                                                                               PUBLISH

                IN THE UNITED STATES COURT OF APPEALS
                       FOR THE ELEVENTH CIRCUIT

                          -------------------------------------------

                               Nos. 96-3657 & 97-2041

                          --------------------------------------------

                          D. C. Docket No. 95-40138-WS


VESTA FIRE INSURANCE CORPORATION, VESTA
INSURANCE CORP., SHEFFIELD INSURANCE
CORPORATION, an Alabama Corporation,

                                                             Plaintiffs-Appellants,

     versus

STATE OF FLORIDA, TOM GALLAGHER, in his
capacity as Insurance Commissioner, STATE
BOARD OF ADMINISTRATION, WILLIAM ASH, JR., in
his capacity as Executive Director,
                                          Defendants-Appellees.




                ----------------------------------------------------------------

                Appeals from the United States District Court
                    for the Northern District of Florida

                ----------------------------------------------------------------

                                     (May 22 , 1998)


Before EDMONDSON and BIRCH, Circuit Judges, and FAY, Senior Circuit Judge.
EDMONDSON, Circuit Judge:

    Plaintiffs appeal the district court’s


grant of summary judgment in favor of


Defendants. In evaluating cross-motions


for summary judgment, the district court


decided that no genuine issues of material


fact existed and that judgment could be


granted to Defendants as a matter of law


on Plaintiffs’ claims that recent Florida


insurance      legislation      violated   the   Due


Process, Taking, and Contract Clauses of the


United States Constitution.           Because we

                            2
conclude that the district court erred in


granting          summary           judgment          about


whether a regulatory taking occurred, we


vacate the grant of summary judgment


on that issue and remand for further


proceedings consistent with this opinion.

                                            1
We affirm on all other issues.




                      Background




  1
    Plaintiffs in this case are insurance companies subject to
the Florida statutes. Defendants include the state agencies
responsible for administering the insurance regulations found
in the statutes.

                              3
   After Hurricane Andrew hit Florida in


1992, insurance companies began to lessen


their potential exposure to policies likely


to result in hurricane damage liability:


residential line policies in Florida.      To


prevent the total withdrawal of insurance


companies        and       the   subsequent


unavailability of insurance if companies


left   the   Florida   market,   the   Florida


legislature passed several statutes.




                       4
   The    first   of   these   statutes    was    a


“Moratorium Statute,” which prohibited the


nonrenewal         and       cancellation        of


residential    line    insurance     policies   for


reasons related to the risk of hurricane


damage.    See 1993 Fla. Laws ch. 93-401 § 1.    The


Moratorium        Statute      was    passed     as


temporary legislation.


   The Florida legislature then passed the


“Moratorium        Phaseout    Statute,”    which


allowed     limited      cancellation           and




                         5
nonrenewal of residential policies. See Fla.

                        2
Stat. § 627.7013;           see also 1993 Fla. Laws ch.


93-410 § 19; 1993 Fla. Laws ch. 93-411 § 1.           The


Moratorium          Phaseout         Statute   provided


that, in a twelve-month period, no insurer


could cancel or nonrenew more than 5% of




   2
       When the summary judgment motions
were      argued        in     the    district      court,
Defendants         said      that    the   moratorium
would     end      in       November        1996.     The
Moratorium Phaseout and related statutes
have since been extended and are not
scheduled to end until 1999. See 1996 Fla. Laws
ch. 96-194 § 13.   Whether          future extensions
might be made is unknown.

                              6
its residential policies in Florida or more


than 10% of its residential policies in a


single   Florida       county.       See   Fla.   Stat.    §


627.7013.             This    phaseout      plan     was


interpreted by Department of Insurance


(DOI)    rules   --    despite   a   Florida      statute


permitting        the        total   withdrawal           of


insurance companies upon 45- days notice,


see Fla. Stat. § 627.4133(2) -- as generally


prohibiting an insurer’s total withdrawal




                             7
from       doing       business        in     the    State   of

           3
Florida.


      In       addition,     legislation was passed


requiring             insurers         to     pay       annual


premiums              to    the       Florida       Hurricane


Catastrophe Fund. This fund is intended to


provide          reinsurance                to      insurance




  3
   The DOI reasoned that the other, more
general withdrawal statute would continue
to apply to other kinds of insurance -- car,
fire,   life     --   and    that       the      new,   specific
Moratorium Phaseout Statute would apply
only    to      companies             issuing      residential
home insurance policies.

