United State s District Judge, WesternDistrict of T ex as, sitting bydesi gn atio n. * 1 

### INTHE UNI TED S TATESCOU RT OFAPPEALS

FORTHE FIFTH CIRCU IT

N o. 08- 30050

ARCT I C S LOP E RE GI ONAL CORP ORAT I ON; AS RC E NERGY S ERVI CES I NC. ; OMEGANA T CHI Q I NC P l a i n ti ffs-A p p ell a n ts v. AF F I L I AT ED F M I NS URA NCE C O. D efen da n t

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rom t h e U n i t ed S t ates D i st ri ctC ou rt f o rt he W e s t e r n Di s t r i c to f Lo ui s i ana

Be f o r e J ONE S , C h i e f

J u d g e , a n d J OL L Y , C i r c u i tJ u d g e , a n d MONTA L VO , D i st ri ctJu dg e. * E D ITH H

. JO N E S , C h i ef Ju dg e: T h i s app ealrepresen ts a vari ati on on the court’ s previ ou s i n suran ce
c o ve r ag e de c i s i o ns i n L eona rd v. Nati on w i d e Mu t u al Ins. Co. , 4 9 9 F

. 3 d 41 9 ( 5 th Ci r . 2 00 7) a nd Tu epker v. S t ateF arm Fi re & C asu alty Co. , 507 F

. 3d 346 ( 5th C i r. 2007)

. App el l ant s, t he i nsur ed par t i es , adm i tt hat H urr i c ane Ri t a’ s st or m s urge i n S ept e m be r2 00 5 f l o o de d Om e ga N at c hi q I nc . ’ s ( “ O m e ga ” ) o f f i c e a nd United States Court of App eals

Fifth Circuit 

### F I L E D April 2, 2009 Cha rl es R. F ulb ru g e II I ClerkN o. 08- 30050

2 c o n s tr u c tio n y a r d in Ib e r ia P a r is h , L o u is ia n a , u p t o t h r e e fe e t d e e p . T h is pa r t i c ul arf

l o o d was e xc l ude d f

r o m c o ve r ag e b y t he “ al l r i s ks ” po l i c y Arc t i c Sl o pe R egi on alC orporati on (“A rct i c Sl ope”) , t h e paren tcom pa n y, ha d p u rchased fr om i ns ur e rAf

f i l i ated F M I n suran ce C o. ( “A f f i l i ated”)

. A rct i c Sl ope contend s t h at t he l oss n on et h el ess fal l s w i t h i n an un u sua lpol i cy p ro vi si on def i n i n g coverage f

or wi nd /ha i ld a ma g e . L i k e t h e d i s t r i c tc o u r t , wh i c h a b l y d i s s e c t e d t h e p o l i c y , we di sagree w i t h A rct i c Sl ope’ s posi t i on an d aff i rm t h e j u dg m en tf

or t h e i n surer. A f t er A f f i l i ated den ied c overage f or t h e com pa n y’ s s t orm surge l osses , A rcti c S l op e fi l ed su i t on be h a l f of i tself an d related com p a n i es. T h e facts
u n derl yi n g i t s i n suran ce c l ai m w ere un di spu t ed. A rct i c Sl ope now ap pea l s f rom t h e di st ri ctcourt ’ s adverse sum m ary j u dg m en ton coverage i ssues. T h i s c ou rtrevi ew s t h e sum m ary j u dg m en ti n t erpret i n g an i n suran ce
con tract de no vo . S ee L eona rd , 4 9 9 F .3 d a t 4 2 8
. In th is d iv e r s ity ca s e , w e a p p ly L ou i sian a ’ s p ri n ci p l es o f con stru cti on to t h e p oli c y a t h a n d

. L ou i sian a cou rts constr u e i n suran ce pol i ci es l i ke an y ot h er c on t ractaccor di n g t o t h e parti es’ in te n t a s e x p r e s s e d in t h e w o r d s o f th e p o lic y . L A
. C IV
. C ODE a r t
. 2 0 4 5

