                            In the

    United States Court of Appeals
                For the Seventh Circuit
                   ____________________
No. 19-2272
NATHAN SIGLER,
                                            Plaintiff-Appellant,
                              v.

GEICO CASUALTY COMPANY
and GEICO CORPORATION,
                                          Defendants-Appellees.
                   ____________________

             Appeal from the United States District Court
                   for the Central District of Illinois.
      No. 1:18-cv-01446-MMM-JEH — Michael M. Mihm, Judge.
                   ____________________

    ARGUED DECEMBER 10, 2019 — DECIDED JULY 24, 2020
                ____________________

   Before SYKES, Chief Judge, and KANNE and BARRETT,
Circuit Judges.
    SYKES, Chief Judge. Nathan Sigler totaled his 2001 Dodge
Ram and filed a claim with GEICO, his auto insurer, for the
loss. GEICO paid him for the value of the car, adjusted for
depreciation, minus his deductible. Sigler claims he is enti-
tled to more—namely, sales tax and title and tag transfer
fees for a replacement vehicle, though he did not incur these
2                                                     No. 19-2272

costs. He filed a proposed class action against GEICO seek-
ing damages for breach of contract.
     Illinois law governs this dispute. The district court dis-
missed the suit, holding that neither the GEICO policy nor
Illinois insurance law requires payment of these costs when
the insured does not incur them.
    We affirm. The premise of Sigler’s suit is that sales tax
and title and tag transfer fees are always part of “replacement
cost” in a total-loss claim—regardless of whether the insured
incurs these costs. That misreads the policy and the relevant
Illinois insurance regulation. GEICO’s policy doesn’t prom-
ise to pay sales tax or title and tag transfer fees, and the
Illinois Administrative Code requires a settling auto insurer
to pay these costs only if the insured actually incurs and
substantiates them with appropriate documentation. Be-
cause Sigler did not do so, the judge properly dismissed the
suit.
                         I. Background
    Nathan Sigler owned a 2001 Dodge Ram and insured it
with GEICO Casualty Company. 1 In June 2013 he was in-
volved in an accident and filed a claim with GEICO for
damage to the vehicle. An adjuster determined that the
vehicle was a total loss and calculated a base value of
$3,151.95. GEICO paid Sigler that amount minus his $500
deductible.




1 GEICO Casualty is a subsidiary of GEICO Corporation. The parent
company is also named as a defendant but can be ignored for purposes
of this appeal.
No. 19-2272                                                                3

    Sigler sued GEICO in federal court in Central Illinois 2 al-
leging that the insurer owed him additional money as part of
the replacement cost for his vehicle—specifically, a $95 title
transfer fee, a $25.50 tag transfer fee, and sales tax “in the
minimum amount of $196.99.” He did not allege that he
purchased or leased a replacement vehicle and actually
incurred these costs. Rather, the amended complaint (the
operative pleading here) asserts that GEICO’s insurance
policy promises to pay the equivalent of these costs in every
total-loss claim without regard to whether the insured
obtains a replacement vehicle and actually incurs these costs.
Sigler proposed to represent a class of policyholders on a
breach-of-contract claim against GEICO for “systematically
underpaying its insureds.”
     GEICO moved to dismiss for failure to state a claim, see
FED. R. CIV. P. 12(b)(6), arguing that nothing in the insurance
policy’s coverage provisions could reasonably be interpreted
as a promise to reimburse Sigler for vehicle-replacement
costs that he had not incurred. GEICO also argued that an
Illinois insurance regulation, incorporated into the policy as
a matter of law, requires reimbursement of these costs only if
the insured has purchased or leased a replacement vehicle
and can document that he paid taxes and transfer fees.
   The judge agreed with GEICO’s reading of the policy and
the incorporated regulation and dismissed the suit. He set a