                                  8
companies doing business in Florida.            The


reinsurance       provides      protection       to


companies which, following a hurricane,


are unable to pay fully on their policies.


   Plaintiffs wish to withdraw entirely


from the insurance industry in Florida


but have been prohibited from doing so by

                                           4
the Moratorium Phaseout Statute.               This



       Although
       4
                   Plaintiffs     challenge     the
constitutionality of both the Moratorium
Phaseout   and     the       Catastrophe       Fund
legislation, only the Moratorium Phaseout
Statute     directly         implicates        the
Constitution. The required contribution to

                         9
prohibition,   Plaintiffs        argue,   violates


several provisions of the United States


Constitution: (1) the Taking Clause of the


Fifth Amendment; (2) the Contract Clause;


and (3) Plaintiffs’ Substantive Due Process




the fund, absent the Moratorium Phaseout
Statute, is a constitutional exercise of the
State of Florida’s police power.          See, e.g.,
Meriden Trust & Safe Deposit Co. v. FDIC, 62
F.3d 449, 454-55 (2d Cir. 1995).          Thus, the
constitutionality    of     the     Moratorium
Phaseout   Statute   is    the    focus   of   this
opinion.

                      10
                                                         5
rights under the Fourteenth Amendment.


 5
     Plaintiffs claim that their Substantive
Due Process rights were violated. Plaintiffs’
argument focuses on the right to freedom
of    association,   but        this   case   does    not
involve infringement of that right. Also,
because      the    regulation          about        which
Plaintiffs     complain          is    economic,       the
legislation is presumed valid unless no
rational basis exists for its enactment.
See Usery v. Turner Elkhorn Mining Co., 96
S.Ct. 2882, 2892 (1976).               We cannot say
Florida lacked a rational basis for passing
this legislation.     Plaintiffs’ Substantive
Due Process claim is without merit, and we
do not discuss further that claim.
     Also without merit is Plaintiffs’ claim
that the district court erred by ruling on
the motions for summary judgment before
ruling on Plaintiffs’ motion to compel
discovery.    We,    therefore,          affirm        the

                           11
   Plaintiffs     filed    complaints      alleging

                                              6
these    constitutional         violations.       Both


Plaintiffs   and    Defendants         moved       for


summary judgment.              Plaintiffs, however,


did not move for summary judgment on


the issue of regulatory taking.           Instead,


Plaintiffs argued that summary judgment


was precluded because genuine issues of


district court’s decision on these issues.
    6
        Two cases by insurance companies
against the Defendants were consolidated
in this appeal.

                          12
material fact existed on that claim.    The


district court granted summary judgment


in favor of Defendants on all claims.




                 Discussion




   The district court’s grant of summary


judgment is reviewed by this court de novo.


See Real Estate Financing v. Resolution


Trust Corp., 950 F.2d 1540, 1543 (11th Cir.


1992).   Summary judgment is appropriate




                     13
only when “there is no genuine issue as to


any material fact and . . . the moving


party      is   entitled   to   a    judgment   as   a


matter of law.”         Fed.R.Civ.P. 56(c); see also


Hale v. Tallapoosa County, 50 F.3d 1579, 1581


(11th Cir. 1995).




I.   The Taking Clause




     The    Taking      Clause       of   the   Fifth


Amendment           states,     in   relevant   part,




                           14
“nor shall private property be taken for


public use, without just compensation.” U.S.


Const.   amend.    V;   see    also   Penn    Cent.


Transp. Co. v. New York City, 98 S.Ct. 2646,


2658     (1978)     (applying         the     Fifth


Amendment     to    the      States   through   the


Fourteenth   Amendment).               “The   Fifth


Amendment’s       guarantee       that      private


property shall not be taken for a public use


without just compensation was designed to


bar [the] Government from forcing some




                        15
people alone to bear public burdens which,


in all fairness and justice, should be borne


by the public as a whole.”     Armstrong v.


United States, 80 S.Ct. 1563, 1569 (1960).


