cent. R.R. Co., 385 F.3d 568, 573 (5th Cir. 2004) (en banc).
5 See id. (stating that where “plaintiff has stated a claim, but has misstated or omitted
discrete facts that would determine the propriety of joinder,” the district court “may, in its
discretion, pierce the pleadings and conduct a summary inquiry”); Travis v. Irby, 326 F.3d
644, 648-49 (5th Cir. 2003) (noting plaintiff may “‘pierce the pleadings’ and consider summary
judgment-type evidence” to determine whether joinder is fraudulent); Badon v. R J R Nabisco
Inc., 224 F.3d 382, 389 (5th Cir. 2000) (“[W]e have consistently recognized that diversity
removal may be based on evidence outside the pleadings to establish that the plaintiff has no
possibility of recovery on the claim or claims asserted against the named resident
defendant.”).
6 The defendants noted that Renteria’s non-involvement “[was] not being asserted” as
a ground for summary judgment “but there is no intent to waive this assertion for purposes
of diversity jurisdiction.”
7 Gebbia v. Wal-Mart Stores, Inc., 233 F.3d 880, 883 (5th Cir. 2000).
8 St. Paul Reinsurance Co. v. Greenberg, 134 F.3d 1250, 1253 (5th Cir. 1998).
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the removal petition, reflects that the amount in controversy was in excess of
$75,000. The district court had jurisdiction over the case.
III
We review a district court’s grant of summary judgment de novo,
applying the same standards as the district court. 9 Summary judgment is
proper “if the movant shows that there is no genuine dispute as to any material
fact and the movant is entitled to judgment as a matter of law.” 10 The moving
party is entitled to summary judgment if the nonmoving party “fails to make a
showing sufficient to establish the existence of an element essential to that
party’s case, and on which that party will bear the burden of proof at trial.” 11
To avoid summary judgment, the nonmoving party must supply “evidence on
which the jury could reasonably find for the plaintiff.” 12 Mere “conclusory
allegations, speculation, [or] unsubstantiated assertions are inadequate to
satisfy the nonmovant’s burden.” 13
The interpretation of an insurance policy is a matter of state law, and
the district court’s conclusions in this regard are reviewed de novo. 14 Under
Texas law, the insured bears the burden of establishing that a claim falls
within the coverage of the policy. 15 When the interpretation of a policy is at
issue, “[t]erms . . . that are subject to more than one reasonable construction
are interpreted in favor of coverage.” 16
9 Int’l Fid. Ins. Co. v. Sweet Little Mex. Corp., 665 F.3d 671, 679 (5th Cir. 2011) (quoting
DePree v. Saunders, 588 F.3d 282, 286 (5th Cir. 2009)).
10 FED. R. CIV. P. 56(a).
11 Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).
12 Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986).
13 Douglass v. United Servs. Auto. Ass’n, 79 F.3d 1415, 1429 (5th Cir. 1996) (citing
Forsyth v. Barr, 19 F.3d 1527, 1533 (5th Cir. 1994)).
14 Anco Insulations, Inc. v. Nat’l Union Fire Ins. Co. of Pittsburgh, 787 F.3d 276, 281
(5th Cir. 2015) (per curiam).
15 Ulico Cas. Co. v. Allied Pilots Ass’n, 262 S.W.3d 773, 782 (Tex. 2008).
16 Gilbert Tex. Constr., L.P. v. Underwriters at Lloyd’s London, 327 S.W.3d 118, 133
(Tex. 2010).
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Toney’s policy provides that State Farm will pay for “the legally required
changes to the undamaged portion of the dwelling caused by the enforcement”
of a building ordinance “if the enforcement is directly caused by the same Loss
Insured and the requirement is in effect at the time the Loss Insured occurs.”
State Farm contends that summary judgment on the contractual claim was
appropriate because changes to Toney’s roof decking were not legally required.
Toney disagrees and argues the district court erred in denying his cross-motion
for summary judgment.
As noted above, Texas adopted the IRC in full, and it has not been
formally amended in any relevant respect by the City of Mission. 17 The IRC
“applies to all construction, alteration, remodeling, enlargement, and repair of
residential structures in a municipality.” 18
Repairs to existing dwellings are governed by IRC § AJ301.1, which
requires that repair work conform to the IRC standards for new construction. 19
IRC § R907.1 adds two rules pertaining to repairs to roofing materials. First,
“[r]oof repairs to existing roofs and roof coverings shall comply with the
provisions of Chapter 34 of the International Building Code.” 20 Chapter 34 of
the IBC, in turn, provides that “[a]dditions, alterations or repairs to any
building or structure shall conform with the requirements of the code for new
construction.” 21 Second, IRC § R907.1 provides that “more than 25 percent of
17 TEX. LOC. GOV’T CODE ANN. § 214.212. The City of Mission adopted the IRC as well.
City of Mission Municipal Code § 18-32.
18 TEX. LOC. GOV’T CODE ANN. § 214.212(b).
19 IRC § AJ301.1 (“Except as otherwise required herein, work shall be done using like
materials or materials permitted by this code for new construction.”). This provision is found
in Appendix J of the 2000 IRC.