2 The suit is in federal court based on diversity of citizenship. GEICO is a
Maryland citizen. Sigler is a citizen of Illinois and proposes to represent a
class of more than 100 on a claim in which the matter in controversy
exceeds $5 million. See 28 U.S.C. § 1332(a)(1), (c)(1), (d).
4                                                     No. 19-2272

deadline for Sigler to file a second amended complaint if he
had “a good faith basis” to do so. When the date passed
without a new pleading, the judge entered final judgment
and terminated the case.
                         II. Discussion
    The interpretation of an insurance policy is a question of
law, so our review is de novo. BASF AG v. Great Am. Assur-
ance Co., 522 F.3d 813, 818–19 (7th Cir. 2008). In Illinois, as
elsewhere, insurance disputes are governed by general
contract principles, but because an insurance policy is a
distinctive type of contract, questions of policy interpretation
are subject to special rules that account for the type of cover-
age purchased, the nature of the risks involved, and the
overall purposes of the policy. Windridge of Naperville Condo.
Ass’n v. Philadelphia Indem. Ins. Co., 932 F.3d 1035, 1039 (7th
Cir. 2019); Nicor, Inc. v. Associated Elec. & Gas Ins. Servs. Ltd.,
860 N.E.2d 280, 285–86 (Ill. 2006).
    Insurance policies typically begin with a basic grant of
coverage—a section explaining the losses that the insurer
will cover—followed by an itemization of exclusions, limita-
tions on the insurer’s liability, conditions, and (sometimes)
exceptions to exclusions. GEICO’s policy is structured in this
typical way. In the coverage-grant section entitled “Losses
We Will Pay for You,” the policy states that GEICO “will pay
for collision loss to the owned or non-owned auto for the
amount of each loss less the applicable deductible.” “Loss” is
defined as “direct and accidental loss of or damage to:
(a) [t]he auto, including its equipment; or (b) [o]ther insured
property.”
No. 19-2272                                                   5

    In a later section entitled “Limit of Liability,” the policy
places a ceiling on GEICO’s payment obligation: “The limit
of our liability for loss … [i]s the actual cash value of the
property at the time of the loss.” “Actual cash value” is
defined as “the replacement cost of the auto or property less
depreciation or betterment.” Sigler’s claim rests on this
language. He contends that in every total-loss claim, GEICO
is contractually obligated to pay “actual cash value,” defined
as “the replacement cost of the auto or property less depre-
ciation or betterment.” Although “replacement cost” is not
further defined, Sigler argues that it must always include
amounts equal to the applicable sales tax and title and tag
transfer fees because Illinois collects these taxes and fees
whenever vehicles are purchased or leased. And GEICO
must pay, he continues, whether or not the insured purchas-
es or leases a replacement vehicle and actually incurs these
costs.
    This argument misconstrues a limitation on liability as a
promise to pay. Put slightly differently, Sigler mistakes a
liability ceiling for a floor. The Limit of Liability section of
the policy doesn’t promise to pay these costs regardless of
whether the insured incurs them; it simply describes the
most that GEICO will pay in the event of a covered loss. To
repeat: the coverage-granting language says only that
GEICO will pay for the “collision loss to the owned or non-
owned auto,” with “loss” defined as “direct and accidental
loss of or damage to” an insured vehicle or “[o]ther insured
property.”
   Sigler argues that the policy’s “silence” on whether he is
entitled to payment for taxes and fees he did not incur
should be interpreted in favor of coverage because GEICO
6                                                    No. 19-2272

cannot point to unambiguous language that excludes these
particular costs. That gets things backward. Analysis of
exclusions does not come into play unless these costs are
encompassed within GEICO’s basic coverage grant in the
first instance; an insurance policy does not need to exclude
coverage for something that it does not cover to begin with.
Westfield Ins. Co. v. Vandenberg, 796 F.3d 773, 779 (7th Cir.
2015).
    As important, the policy is not really silent on this sub-
ject. An Illinois insurance regulation specifically addresses
when an auto insurer must pay sales tax and title and tag
transfer fees in a total-loss claim, and the regulation is
incorporated into the policy as a default term as a matter of
law. See Moran v. Rush Prudential HMO, Inc., 230 F.3d 959, 967
(7th Cir. 2000) (“Illinois laws automatically are incorporated
into all contracts of insurance in that state.”); Kapinus v. State
Farm Mut. Auto. Ins. Co., 738 N.E.2d 1003, 1005 (Ill. App. Ct.
2000) (“It is well settled that, when an insurance policy is
issued, applicable statutory provisions in effect at the time
are treated as part of the policy.”).
    The Illinois Administrative Code provides that when an
auto insurer determines that an insured vehicle is a total loss
as a result of a collision, the insurer may elect to either
replace the insured vehicle or pay a cash settlement. ILL.
ADMIN. CODE tit. 50, § 919.80(c)(1), (2). If the insurer chooses
to pay a cash settlement, the regulation requires payment of
applicable sales tax and title and transfer fees only when the
insured purchases or leases a new vehicle within a specified
time and substantiates that he has incurred these costs:
       If a cash settlement is provided, and if within
       30 days after the receipt of the settlement by
No. 19-2272                                                    7