   Plaintiffs allege substantial financial


losses as a result of the prohibition of


withdrawal from Florida, coupled with the


forced contributions to the Catastrophe


Fund.   This   statutory    scheme,   Plaintiffs


argue, precludes them from allocating their


companies’ resources as they see fit and




                       16
forces them to suffer net economic losses


in       the   Florida    market,          resulting    in   a


taking of their “property” without just


compensation in violation of the Fifth


Amendment                to        the     United      States

                    7
Constitution.



     Plaintiffs argued an additional issue:
     7


that the district court erred because it
treated        Plaintiffs’          taking      challenge    as
“facial”       instead        of    as    an    “as   applied”
constitutional challenge.                   We believe the
district        court     properly           addressed      the
challenge in this case as an “as applied”
challenge.        Plaintiffs             now,   and   in    the
district        court,        challenged        the    Florida
statutes only as applied to Plaintiffs. Thus,

                                   17
   A.   Per Se Takings




   Whether      government         conduct,      in


relation   to   private      property,   works   a


taking involves the courts in an ad hoc,


factual inquiry.   See Penn Central, 98 S.Ct.




we do not consider the statutory scheme’s
constitutionality on its face.       We discuss
(as     urged      by        Plaintiffs)      the
constitutionality of the statutes only “as
applied” to Plaintiffs.       Compare Agins v.
City of Tiburon, 100 S.Ct. 2138, 2141 (1980)
(facial challenge), with Penn Central, 98
S.Ct. 2646, 2661-62 (as applied challenge).

                        18
at   2659.     But,    certain     invasions   of


private     property    are    deemed   “takings”


without regard to the state’s interest in


possessing or otherwise using the property:


per se takings. See New Port Largo, Inc. v.


Monroe County, 95 F.3d 1084, 1089 (11th Cir.


1996) (“In addition to physical invasions of


property,    the   Supreme      Court   has   also


accorded ‘categorical [per se] treatment,’


invariably    requiring       compensation,    to


cases     ‘where      regulation     denies    all




                         19
economically beneficial or productive use


of    land.’”)    (emphasis        added)     (citation


omitted).


     Plaintiffs     argue        that   the    statutes


establishing the Moratorium Phaseout and


the Catastrophe Fund are per se takings


because of the compulsory nature of the


government         act:    the    statutes    make     it


mandatory for all insurance companies


currently        doing    business      in   Florida   to


remain in that market and contribute to




                           20
the fund.     But, the mandatory nature of


the government’s act does not place these


statutes in the per se takings category:


neither a physical invasion nor a denial


of all beneficial use of “property” has been


shown.      As     the    district       court   properly


pointed     out:    “[t]he       compelled    insurance


contracts     still      belong     to   Plaintiffs;    the


insureds     must        still    pay     Plaintiffs    all


required    premiums;            Plaintiffs      can   still


cancel      or      nonrenew              policies     for




                             21
[nonhurricane      related    reasons];     [and]


Plaintiffs   can    still    apply   for    rate


increases . . . .” District Court Order at 20.




   Plaintiffs also argue that these statutes


effect a government takeover of private


insurance companies, resulting in per se


takings.     But   the   cases   relied    on   by


Plaintiffs -- United States v. Pewee Coal Co.,


71 S.Ct. 670 (1951), and United States v.


United Mine Workers, 67 S.Ct. 677 (1947) --




                     22
are not comparable to this case. In Pewee


Coal    and    United       Mine    Workers,    the


government took total, direct control of


private businesses.          This case does not


present       that   kind    of    occupation   or


takeover, and it does not present a per se


taking.




   B.   Regulatory Takings




                        23
      Plaintiffs also allege that a regulatory


(non per se) taking is effected by the

             8
statutes.             The    current      standard         for


evaluating            such    claims      is    found       in


Connolly         v.   Pension      Benefit       Guaranty


Corp., 106 S.Ct. 1018 (1986).         In Connolly, the


Supreme Court recognized three factors


  8
   At the outset, we recognize that insurance contracts can be
property subject to an unconstitutional taking under the Fifth
Amendment. See Lynch v. United States, 54 S.Ct. 840, 843
(1934) (“Valid contracts are property . . . .”); see also
Ruckelshaus v. Monsanto Co., 104 S.Ct. 2862, 2873 (1984). “If
regulation goes too far it will be recognized as a taking.”
Pennsylvania Coal Co. v. Mahon, 43 S.Ct. 158, 160 (1922). But,
“that legislation disregards or destroys existing contractual
rights [like the right to cancel an insurance contract] does not
always transform the regulation into an illegal taking.”
Connolly v. Pension Benefit Guar. Corp., 106 S.Ct. 1018, 1025
(1986).

