Michael Adams, on behalf of themselves and all others similarly situated; Colleen Adams, on behalf of themselves and all others similarly situated, Plaintiffs - Appellants
American Family Mutual Insurance Company, Defendant - Appellee
Submitted January 12, 2016.
Appeal from United States District Court for the Southern District of Iowa - Des Moines.
For Michael Adams, on behalf of themselves and all others similarly situated, Colleen Adams, on behalf of themselves and all others similarly situated, Plaintiffs - Appellants: Travis J. Burk, West Des Moines, IA; Ronald R. Parry, STRAUSS & TROY, Cincinnatti, OH.
For American Family Mutual Insurance Company, Defendant - Appellee: Ryan Patrick Howell, Ross W. Johnson, FAEGRE & BAKER, Des Moines, IA; Michael Sean McCarthy, FAEGRE & BAKER, Denver, CO; D. Lucetta Pope, FAEGRE & BAKER, South Bend, IN.
Before MURPHY, SMITH, and BENTON, Circuit Judges.
MURPHY, Circuit Judge.
Michael and Colleen Adams owned a homeowners insurance policy issued by American Family Mutual Insurance Company (American Family) at the time a pipe burst in their home. The Adams couple (the Adams) believed that American Family had not reimbursed them for all of the damage to their home, and they invoked their right to appraisal under Iowa law. American Family did not participate in the appraisal process, claiming that its policy did not allow for appraisals. The Adams initially filed a state court petition seeking damages from American Family for their individual claims, but later amended the petition to state a class action. American Family then removed the class action to federal district court and moved to dismiss. After the district court granted American Family's motion and dismissed the case, the Adams moved to amend their complaint to reassert their individual claims. The district court denied the motion to amend. The Adams appeal, and we affirm.
At the time a pipe burst in their home, the Adams owned an American Family homeowners insurance policy. American Family paid them for their structural damage pursuant to the policy. After the Adams received this payment, they discovered additional damage to their home and American Family refused to consider the additional losses. The Adams attempted to invoke their right to appraisal under Iowa Code § 515.109, but were informed by American Family that their contract only provided for arbitration, not appraisal.
The Adams then brought this claim against American Family in the Iowa District Court for Polk County. Initially they alleged that American Family had breached its duty of good faith, as well as their homeowners insurance contract, by refusing to pay for the additional damage and by not participating in an appraisal process. They sought punitive damages and a declaration that they had a right to appraisal for their additional losses. The Adams later amended their petition to plead a class action composed of all American Family insureds who had submitted claims for benefits under insurance policies which had binding arbitration clauses, whether for their homes, farms, or ranches. The class action petition sought a declaratory judgment that American Family had illegally deprived the class members of their statutory rights to appraisal under Iowa Code § 515.109 and breached its duty of good faith. They also sought an injunction requiring American Family to advise all class members of their right to appraisal. After the state district court certified the class, American Family removed the lawsuit to federal court under the Class Action Fairness Act, 28 U.S.C. § 1332(d).
American Family moved to dismiss, arguing that the class claims for declaratory and injunctive relief did not state claims because Iowa's appraisal statute does not create a private right of action. The Adams responded that these claims were premised on American Family's breach of the " conformity clause" in its homeowner contracts, not on a direct violation of Iowa's appraisal statute. The policy's conformity clause provides that if any part of a policy were found contrary to Iowa law, American Family agrees " to alter that part of [the] policy and make it conform with state law." The Adams argued that since the contract did not allow for appraisals, it did not conform with state law so the right to appraisal had to be inserted into the policy. When American Family did not honor the Adams' right to appraisal, it thus breached the contract.
The district court rejected this argument, concluding that the plaintiffs had simply requested the court to find that American Family had violated Iowa's appraisal statute, a statute which does not provide for a private right of action. The court alternatively noted that the conformity clause had not been pled in the amended class petition and concluded that this theory did not create a " case or controversy" appropriate for resolution under the Declaratory Judgment Act, 28 U.S.C. § 2201. The Adams' declaratory judgment was dismissed as well as their request for an injunction. The court also dismissed the bad faith claim because the Adams had not alleged that American Family denied any of the class members' claims, a prerequisite for a bad faith claim in Iowa.
After the district court dismissed all of the Adams' class action claims, the court permitted them to file a Rule 15(a)(2) motion for leave to file an amended petition. Their proposed second amended petition alleged a breach of contract claim based upon American Family's failure to pay for the additional damage done to the their home and a bad faith claim seeking damages for American Family's failure to investigate, adjust, and pay for the additional losses. The district court denied the motion, concluding that the new petition merely attempted to resurrect the individual claims the Adams had initially asserted in state court ...