IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF TEXAS

DALLAS DIVISION

SNELLING AND SNELLING, INC.,

Plaintiff,

VS.

FEDERAL INSURANCE COMPANY,

Defendant.

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§ CIVIL ACTION NO.

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§ 3:03-CV-2948-K

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MEMORANDUM OPINION and ORDER

Before the Court is Plaintiff Snelling and Snelling, Inc.’s (“Snelling”) Motion for

Partial Summary Judgment, and Defendant Federal Insurance Company’s (“Federal”)

Motion for Summary Judgment. The Court holds that Federal has already paid the

maximum recovery to which Snelling is entitled under the terms of the insurance policy.

Therefore, Federal’s Motion for Summary Judgment is GRANTED, and Snelling’s

motion is DENIED.

I. Background

Plaintiff Snelling provides personnel services to businesses throughout the United

States. In connection with these services, Snelling operates from offices located around

the country, including an office at 150 Broadway near the site of the World Trade

Center. Snelling procured property insurance for several of these office locations from

Defendant Federal, an underwriter and insurance provider. The insurance policy (“the

 

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Policy”) at issue in this case was effective from December 1, 2000, to December 1, 2001.

The Policy provided property insurance, including coverage for lost business income and

extra expenses, for Snelling’s office located at 150 Broadway. After the terrorist attack

of September 11, 2001, Snelling sought to recover from Federal, under the Policy, for

damages sustained at the 150 Broadway location.

II. Legal Standard

Summary judgment is appropriate when the pleadings, affidavits and other

summary judgment evidence show that no genuine issue of material fact exists and the

moving party is entitled to judgment as a matter of law. FED. R. CIV. P. 56(c); Gonzalez

v. Denning, 394 F.3d 388, 391 (5th Cir. 2004). Contract interpretation is purely a legal

issue. Gonzalez, 394 F.3d at 392. Summary judgment is, therefore, appropriate unless

a choice of reasonable interpretations creates an ambiguity in the contract. See Amoco

Prod. Co v. Texas Meridian Res. Exploration Co., Inc., 180 F.3d 664, 669 (5th Cir. 1999).

In cases brought under diversity jurisdiction, this Court interprets contracts

according to the applicable state law. See Gonzalez, 394 F.3d at 392. Under Texas law,

insurance policies are interpreted according to the rules of construction applicable to

contracts generally. Nat’l Union Fire Ins. Co. v. CBI Indus., Inc., 907 S.W.2d 517, 520

(Tex. 1995). Interpretation of an unambiguous contract is a question of law to be

determined by looking at the contract as a whole. Coker v. Coker, 650 S.W.2d 391, 394

(Tex. 1983). If the terms of a written contract can be given a definite legal meaning,

 

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then it is not ambiguous, and summary judgment is appropriate. See Gonzales, 394 F.3d

at 391-92. 

III. Analysis of Snelling’s Claims

A. Lost Business Income

In addition to providing insurance for Snelling’s buildings and personal property,

the Policy issued by Federal also covers lost business income. Specifically, the Policy

provides that Federal will pay for Snelling’s actual business income losses that result from

direct physical damage to a dependent business premises. The primary dispute in this

case centers around the precise limit of coverage for Snelling’s dependent business

premises. Federal argues that the Policy grants a total of $250,000 in lost business

income coverage for Snelling’s 150 Broadway location. Snelling, on the other hand,

contends that the Policy provides up to $250,000 in coverage for each of Snelling’s

dependent business premises related to the 150 Broadway location. This would include

$250,000 of coverage for each additional business premises, operated by others, that

accept Snelling’s personnel services. Because the Policy clearly limits the coverage for

business income loss to $250,000 at Snelling’s 150 Broadway location, the Court finds

that summary judgment is appropriate for Federal.

Under Texas law, a court must read all the parts of a contract together, in relation

to one another, in order to ascertain the true intent of the parties. Forbau v. Aetna Life

Ins. Co., 876 S.W.2d 132, 133-34 (Tex. 1994). Therefore, this Court must set forth and

 

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analyze all of the relevant Policy language in order to determine whether the Business

Income provision can be given a definite legal meaning. The appropriate way to begin

this inquiry is by looking at the Policy’s definitions of the relevant terms.

At the outset, the Business Income provision of the Policy states, “Throughout

this contract the words ‘you’ and ‘your’ refer to the Named Insured [Snelling] shown in

the Declarations of this policy. The words ‘we,’ ‘us’ and ‘our’ refer to the company

providing this insurance [Federal].” The policy also defines “Dependent Business

Premises,” in relevant part, to mean “premises operated by others on whom you depend

to...accept your products or services....” With these definitions in hand, the Court now

turns to address the substantive Policy provisions. 

The Policy provision that grants coverage for lost business income provides as

follows:

We [Federal] will pay for the actual business income loss and extra expense you

[Snelling] incur due to the actual or potential impairment of your [Snelling’s]

operations during the period of restoration, not to exceed the Limit of Insurance

for Dependent Business Premises shown under Business Income in the

Declarations. 

This actual or potential impairment of operations must be caused by or result

from direct physical loss or damage by a covered peril to property or personal

property of a dependent business premises at a dependent business premises.

The Policy provision that limits coverage for lost business income is set forth in

the Supplementary Declarations. The Supplementary Declarations list separate “Limits

Of Insurance” for specific types of business income losses, including “Dependent

 

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Business Premises.” Specifically, the Supplementary Declarations limit lost business

income coverage for dependent business premises to $250,000. The Supplementary

Declarations further provide:

The Limits Of Insurance shown below are provided for the Coverages shown at

no additional cost to you [Snelling]. These Limits Of Insurance apply

separately at each of your [Snelling’s] premises unless otherwise shown.