                              24
that should be considered to identify a


regulatory taking: (1) the economic impact


of the challenged rule, regulation, or statute


on the plaintiff; (2) the extent to which


the     regulation        interferes        with


investment-backed expectations; and (3)


the nature of the challenged action. See id.


at 1026 (citations omitted).         Plaintiffs


contend, and we agree, that the district


court   failed   to   consider   properly   these


factors    and    that    genuine    issues   of




                        25
material fact exist to preclude summary


judgment on this claim.




      1.   Economic Impact on Plaintiffs




      Plaintiffs point to their economic loss


in         the   Florida     market        and   the


approximately $1 million premium paid to


the        Catastrophe     Fund   as   a   negative


economic impact.            Plaintiffs also argue




                           26
that   the     nature       of     the     Moratorium


Phaseout     Statute       --    the   potential   for


another extension -- requires them to stay


in     the     Florida          insurance      market


indefinitely,        creating          a    substantial


economic impact. But Defendants say that


the    possibility         for     rate      increases


counteracts          the        negative      economic


impact.      Plaintiffs’ applications for rate


increases, however, have been denied.               We


believe      that,    when         considering      the




                           27
economic    impact    on     Plaintiffs,    the


potential for future extensions of the


Moratorium        Phaseout       cannot      be


determined; and the potential for future


rate increases is no answer to Plaintiffs’


ongoing    economic       loss   when      rate


increases have been applied for and have


been denied.


   The district court should have considered


what   economic   impact     Plaintiffs    have


suffered and will suffer as a result of the




                     28
challenged statutes.    The parties dispute


exactly   what   return     Plaintiffs   have


enjoyed in the Florida market since the


moratorium and whether that return is


reasonable.   Defendants, and the district


court in its decision, relied heavily on the


fact that the moratorium would end in


1996. But now, in 1998, the moratorium still


exists and is scheduled to exist until June


1999.   Thus, the extent of the economic


impact on Plaintiffs remains a material




                       29
fact that must be determined based upon

                                                                9
an expiration of the moratorium in 1999.




     2.   Investment-Backed Expectations




     Plaintiffs         also        allege      that        the


limitations on their withdrawal from the


 9
    The extension of the moratorium statutes into 1999 occurred
after Plaintiffs filed their complaint. Thus we expect Plaintiffs
will be permitted to file supplemental pleadings, which would
include the economic effect of the moratorium statutes due to
the latest extension. See Fed.R.Civ.P. 15(d) (providing for the
filing of supplemental briefs, upon motion of a party, “setting
forth transactions or occurrences or events which have
happened since the date of the pleading sought to be
supplemented”).

                               30
Florida     market    interfere       with     their


investment-backed        expectations.           The


district court did not address this factor.


   In general, “[t]hose who do business in


the regulated field [of insurance] cannot


object if the legislative scheme is buttressed


by subsequent amendments to achieve the


legislative end.” Connolly, 106 S.Ct. at 1027


(internal      quotations       and     citations


omitted).     This   case,   however,   does    not


present the typical situation of simple




                        31
regulation       as   a   condition     of   doing


business: the statutes require the doing of


business.


   The Supreme Court has written these


words about the constitutionality of a


taking:     “A    different      case   would     be


presented were the statute, on its face or


as applied, to compel a landowner over


objection    to   rent     his   property    or   to


refrain in perpetuity from terminating


a tenancy.”       Yee v. City of Escondido, 112




                          32
S.Ct. 1522, 1529 (1992); see also Lewis v.


Safeco Ins. Co. of America, 414 N.Y.S.2d


823,    861   (1978)   (“[T]his     law    expressly


requires that . . . insurance companies, like


the    defendants,         renew        automobile


insurance      policies    and,     accordingly,   it


warrants careful review.”). This case may


be    that    “different       case”:     insurance


companies must refrain, potentially in


perpetuity, from terminating contracts.