- 2 0 4 8
. An i ns ur anc e po l i c y m us tb e “ c o ns t r ue d a c c o r di ng t o t he e n t i ret y o f i t s t e r m s a nd
c ondi t i ons as se t f

or t h i n t he pol i c y, and as am pl i f i ed, ex t ended, orm odi f i ed by
a n y rid e r , e n d o r s e m e n t, o ra p p lic a tio n a tt a c h e d to o rm a d e a p a r t o f th e p o lic y .” L A
. R EV
. S TAT
. § 22: 88 1. The Lou i s i ana Supr e m e C o ur tre c e nt l y e m pha s i z e d t he i m po r t anc e o f

r e as o nab l e ne s s i n i ns ur anc e po l i c y i nt e r pr e t at i o n: A n i n suran ce pol i cy shou l d n otbe i n t erpret ed i n an un reasona bl e or a s t r ai ne d m anne r s o as t o e nl ar ge o rr e s t r i c ti t s pr o vi s i o ns b e yo nd w hat i s r eas onabl y c ont em pl at ed byi t s t er m s ors o a s t o a c hi eve an a b s u r d co n c lu s io n . . . . I f af t erappl yi ng t he o t herge ner alru l es of c ons t r uct i on an am bi gui t y r em ai ns, t he am bi guous c ont r a ctu a l pr ovi si on i s t o b e c o n s tr u e d a g a in s t t h e in s u r e ra n d in fa v o r o f c o v e r a g e . U n d e rth is r ul e o f s t r i c tc ons t r uct i on, eq ui voc alpr ovi si ons s ee ki ng t o nar r ow an i nsur er ’ s obl i gat i on are s t r i c t l y c ons t r ued agai nstt he i nsur er . ThatN o. 08- 30050

Fl oodmeans anysurface water; tidalor seismic sea wave ; rising(inclu ding 1 overflowingor breakingof bou ndaries) of a nyb od y of water; includin g butnot limitedto reservoirs, lakes, streams, rivers, po nds and harbors allw heth er driven byw ind or not, and includingsprayfrom anyof the foregoin g that re sults from, co ntribut es to , or is a ggravated b y a ny of th e ab ove. Fl oodalso includes phy sicalloss or damage from w aterw hich backs up thro u ghse we rso r dr ain s th at areb elowgro u n d levela s ar es ulto f flo od

. 1. Fl oodExc lu sio n 2 Coverage a s provided bySectionC., Additio nalCoverage, Item 2. Flood : is e xcluded at anylo cation situated in: 1. Any floo dz oneor areadesi gn ated byth e F ederal E mergency Mana ge ment Agency(F EMA ) as subj ect to a flood frequ encyup to and 3 s t r i c tc o ns t r uc t i o n pr i nc i pl e , howev e r , i s sub j e c tt o e xc e pt i o ns . One o f th e s e e x c e p tio n s is th a t t h e s tr ic t c o n s tr u c tio n ru le a p p lie s o n ly i f t he am bi guo us po l i c y pr o vi s i o n i s s us c e pt i bl e t o t w o or m ore rea s o n a b le i n terp reta ti on s. F or th e ru l e of stri ct con stru cti on to ap pl y, t h e i n suran ce pol i cy m u st be not onl y susceptibl e t o t w o or m o r e i n t e r p r e t a t i o n s , b u te a c h o f t h e a l t e r n a t i v e i n t e r p r e t a t i o ns m u stbe reasonab l e. She rv . Laf

ay e t t e I ns ur anc e Company , 98 8 So

. 2d 1 86 , 1 93 ( La. 2 00 8) ( c i t at i o ns
o m itted ). A r c t ic S lo p e co n te n d s th a t O m e g a ’ s s to r m s u r g e d a m a g e w a s e x p r e s s ly
c ove r ed byt he w i nd/hai lpr ovi si on o f t h e A f f i l i at ed po l i c y o ral t er nat i vel y t hat t h e pol i cy i s am bi gu ou s an d m u st be constr u ed i n i t s favor. Asyst em ati c r evi ew of t he appl i c abl e po l i c y pr ovi si ons i s t her ef or e ne c es sa r y. T h e A ffilia te d po l i cy cov ers facil i ti es o w n ed by A rcti c S l op e a n d i ts sub si di ari es t h rough ou t t h e U n i t ed Stat es f or “ al l ri sks of di rect ph ysi call oss or da m age t o i n sured propert y except as defi n ed and l i m i t ed herei n . ” T h e p o li cy g o e s o n to co v e r lo s s e s fr o m b o th “flo o d ” a n d “w in d a n d h a il,” s u b je c t t o s p e c ific sub

