Jarrett Cudd v. State Farm Mutual Automobile Insurance Company

[DO NOT PUBLISH]
In the
United States Court of Appeals
For the Eleventh Circuit
____________________
No. 22-13916
____________________
JARRETT CUDD,
on behalf of himself and all others similarly situated,
Plaintiff-Appellant,
versus
STATE FARM MUTUAL AUTOMOBILE INSURANCE
COMPANY,
Defendant-Appellee.
____________________
Appeal from the United States District Court
for the Middle District of Georgia
D.C. Docket No. 4:21-cv-00217-CDL
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2 Opinion of the Court 22-13916
____________________
Before WILLIAM P RYOR , Chief Judge, R OSENBAUM and A BUDU , Cir-
cuit Judges.
PER CURIAM:
Appellant Jarrett Cudd (“Cudd”) filed this class action
against appellee, State Farm Mutual Automobile Insurance Com-
pany (“State Farm”), alleging breach of contract. Cudd owned a
vehicle insured by State Farm. When Cudd submitted a claim for
damage to the insured vehicle, State Farm declared that vehicle a
total loss and elected to pay the actual cash value of the insured
vehicle pursuant to an automobile insurance policy (the “Policy”)
between the parties. Cudd disagreed with State Farm’s initial val-
uation of his vehicle. The Policy requires the parties to participate
in an appraisal if a dispute over the insured vehicle’s actual cash
value arises; however, that requirement is not a condition prece-
dent to Cudd’s lawsuit.
Accordingly, after reviewing the record and the parties’
briefs, and with the benefit of oral argument, we vacate the district
court’s order granting State Farm’s motion to dismiss and remand
this case for further proceedings. However, we affirm the district
court’s dismissal of the unjust-enrichment claim under its alterna-
tive reasoning for failure to state a claim as a matter of Georgia law.
I. FACTUAL BACKGROUND & PROCEDURAL
HISTORY
State Farm issued Cudd a Policy that provided insurance
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22-13916 Opinion of the Court 3
coverage for his 2014 Nissan Sentra SV. Under the terms of the
Policy, when the policyholder files a claim for loss caused to an in-
sured vehicle, State Farm can exercise one of two options: (1) it can
pay the cost to repair the vehicle minus any deductible; or (2) pay
the vehicle’s actual cash value minus any applicable deductible. If
State Farm chooses to pay the actual cash value of a total loss vehi-
cle, the Policy provides that “[t]he owner of the covered vehicle and
[State Farm] must agree upon the actual cash value of the covered
vehicle. If there is a disagreement as to the actual cash value of the
covered vehicle, then the disagreement will be resolved by ap-
praisal upon written request” by either party. The Policy does not
define the term “actual cash value.” Instead, the Policy details an
appraisal procedure that the parties must utilize if they disagree
about the actual cash value of an insured total loss vehicle. Addi-
tionally, the Policy states that “[l]egal action may not be brought
against [State Farm] until there has been full compliance with all
provisions of th[e] [P]olicy.”
State Farm deemed Cudd’s insured vehicle a total loss and
elected to pay the actual cash value of the vehicle pursuant to the
Policy. To calculate the actual cash value of insured vehicles, State
Farm relies on a valuation report obtained from Audatex—a third-
party vehicle valuation company. Audatex generates valuation re-
ports using the Autosource Market-Driven Valuation software pro-
gram. In a valuation report, Audatex provides the price of four
comparable vehicles listed for sale online in the relevant market.
Audatex then deducts a percentage representing the cost of “typical
negotiation” from the listed sale price for each comparable vehicle.
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4 Opinion of the Court 22-13916
State Farm used Audatex’s valuation of Cudd’s total loss vehicle
and applied a typical negotiation deduction of approximately 8%
or 9% to Cudd’s total loss claim. State Farm valued Cudd’s vehicle
at $8,531 and paid him that amount as the actual cash value of his
totaled vehicle.
Following State Farm’s valuation of his total loss vehicle
claim, Cudd initiated a putative class action suit in federal district
court, alleging that State Farm’s systematic application of typical
negotiation deductions deliberately undervalues the actual cash
value of its insureds’ total loss vehicles. Cudd further alleged that
State Farm’s systematic application of typical negotiation deduc-
tions is a breach of the Policy and violates Georgia law because by
applying the typical negotiation deduction, it reduced the actual
cash value of his totaled vehicle by $670.25.