“While [a state’s] police power may limit




                          33
and restrict the uses to which an owner


may put his property, it may not compel


him to use such property for a particular


purpose if he prefers to abandon such a use


thereof.” Department of Pub. Works v. City


of San Diego, 10 P.2d 102, 105 (Cal. Ct. App.


1932).


   Interference with investment-backed


expectations occurs when an inadequate


history of similar government regulation


exists:   where the earlier regulation does




                     34
not   provide    companies      with   sufficient


notice that they may be subject to the new


or additional regulation. See Connolly, 106


S.Ct. at 1027.    Plaintiffs argue that the


moratorium       statutes       interfere      with


reasonable          investment-backed


expectations.      Plaintiffs     contend      that


whatever regulation Plaintiffs may have


anticipated when they entered the Florida


market   they    could   not    anticipate     that


withdrawal   from        that   market   --   should




                         35
additional     regulation              become     too


burdensome    --   would    be    prohibited.      The


district court, however, did not consider


whether the regulation at issue should have


been anticipated by Plaintiffs, particularly


the    Moratorium    Phaseout          Statute   which


prohibits Plaintiffs’ total withdrawal from


doing business in Florida.


      Interference   with        the   investment-


backed   expectations      must        be   considered


with the other factors: the government’s




                       36
interest      and    the   economic      impact    on


Plaintiffs.      Genuine issues of material


fact exist about what investment-backed


expectations        Plaintiffs    had    when     they


entered    the      Florida     market   and    what


impact the moratorium statutes have had


on Plaintiffs’ expectations.          So, summary


judgment was inappropriate.




   3.   Nature of the Government Action




                           37
   In addition, Plaintiffs argue that the


nature of the government acts supports


the takings claim. Plaintiffs contend that


the compulsory nature of the legislation


alone     results   in    a   taking;    but   all


government regulation is compulsory in


nature.     “[I]t cannot be said that the


Taking     Clause   is    violated      whenever


legislation requires one person to use his


or her assets for the benefit of another.”


Connolly, 106 S.Ct. at 1025.    But the nature




                         38
of   the   state’s     interest       is   critical   in


determining          whether      a        taking     has


occurred.    See id.      When important public


interests are served, a taking is less likely


to have occurred. See Keystone Bituminous


Coal Ass’n v. DeBenedictis, 107 S.Ct. 1232,


1242-43 (1987).


     No doubt can exist that the general


regulation    of     insurance        is    within    the


State’s police powers.          See 15 U.S.C. §§ 1012


(“The   business     of   insurance,        and   every




                           39
person engaged therein, shall be subject to


the laws of the several States which relate


to   the   regulation     or    taxation      of   such


business.”).      After        Hurricane      Andrew,


several     insurance          companies      became


insolvent,      unable   to     pay   their   policies.


Other      companies      sought      to    withdraw


altogether      from     the    Florida    insurance


market.        This withdrawal could have had


serious negative effects on Florida’s real


estate market and on the economy of the




                          40
State. The moratorium was intended as a


stabilizing force in the market and was


within the State of Florida’s police power.


The government interest in this case was


the   public   welfare     of     the   residents   of


Florida. But the nature of the government


interest and its importance, given all the


circumstances, as well as the extent of the


regulations’ harsh impact on Plaintiffs’


interests      must   be        determined   by     the


district court.




                           41
   The district court erroneously granted


Defendants’        motion     for   summary


judgment      without       considering    the


financial rate of return for Plaintiffs


and the impact on Plaintiffs’ investment-


backed expectations.    “These ‘ad hoc, factual


inquiries’ must be conducted with respect


to specific property, and the particular


estimates     of    economic    impact    and


ultimate valuation relevant in the unique


circumstances.”     Hodel v. Virginia Surface




                      42
Mining and Reclamation Ass’n, Inc., 101


S.Ct. 2352, 2370 (1981).       Without knowing


the economic impact of the legislation and


the Plaintiffs’ reasonable expectations, the


necessary study of competing interests


cannot    be   accomplished        and    summary


judgment       cannot     be   granted.            See


generally   Penn   Central,        98    S.Ct.   2646,


2659-61     (discussing      the    variety         of


interests involved and to be considered in


a taking case).