- l i m i t s, res t ri ct i on s and excl u si on s. N o t ab l y, Ar c t i c Sl o pe co nc e de s t hatw hi l e t he po l i c y de f i ni t i o n o f

“ f l o o d” 1
en com p a ss e s s to rm su rg e d a m a ge , the po l i cy ex cl u d es fl oo d cov era ge , at a
m i ni m um , i n l o w - l yi ng f l o o d- pr o ne ar e as l i ke O m e ga ’ s l o c at i o n. Apar tf r o m t he 2N o. 08- 30050

includingth e 1 00 ye ar frequ ency , or 2. Any flood zone or area for which FE MA has not ye t det ermin ed th e flood haz ard frequ en cy or h as not yet classifi ed o r de sign ated as b ein g in or out of af lo odz on e, o r a nyare ao uts id e th e Unit edS tate s. Th e pe ril of

f lo od is cover ed in a n are a prot ecte d b yd a ms, l evee s, dike s, or walls which :

a. Pro tect such area s from atle ast the level of th e 1 00 ye ar flood, and have no such openings or flood gates, and b. Werebuilt byan d ar e e ither maintaine d orin spe c t edb y the Unit edS tate s (U. S. ) Arm yC orpso f E n gin ee rs . Affiliate d FMw il l not undert ake anyduty to a dvi se th e insure d on wheth er anylo cations are in an area exclu ded fro m coverage under the Fl ood En dorsement. Th e I nsure d h as th e re sponsib ility to determin e wheth er its lo cations are in an exclu ded area. 4 d e fin ed ti m e peri od an d l ocat i on s i n w h i ch f l ood d am age i s c overed, t h e pol i cy spe c i f i c al l y e xc l udes l os s ordam age c ause d by “ [ f ] l ood , [ s] eepa ge or [ i ] n f l u x of
w a te rfr o m n a tu r a l u n d e r g r o u n d s o u r c e s b e lo w th e s u r fa c e o f th e g r o u n d

. . . ” S ee G roup I E xcl u si on s. W i n d/h ai lcoverage i s aff orded by F orm S 2 accom pa n yi n g t h e p ol i cy, a l i st of W i nd a nd H ai lPr o ne Ar e as t hati nc l ude s I be r i a Par i s h, Lo ui s i ana , a m o ng
coun t i es of

ni n e st ates, P u ert o R i co and t h e V i rgi n I sl an ds. R ei m bu rsem en tf or
w i n d/h ai ldam age i s s u bj ectt o a s p eci alsub-l i m i tan d d edu ct i bl e. Th e pol i cy de f i ni t i o n o f

“ w i nd a nd/o rha i l ” i s r at he rb r o ad : W in d a n d /o r h a il m e ans di r e c ta nd/o ri ndi r e c ta c t i o n o f w i nd an d/ or hai lan d alll oss o r da m age resul t i n g t h eref rom w h et h er cau sed by w i n d, by h ai lor by an y ot h er peril o th e r t h an f i re or exp l osi on i n cl u di n g bu tn otli m i t ed t o, l oss or dam age cau sed w h en w ater , i n an y st ate, rai n , sl eet , snow , san d, du stor an y ot h er sub st an ce, m ater i al , obj ector t h i n g i s c arri ed, bl ow n , dri ven , or o t he r w i s e t r ans po r t e d b y w i nd o nt o o ri nt o s ai d l o c at i o n. O ne m o r e c r i t i c alpo l i c y feat ur e i s r e l e va nt
. Pr e fac i ng t he G r o up I E x c lu s io n s (in c lu d in g th e flo o d e x c lu s io n n o te d a b o v e ) is th e fo llo w in ga n t i-N o. 08- 30050

5 concu rr e n t cau se ( “A C C ” ) cl au se, t ai l ored as a L ou i si an a m an da t ory en d orse m en t: G roup I