20 IRC § R907.1 (emphasis removed). This provision is found in Chapter 9.
21 IBC § 3402.1. It also provides that “[a]lterations or repairs to an existing building
or structure that are non-structural . . . are permitted to be made with the same materials of
which the building or structure is constructed.” IBC § 3402.3. State Farm does not argue
that this provision applies here, perhaps because roof decking is probably not “non-
structural.”
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the roof covering of any building shall not be removed and replaced within a
12–month period unless the entire roof covering is made to conform to the
requirements for new roofing.”
Neither IRC § AJ301.1 nor the first provision of IRC § R907.1 require the
replacement of undamaged materials. By their terms, they only require that
the materials actually used and repairs actually undertaken conform to the
requirements for newly constructed dwellings. Chapter 34 of the IBC
expressly provides that “[p]ortions of the structure not altered and not affected
by the alteration are not required to comply with the code requirements for a
new structure.” 22 Since the parties agree that Toney’s roof decking was not
damaged and the repair could be performed without replacing the spaced
decking, these provisions do not legally require the replacement of the decking.
Additionally, the “25 percent” requirement is inapplicable to Toney’s
claim because it requires, at most, replacement of the “roof covering.” The roof
covering and roof deck are distinct elements of the roof, 23 so this section could
not have required Toney to replace his undamaged spaced decking with solid
decking. Toney points to no other provisions of the IRC that indicate the
replacement of his decking was legally required.
Toney relies on the building inspector’s October 2012 letter. He argues
that the letter “explicitly set[s] forth . . . that the IRC required solid decking
when repairing wood shingled roofs.” But the letter confines itself to a general
description of the rules governing new construction and repairs of damaged
elements of a structure. In particular, the letter states that “[t]he minimum
requirement for roof deck is 7/16” OSB sheathing; this includes roof decks
under cedar shakes” and that “spaced decking does not provide the necessary
22 IBC § 3402.1. Chapter 34 of the IBC is incorporated into the IRC by operation of
IRC § 907.1.
23 See IRC § R202 (defining “roof covering” as “[t]he covering applied to the roof deck”).
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sheer strength to withstand hurricane strength wind loads in Hidalgo County.”
Nothing in the text of the letter suggests that undamaged decking must be
replaced or abrogates the principle that unaltered portions of an existing
structure need not conform to requirements for new structures. 24 Even
assuming, without deciding, that the building inspector had authority to alter
the regulations adopted by the state and by Mission, there is no clear
statement that he intended to do so. 25
Toney asserts that the October 2012 letter was relevant to Toney’s
situation because it “specifically cites a Code provision pertaining to repairs.”
The code provision in question is IRC § AJ301.1, which provides only that
“work shall be done using like materials or materials permitted by this code
for new construction.” But as the discussion above notes, this bears only on
the materials and methods used for repairs actually made; it creates no
requirement that undamaged materials be replaced.
Toney contends that the relevance of the October 2012 letter is reinforced
by the January 2013 letter. That letter “retract[ed]” the earlier one “in relation
to the requirement of ‘OSB sheathing requirements for roof decks under cedar
shakes’ for re-roofs,” and concluded that “if [a] roof has pre-existing spaced
sheathing, the code does not require solid sheathing to be placed for a re-
roofing project.” Because the January 2013 letter “retracted” the earlier one,
Toney contends, the earlier one must be at odds with the January letter’s
conclusion that there was no requirement to replace undamaged decking.
24 See IBC § 3402.1 (“Portions of the structure not altered and not affected by the
alteration are not required to comply with the code requirements for a new structure.”).
25 Cf. Whitman v. Am. Trucking Ass’ns, 531 U.S. 457, 468 (2001) (“Congress, we have
held, does not alter the fundamental details of a regulatory scheme in vague terms or
ancillary provisions—it does not, one might say, hide elephants in mouseholes.”).
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Toney’s reading of the inspector’s October 2012 letter is consistent with
his position. But the IRC, Texas statutes, and Mission ordinances do not
support Toney’s legal theory.
Toney has also submitted a declaration from his roofer, asserting among
other things that “the City of Mission was enforcing the solid decking
requirement for wood roofs” during the relevant period. However, the
existence of a legal requirement is a question of law not susceptible to proof by
declarations and other similar evidence. 26 Whether the applicable building
ordinances “legally required” Toney to replace his roof decking is a question of
law, and the only relevant fact—whether Toney’s roof decking was damaged,
which it was not—is not in dispute. None of the potential fact issues raised by
Toney are material to this coverage question, and State Farm is entitled to
judgment as a matter of law.
* * *
For the foregoing reasons, we AFFIRM the judgment of the district court.
26See City of New Orleans v. BellSouth Telecomms., Inc., 690 F.3d 312, 322 (5th Cir.
2012) (“[D]etermining the meaning of [New Orleans] ordinances poses questions of law.”);
Goodman v. Harris Cty., 571 F.3d 388, 399 (5th Cir. 2009) (“[A]n expert may never render
conclusions of law.”); see also State Farm Fire & Cas. Co. v. Lange, 480 F. App’x 309, 313 (5th
Cir. 2012) (per curiam) (unpublished) (citing Fid. & Cas. Co. of N.Y. v. Lott, 273 F.2d 500,
502 (5th Cir. 1960)) (“When the terms of a contract are unambiguous and the facts underlying
a contract claim are undisputed, whether coverage exists under the contract is a question of
law.”).
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