                        43
II.         Contract Clause




        The Contract Clause of the United States


Constitution provides that “[n]o State shall


.   .   .   pass   any   .   .   .   Law   impairing      the


Obligation of Contracts.”                  U.S. Const. art. 1,


§ 10. “Although the language of the Contract


Clause is facially absolute, its prohibition


must be accommodated to the inherent


police power of the State ‘to safeguard the




                                 44
vital interests of its people.’”               Energy


Reserves Group, Inc. v. Kansas Power and


Light Co., 103 S.Ct. 697, 704 (1983) (citation


omitted).


   Three    factors     are    considered         when


evaluating    a     claim    that       the   Contract


Clause has been violated: (1) whether the law


substantially       impairs         a    contractual


relationship;     (2)   whether          there    is    a


significant and legitimate public purpose


for   the    law;    and      (3)       whether        the




                        45
adjustments of rights and responsibilities


of the contracting parties are based upon


reasonable    conditions   and    are   of   an


appropriate nature.    See id. at 704-05.


   Plaintiffs make a sufficient showing


that the Florida legislation substantially


impaired     the   contracts     between     the


insurance companies and their insureds.


Insurance provides coverage of a specified


risk for a specified time.     At the end of


that   time,       insurance      companies




                      46
reevaluate the risk and decide whether they


wish to remain the insurers of that risk.


“Total    destruction     of    contractual


expectations   is   not   necessary   for    a


finding of substantial impairment.”         Id.


at 704.   Under the Moratorium Phaseout,


Plaintiffs   are    forced     to   continue


contractual relationships that otherwise,


pursuant to the terms of the contracts,


could be rightfully terminated.




                     47
      Assuming a substantial impairment to


Plaintiffs’    contracts     exists,   the   State


“must have a significant and legitimate


public purpose behind the regulation.”          Id.


“[T]he public purpose need not be addressed


to an emergency or temporary situation.”


Id.     at    705.       Defendants           have


demonstrated a legitimate public purpose:


protection and stabilization of the Florida


economy,      particularly    the   real     estate


market.       See generally Allied Structural




                       48
Steel Co. v. Spannaus, 98 S.Ct. 2716 (1978);


Home Building & Loan Ass’n v. Blaisdell, 54


S.Ct. 231 (1934).


     Once a legitimate purpose is identified,


we    must    look    to   whether   the   state’s


adjustments           of    the   rights     and


responsibilities of the contracting parties


are based upon reasonable conditions and


are    of   an      appropriate   nature.     See


Energy Reserves, 103 S.Ct. at 705.         “Unless


the State itself is a contracting party . . .




                           49
courts         properly             defer     to    legislative


judgment              as     to      the     necessity       and


reasonableness of a particular measure.”


Id. (internal citations and quotations


omitted).         The State was no party to the

                                      10
insurance contracts;                       so based upon the



          Plaintiffs
         10
                               argue        that   we   cannot
consider              the     legislature’s         purported
purposes for the statutes because the State
is   a        third-party            beneficiary        to   the
contracts based upon its control of the
Catastrophe Fund.                   The law of Florida does
not support this theory.                     See Thompson v.
Commercial Union Ins. Co., 250 So.2d 259,
262           (Fla.     1971)        (To     be    third-party
beneficiary,               “[t]he     clear       intent     and

                                    50
legislature’s judgment, the statutes’ impact


on existing insurance contracts cannot


be   said     to      be    an      unconstitutional


impairment.




                      Conclusion




     No     factual      disputes   exist   about    the


Contract Clause, Substantive Due Process, or




purpose      of    the     contract    [must   be]   to
directly and substantially benefit the third
party.”).

                             51
Per Se Taking claims; so summary judgment


was appropriate for Defendant on those


claims.     But,   summary       judgment     was


incorrect     on        Plaintiffs’   claim    of


regulatory    taking      resulting   from    the


Florida insurance statutes.


   AFFIRMED        in    part;   VACATED      and


REMANDED in part.




                         52