. Th i s pol i cy does not i n sure aga i n st l oss or dam age cau sed di rect l y or i n di rect l y or resul t i n g f rom an y of

t h e f ol l ow i n g. Loss or da m age i s excl u ded regardl ess of an y ot h er c au se oreven tw h et h er o rn o t in s u r e d u n d e rth is p o lic y th a t c o n tr ib u te s co n c u r r e n tly o rin an y sequ en ce t o t h e l oss or dam age. Arc t i c Sl o pe m ai nt ai ns t hatO m e ga ’ s da m ag e fal l s s qua r e l y w i t hi n t he pl ai n l an gu age of

t h e w i n d/h ai l provi si on becau se t h e st orm surge consi st ed of
w a te r d r iv e n b y w in d o n to o rin to O m e g a ’ s p r o p e r ty
. S ee L eona rd , 499 F. 3d at 437, n. 15 ( def

i ni ng a s t or m s urge as “ w at ert hat i s pushed t ow ar d t he s hor e b y t he force o f t he w i nds s w i r l i ng ar ound t he s t or m . Thi s advanci ng s urge
com bi n es w i t h t h e n orm al t i des t o cr eate t h e hu rri can e st orm t i de .

. . T h i s r i se in w a te rle v e l c a n c a u s e s e v e r e flo o d in gin co a s ta l a r e a s .”). B a s e d o n th is pr e m i s e , t he c o m pa ny po s i t s t w o l evel s of a m bi gui t y i n t he po l i c y. Fi r s t , t he pol i c y i s al l ege dl y am bi guous bec ause i texc l udes c ove r age f orthe s t or m s urge d a ma g e w i t h i n t h e f l o o d d e f

i n i t i o n w h i l e a u t h o r i z i n gc o v e r a g e f o rt h e s a me d a m a g e in th e w in d /h a ilp r o v is io n . T h e d is t r ic tc o u r tr eje c t e d A r c t i c S lo p e ’s pr o f fe r e d i nt e r pr e t at i o n o f t he w i nd/hai lpr o vi s i o n a s unr e as o nab l e i n l i g h to f t he
e n tire p o li cy . W e n e e d n o t o p in e o n th a t c o n clu sio n , h o w e v e r, b e ca u se e v e n if a h u rri can e st orm surge fal l s w i t h i n t h e def i n i t i on s of both an excl u ded peri l(f l ood at O m ega’ s s i t e) an d a covered peri l( w i n d/h ai l) , t h e pol i cy i s not am bi gu ou s. T h e pol i cy expl i ci t l y st ates t h at i tcovers all r isk s o f d i rectph ysi call oss or da m age “exceptas excl u ded un der t h i s pol i cy. ” S ect i on A , P eri l s I n sured. Th ere i s no am bi gui t y w hen t he pol i c y i s r ead as a w hol e. Th e exc l usi on of s t or m s urge
a s a fl oo d ev en t can n ot be rev erse d b y i ts p oss i b l e i n cl u sion a s a w i n d /h a i lev en t. S econd , A rct i c S l ope c on si ders t h e A C C cl au se am bi gu ou s because there i s o nl y o ne c a us e o f d a m a g e
– s t o r m s ur g e
– no t s e p a r a t e c a us e s d e f i ned as
s e p a r a te p e r ils in th e p o lic y ; a n d b e c a u s e th e flo o d e x c lu s io n is a w k w a r d lyN o. 08- 30050

R estatingin full the floo d exclu sionw ithin Group I of E xcluded Perils, the provision 3 st ate s: 8
. Fl ood , See page o r I nflux of Waterfrom Natural Unde rgroun d So urce s

b elowth e surf

a ceo f th e gro u n d. E xcep t a s p rovid edinS ectionC ., Additio n al C over a ge, I te m 2
. Flo od

. . . . Unlike in Leo nard , th e da mage h ere was all alle ge dlycaused bystorm surge. Arctic 4 Slopedid not assert damages attrib utableseparate lyan d in depen dently eith er tow ind or flo odi ng. 6 art i cul ated w i t h i n t h at c l au se . N e i t he ro f t he s e a r gum e nt s w i t h st an ds an al ysi s. 3 N o t w i t hs t and i ng Arc t i c Sl o pe ’ s c r e at i ve e f f o r t s t o m anufact u re a m bi gui t y, t he A C C cl au se i s un equ ivo ca lan d u n yi el di n g. I texcl u des i n suran ce agai n stl oss or d am age cau sed by or resul t i n g f rom a n y of

t h e l i st ed cau ses, i n cl u di n g f l ood ( as def i n ed by t h e pol i cy)