       the insured[] the insured has purchased or
       leased a vehicle, the company is required to re-
       imburse the insured for the applicable sales
       taxes and transfer and title fees incurred on ac-
       count of the purchase or lease of the vehi-
       cle … . If the insured cannot substantiate such
       purchase and the payment of such taxes and fees[]
       by submission to the company of appropriate docu-
       mentation within 33 days after the receipt of settle-
       ment, the company shall not be required to
       reimburse the insured for the sales taxes or transfer
       or title fees.
Id. § 919.80(c)(3)(A)(i) (emphasis added).
    The use of the word “reimburse” is telling. The regula-
tion mandates payment of these costs if and only if the in-
sured (1) has purchased or leased a vehicle within 30 days of
receiving a cash settlement and incurred applicable sales
taxes and fees and (2) substantiates the purchase and pay-
ment of those taxes and fees by submitting appropriate
documentation to the insurer within 33 days after the receipt
of the settlement.
   To be sure, an insurer may contractually obligate itself to
pay these costs without substantiation; the regulation states
that “[i]n lieu of” the above-described “reimbursement
procedure,” an insurer “may directly pay the required
amounts of sales taxes and transfer and title fees to the
insured at the time of settlement.” Id. (emphasis added). But
“may” is a permissive term, and permissive statutory or
regulatory language, by definition, does not command
anyone to do anything. See ANTONIN SCALIA & BRYAN A.
GARNER, READING LAW: THE INTERPRETATION OF LEGAL TEXTS
8                                                             No. 19-2272

112 (2012) (“The traditional, commonly repeated rule is that
shall is mandatory and may is permissive … .”).
    As a last resort, Sigler argues that the regulatory condi-
tions on reimbursement do not apply unless the insurance
policy unambiguously opts in to the payment regime estab-
lished in section 919.80(c)(3)(A)(i). That’s a nonstarter. As we
explained, the regulation is incorporated as a term in the
policy as a matter of law. An insurer may contract to provide
coverage above the default floor specified in the regulation,
but it must do so expressly. See Brandt v. Time Ins. Co.,
704 N.E.2d 843, 851 (Ill. App. Ct. 1998) (“By entering into a
contract, and by not excluding or modifying the effects of
the various laws, the contracting parties are deemed to have
accepted these laws as part of their agreement.”). GEICO did
not do so. 3
    A straightforward reading of GEICO’s policy and the in-
corporated regulation defeats Sigler’s claim. He does not
allege that he incurred these vehicle-replacement costs, let
alone that he substantiated them before the deadline speci-

3 The Fifth Circuit’s recent decision in Singleton v. Elephant Insurance Co.,
953 F.3d 334 (5th Cir. 2020), does not affect the outcome here. There, as
here, the plaintiffs filed a proposed class action against their auto insurer
alleging that recovery in a total-loss collision claim always includes taxes
and fees for a replacement vehicle. The case turned on Texas law, which
construes “actual cash value” as “fair market value.” Id. at 337. The court
held that “fair market value” under Texas caselaw does not include taxes
and fees and affirmed the dismissal of the suit. Id. at 338. Our case is
even clearer: the Illinois insurance regulation, incorporated into the
GEICO policy as a matter of law, specifically provides that a settling
insurer is not required to pay sales tax and title and tag transfer fees
unless the insured timely provides documentation that these costs were
actually incurred.
No. 19-2272                                               9

fied in the regulation. Accordingly, his claim for breach of
contract necessarily fails, and the decision below is
                                                 AFFIRMED.
