109 F.4th 806
5th Cir.2024Background:
- Christa Taylor held a personal auto insurance policy from Root Insurance Company.
- Her car was damaged in a hailstorm and Root determined it to be a total loss, paying her the vehicle's actual cash value ($22,750).
- Taylor did not receive an additional payment for sales tax on the vehicle's value.
- She filed a putative class action alleging breach of contract and violation of the Texas Prompt Payment of Claims Act (TPPCA) over Root’s failure to pay sales tax.
- Root moved to dismiss the case; the district court agreed, dismissing Taylor’s claims, and Taylor appealed to the Fifth Circuit.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Root must pay sales tax on the actual cash value in a total-loss settlement | The policy’s “Payment of loss” clause requires sales tax payment when settling in money; tax computed as 6.25% of vehicle’s value | No sales tax is legally applicable; total loss payment is not a taxable "sale" under Texas law | No sales tax owed, as no tax is applicable under Texas law |
| Whether actual cash value under Texas law includes sales tax or fees | Actual cash value should comprise retail sales tax | Actual cash value does not include taxes or fees | Actual cash value does not include taxes/fees under Texas law |
| Whether Root violated the TPPCA by not paying claimed sales tax | Failure to pay sales tax violates TPPCA | No violation, as no amount is owed | No TPPCA violation since claim not owed under policy |
| Whether Taylor should be granted leave to amend her complaint | District court erred in denying leave to amend | No adequate briefing or authority supplied | No error; claim forfeited for inadequate briefing |
Key Cases Cited
- Ferrer & Poirot, GP v. Cincinnati Ins., 36 F.4th 656 (5th Cir. 2022) (Setting forth standard for reviewing motions to dismiss and insurance policy interpretation)
- Singleton v. Elephant Ins., 953 F.3d 334 (5th Cir. 2020) (Holding that actual cash value does not include taxes and fees for replacement vehicles under Texas law)
- Wease v. Ocwen Loan Servicing, L.L.C., 915 F.3d 987 (5th Cir. 2019) (Stating elements of breach of contract under Texas law)