A month after Cudd filed the complaint, State Farm sent him
a written request for appraisal pursuant to the Policy. However,
Cudd refused to participate in the appraisal process, asserting that
the Policy’s appraisal provision is unenforceable because he sought
to challenge State Farm’s systematic application of typical negotia-
tion deductions to total loss vehicle claims.
Shortly after Cudd’s refusal to participate in an appraisal,
State Farm filed a motion to dismiss the action under Federal Rules
of Civil Procedure 12(b)(1) and 12(b)(6), arguing that Cudd has
failed to comply with the Policy’s appraisal provision. The district
court granted State Farm’s motion to dismiss. The district court
reasoned that Cudd’s challenge to State Farm’s application of the
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22-13916 Opinion of the Court 5
typical negotiation deduction to his total loss vehicle claim repre-
sented an actual-cash-value dispute. The district court determined
that the Policy’s appraisal provision was a condition precedent to
suing State Farm regarding the actual cash value of his totaled ve-
hicle. Accordingly, the district court entered judgment in favor of
State Farm, finding that Cudd’s suit was premature because he
failed to provide State Farm with a meaningful opportunity to in-
voke the Policy’s appraisal provision before initiating suit. The dis-
trict court also dismissed Cudd’s unjust-enrichment claim on alter-
native grounds, finding that Cudd could not state such a claim
when a contract exists covering the same subject matter under
Georgia law. Cudd timely appealed.
II. STANDARD OF REVIEW
We review de novo a district court’s grant of a motion to dis-
miss for failure to state a claim. Berman v. Blount Parrish & Co., 525
F.3d 1057, 1058 (11th Cir. 2008). At the motion to dismiss stage,
we accept the complaint’s factual allegations as true and construe
them in the light most favorable to the nonmovant. Kizzire v. Bap-
tist Health Sys., Inc., 441 F.3d 1306, 1308 (11th Cir. 2006) (citation
omitted). We also review de novo the interpretation of an insurance
policy. Hallums v. Infinity Ins. Co., 945 F.3d 1144, 1148 (11th Cir.
2019).
III. DISCUSSION
Georgia law controls the interpretation of the Policy. Under
Georgia law, the standard rules of contract construction govern the
interpretation of an insurance policy, “and the cardinal rule of
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6 Opinion of the Court 22-13916
construction is to ascertain the intent of the parties.” Auto-Owners
Ins. Co. v. Smith, 798 S.E.2d 93, 96 (Ga. Ct. App. 2017) (internal quo-
tation marks and citation omitted). When the language of an in-
surance policy is plain and unambiguous, Georgia “court[s] simply
enforce[] the contract according to the terms, and look[] to the con-
tract alone for the meaning.” Am. Empire Surplus Lines Ins. Co. v.
Hathaway Dev. Co., 707 S.E.2d 369, 371 (Ga. 2011) (citation omit-
ted). Georgia law requires any ambiguities in an insurance policy
to be “strictly construed against the insurer as drafter of the docu-
ment” and liberally in favor of the insured. Am. Strategic Ins. Corp.
v. Helm, 759 S.E.2d 563, 567 (Ga. Ct. App. 2014) (citation omitted).
A provision in an insurance policy is ambiguous if it is susceptible
to more than one reasonable interpretation. Id. at 565. Neverthe-
less, Georgia courts apply the ordinary rules of contract construc-
tion to resolve any ambiguities in an insurance contract. Id.; Duck-
worth v. Allianz Life Ins. Co. of N. Am., 706 F.3d 1338, 1342 (11th Cir.
2013) (quoting Alea London Ltd. v. Am. Home Servs., Inc., 638 F.3d
768, 773 (11th Cir. 2011)).
Generally, Georgia law disfavors conditions precedent in an
insurance contract but “where the language of the contract clearly
creates such a condition, that condition must be enforced.” Moore
v. Humble, 890 S.E.2d 28, 31 (Ga. Ct. App. 2023) (internal quotation
marks omitted) (quoting Allen v. Sea Gardens Seafood, 723 S.E.2d
669, 671 (Ga. 2012)). To determine if a condition precedent exists
in a contract, Georgia courts “look to the language of the agree-
ment itself.” Hall v. Ross, 616 S.E.2d 145, 147 (Ga. Ct. App. 2005).
If the contract’s language “is plain and unambiguous” and the
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22-13916 Opinion of the Court 7
parties’ intent is obvious, courts will enforce the contract as writ-
ten. Id. (quoting Guthrie v. Guthrie, 594 S.E.2d 356, 358 (Ga. 2004)).