. I tt h en repeats t h a t lo ss o r d am age i s excl u ded

“ regardl ess of

an y ot h er c au se oreven tw h et h er ornot i n sured u n der t h i s pol i cy t hatc o nt r i but e s c o nc urr en t l y or i n a ny s e que nc e t o t he l o s s o rda m ag e . ” The storm su rg e fl oo d occa sion ed b y H u rrican e R i ta “ w h eth er driven b y w i n d or n ot” i s notc ove r ed bythi s pol i c y. Conseque nt l y, t he A C C c l ause pr ec l udes c ove r age
o f t he l o s s o r da m ag e unde r t he w i nd/hai l pr o vi s i o n as w at e r “ c arri ed, b l o w n, d r iv e n o ro th e r w is e tr a n s p o r te d b y w in d o n to o rin to s a id lo c a t i o n .” In th is 4 si t u ati on , t h e A C C cl au se operat es e x act l y as i tw as i n t en ded , an d i ti s not
am bi gu ou s. Th e cl au se el i m i n a te s ap pl i cat i on of an ef f i ci en tproxi m ate c au se rul e, w h ereby a j u ry coul d be cal l ed u pon t o deter m i n e t h e rel ati ve contribu t i on of t h e covered and t h e excl u ded peri l s, by excl u di n g coverage al t ogether. T h e in te r p r e ta tio n o f th e A C C in A ffilia te d ’ s p o lic y is th e r e fo r e e s s e n tia lly
s i m i l art o ouri nt e r pr e t at i o n o f a n AC C c l aus e i n L eona rd

. Th i s c ou rtconcl u ded t hat t he pol i c y’ s p l a i n l anguage l ef t“ no i nt er pre t i ve l ee w ay t o c onc l ude t hat
r e c o v e r y ca n b e o b ta in e d fo rw in d d a m a g e th a t o c c u r r e d co n c u r r e n t l y o r in seq u en ce w i th the ex cl u d ed w a ter d a m a ge . ” L eona rd , 499 F. 3d at430 ( i nt er nal q u ota ti on om i tted ). L eo n ardf ur t he re xp l ai ne d t hatda m ag e c aus e d b y w i ndN o. 08- 30050

7 “ c onc urr ent l y o ri n any s equenc e” w i t h w at er i s exe m pl i f i ed by “ t he s t or m - sur ge fl oo d i n g th a t fol l ow s on th e h ee l s of a h u rrican e’ s l a n d fal l

. ” I d. H e nc e , “ i f

w i nd
an d w atersynergi st i cal l y cau sed t h e s a me d a m a g e , su c h d a m a g e is e x c lu d e d .” I d. (e m p h a s is in o r ig in a l). T h e fa c t t h a t t h e w in d /h a il p r o v is io n in th is ca s e is
w r i t t e n m o r e br o ad l y t han t he w i nd- o nl y pr o vi s i o n i n L eona rddo e s no t , i n o ur vi ew , render the A C C cl au se am bi gu ou s. W e a ls o r eje c t A r c tic S lo p e ’ s c o n te n tio n t h a t th e d e s c r ip tio n o f a flo o d p e r il
e xc l ude d by t he AC C c l aus e i s i t s e l f a m bi guo us . I ti s s i m pl y a m i c r o c o s m o f t he ge ne r als c o pe o f

po l i c y c o ve r ag e , t hati s , c e r t ai n pe r i l s a r e c o ve r e d a s de f i ne d a nd l i m i t ed i n t h e pol i cy an d s u bj ect t o t h e pol i cy’ s exp ress excl u si on s. H en ce, f l ood l oss, as supp l em en t al l y defi n ed t o i n cl u de seepa ge or i n f l u x of w aterf rom bel ow groun d, rem ai n s excl u ded un der t h e A C C cl au se, al t h ou gh i t i s covered, subj ect t o o t herqual i f

i c at i ons , as def

i ned by PartC , A ddi t i onalC ove r age, Sec t i on 2. T h ere i s no am bi gu i t y; i n st ead , coverage ha s been caref u l l y ap porti on ed u n der t h e pol i cy t o cer t ai n f l ood l osses .

CO NC L US I ON For t he f

or ego i ng r eas ons , O m ega’ s l os s f r om H ur r i c ane Ri t a’ s st or m s urge i s not covered by A f f i l i ated’ s pol i cy, ei t h er a s a m a tter of express pol i cy i nt e r p r e t a t i o n o r b y i n f e r e n c e d r a wn f

r o m a m b i g u i t y . Th e j u d g m e n t o f t he di st ri ctcourti s AF FI RM ED

.