You [Snelling] may purchase additional Limits Of Insurance, and we [Federal] will

charge you [Snelling] an additional premium. If you [Snelling] purchase

additional limits for any of these Coverages, the Limits Of Insurance shown in the

Declarations will reflect your [Snelling’s] total limit, including the Limits Of

Insurance shown below. (emphasis added).

After careful review, the Court concludes that the individual Policy provisions,

when read together as a whole, clearly indicate that the maximum limit of lost income

coverage for dependent business premises is $250,000 per Snelling location. The policy

does not provide up to $250,00 of coverage per dependent premises location, as Snelling

claims. Snelling’s argument focuses, almost exclusively, on the words “your premises”

as used in the Supplementary Declarations – “These Limits Of Insurance apply

separately at each of your premises unless otherwise shown.” (emphasis added).

According to Snelling, the phrase “your premises” refers to any type of premises

mentioned in the Policy, including dependent business premises. Under this argument,

the $250,000 limit applies separately at each of Snelling’s dependent business premises.

Such a construction, however, runs contrary to the plain language of the contract.

The Policy clearly states that the terms “you” and “your,” as those words are used

throughout the contract, refer to the named insured, that being Snelling. Thus, the

 

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limits of insurance, by the Policy’s very terms, apply separately at each of Snelling’s

premises. The Policy’s loss of income coverage for dependent business premises is,

therefore, limited to $250,000 for Snelling’s 150 Broadway location. The mere fact that

Snelling proffers a conflicting interpretations does not render the contract ambiguous.

See DeWitt County Elec. Coop., Inc., v. Parks, 1 S.W.3d 96, 100 (Tex. 1999). 

This Court’s reading of the Policy finds further support in the Business Income

provision under the heading “Limits Of Insurance,” which states: “The most we [Federal]

will pay in any one occurrence, is the amount of loss, not to exceed the applicable Limit

of Insurance shown in the Declarations.” Thus, the most Federal will pay, with respect

to dependent business premises, for losses resulting from the September 11, 2001,

terrorist attack, is $250,000 for Snelling’s 150 Broadway location. As it is undisputed

that Federal has already paid Snelling this amount in dependent business premises

liability, the Court finds that Federal is entitled to summary judgment regarding

Snelling’s business income claim.

B. Extra Expenses

Snelling has also made claims for extra expenses, under the Policy, for Worker’s

Compensation costs and for legal fees associated with the eviction of a tenant from the

150 Broadway location. The Court finds that both of these claims are beyond the clear

and definite scope of the Policy, and that Federal is entitled to summary judgment on

these issues as well.

 

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With respect to coverage for extra expenses, the Policy provides that “We

[Federal] will pay for the actual...extra expenses you [Snelling] incur,” so long as such

expenses “result from direct physical loss or damages by a covered peril to property at the

premises shown in the Declarations....” While it may be true that Snelling would not

have incurred the Worker’s Compensation expenses but for the terrorist attack of

September 11, those expenses did not result from direct physical loss or damages to

property. Rather, these costs resulted from physical harm suffered by individuals,

namely Snelling employees. Thus, the claim for Worker’s Compensation costs is beyond

the scope of the Policy coverage. 

Likewise, Snelling’s claim for legal fees associated with the eviction of subtenants,

to whom it had leased space at its 150 Broadway location after September 11, 2001, is

beyond the scope of the Policy. Snelling claims that it made the decision to partially

rent its space at 150 Broadway in an effort to reduce its losses after the terrorist attack

of September 11. According to Snelling, the subsequent eviction costs associated with

removing the subtenants were over and above the expenses that they would normally

have incurred, and thus, are covered by the Policy. However, this type of loss falls

outside the Policy’s definition of extra expenses.

Under the Policy, an “extra expense” is defined as an expense incurred “in an

attempt to continue operations, over and above the expenses you [Snelling] would have

normally incurred....” The Policy further defines “operations” as any “business activities

 

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occurring at your [Snelling’s] premises prior to the loss, including the tenantability of

these premises.” Applying these definitions, the Court concludes that Snelling’s

attorney’s fees were not incurred in an attempt to continue a business activity occurring

prior to the loss. Rather, Snelling’s attorney’s fees were incurred in an attempt to

terminate an activity that began subsequent to the loss, that activity being the subletting

of the property located at 150 Broadway. The Court finds Snelling’s claim for attorney’s

fees to be too remote to qualify as an attempted continuation of operations at the 150

Broadway location. Thus, Snelling’s claim for attorney’s fees also falls outside the scope

of the Policy. Consequently, Federal is entitled to summary judgment with respect to

Snelling’s claims for extra expenses. 

IV. Conclusion

The Court finds that the Policy issued by Federal is not ambiguous as a matter of

law. The definite legal meaning of the of the Policy is that the maximum limit of lost

income coverage for dependent business premises is $250,000 for Snelling’s office

located at 150 Broadway, which Federal has already paid. Furthermore, Snelling’s claims

for extra expenses are beyond the scope of the Policy’s coverage. Therefore, the Court

GRANTS Federal’s Motion for Summary Judgment. Accordingly, Snellings’ Motion for

Partial Summary Judgment is DENIED.

SO ORDERED.

Signed October 25th, 2005.

s/ ED KINKEADE 

ED KINKEADE

UNITED STATES DISTRICT JUDGE

 

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