This appeal presents two main issues for us to resolve: (1)
whether the Policy’s appraisal provision is enforceable in the pre-
sent circumstance; and (2) whether the Policy’s appraisal provision
is a condition precedent to suit.
First, we conclude that the Policy’s appraisal provision is
valid and enforceable. The appraisal provision is clear and unam-
biguous: it provides that State Farm and the policyholder must
agree on the actual cash value of a total loss vehicle, and if the par-
ties dispute the actual cash value, the dispute must be resolved by
the Policy’s appraisal process upon written request by either party.
Under the Policy’s appraisal provision, the parties agreed to resolve
any dispute over the insured vehicle’s actual cash value through
appraisal. That is the intent of the parties as expressed in the ap-
praisal provision. Nothing else in the language of the Policy ren-
ders the appraisal provision invalid or unenforceable. See Reed v.
Auto-Owners Ins. Co., 667 S.E.2d 90, 92 (Ga. 2008) (“Where the con-
tractual language unambiguously governs the factual scenario be-
fore the court, the court’s job is simply to apply the terms of the
contract as written, regardless of whether doing so benefits the car-
rier or the insured.” (citations omitted)).
Here, Cudd’s assertion that State Farm paid him $670.25 less
than his vehicle was worth signifies a disagreement over the totaled
vehicle’s actual cash value. Therefore, the appraisal provision ap-
plies, at least in part, to the dispute before us. Nevertheless, Cudd
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8 Opinion of the Court 22-13916
argues that even if the appraisal provision applies to his claims, it is
unenforceable because Georgia law prohibits arbitration provi-
sions in insurance contracts and pre-dispute waivers of the right to
a jury trial. However, the Supreme Court of Georgia has explained
that the bar on arbitration clauses does not extend to a provision
within an insurance contract that establishes a process for settling
disputes over the value of an insured’s covered loss. See McGowan
v. Progressive Preferred Ins. Co., 637 S.E.2d 27, 29 (Ga. 2006) (explain-
ing that “appraisal clauses in insurance contracts are enforceable”).
Moreover, the appraisal provision does not waive the right to a jury
trial. Indeed, the Policy states that “[a]ppraisers shall have no au-
thority to . . . decide any questions of law.” Therefore, the ap-
praisal provision applies and is enforceable in Cudd’s case.
Second, we conclude that the Policy’s appraisal provision is
not a condition precedent to suit. Nothing in the Policy’s appraisal
provision language requires the policyholder to notify State Farm
if he or she disagrees with its initial valuation of a totaled vehicle’s
actual cash value before filing suit. In fact, the plain language of
the Policy demonstrates that the appraisal provision is triggered
only if a party requests appraisal in writing. The Policy is silent on
when and how a policyholder is to notify State Farm of an actual-
cash-value dispute. Therefore, Cudd did not violate the Policy
simply because he did not notify State Farm of an actual-cash-value
dispute before commencing suit.
The Policy’s appraisal provision is clear as day: the actual-
cash-value dispute of the insured vehicle must be resolved through
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22-13916 Opinion of the Court 9
the Policy’s appraisal process once requested in writing by either
party. Compliance with the appraisal provision is mandatory.
The parties do not dispute that State Farm requested ap-
praisal in writing after Cudd filed suit. State Farm’s written request
for appraisal remains unsatisfied. Therefore, although Cudd did
not violate the Policy by filing suit prior to receiving State Farm’s
written request for an appraisal, and the district court erred by dis-
missing the action because appraisal is not a condition precedent to
suit, the parties must still participate in the Policy’s appraisal pro-
cess now that State Farm has invoked that provision.
Finally, we affirm the district court’s dismissal of Cudd’s un-
just-enrichment claim on the district court’s alternative reasoning.
Unjust enrichment claims like Cudd’s fail as a matter of Georgia
law where, as here, “any benefit conferred on the defendant[] was
triggered by a provision in the contract, the validity of which nei-
ther [plaintiff] nor the defendant[] challenge[s].” Tidikis v. Network
for Med. Commc’ns & Rsch. LLC, 619 S.E.2d 481, 485 (Ga. Ct. App.
2005).
IV. CONCLUSION
Based on the foregoing, we AFFIRM the district court’s dis-
missal of Cudd’s unjust-enrichment claim, VACATE the rest of the
district court’s judgment in favor of State Farm, and REMAND this
case for further proceedings consistent with this opinion.
AFFIRMED IN PART, VACATED IN PART, and
REMANDED.
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