### IN THE UNI TED STAT ES COURT OF APPEALS FOR THE FIF TH CIRCU IT

No. 10-31091

WH HOLDINGS, L.L.C.; AXIS US INSURANCE; SWISS RE INTERNATIONAL SE; LLOYDS OF LONDON; XL INSURANCE BERMUDA, LIMITED, Plaintiffs - Appellants,
v. ACE AMERICAN INSURANCE COMPANY, Defendant - Appellee.

Appeal from the United States District Court for the Eastern District of Louisiana USDC No. 2:07-CV-7110

Before BARKSDALE, GARZA, and ELROD, Circuit Judges. PER CURIAM: *
T h e so le q u e stio n p re se n te d b y th is d iv e rsity a ctio n is w h e th e r th e

co n stru ctio n co n tra ct a t issu e o b lig a te d th e b u ild in g o w n e r, W H H o ld in g s, o r its

co n tra cto r, G o o te e C o n stru ctio n C o m p a n y , t o p u rch a se p ro p e rty in su ra n ce to

co v e r d a m a g e to re n o v a tio n w o r k

. T h e d istrict co u rt d e te rm in e d th a t W H H o ld in g s b o re th a t o b lig a tio n u n d e r th e co n tra ct a n d e n te re d s u m m a ry U n i te d S ta te s C o u rt o f A p p ea l s

F i ft h C i rc u i t 

### F I L E D June 6, 201 2 Lyle W . Cayce Clerk

Purs uant to 5th Cir. R. 47.5 , the cour t has det erm ined that this op i n i o n s hould not * be publ ish ed and is not pr ece dent excep t unde r the lim ite d cir cum st ance s se t for th in 5th Cir. R. 47.5 .4. Case: 10-31091 Document: 00511878747 Page: 1 Date Filed: 06/06/2012No. 10-31091

ju d g m e n t in fa v o r o f G o o te e ’s in su re r, d e fe n d a n t A C E A m e rica n In su ra n ce C o m p a n y
. W e V A C A T E th e ju d g m e n t o f th e d istrict co u rt a n d R E M A N D fo r fu rth e r p ro ce e d in g s. I. P rio r to H u rrica n e K a trin a , W H H o l di ngs , owner of t he R itz C a rlto n H o te l

co m p le x in N e w O rle a n s, co n tra cte d w ith G o o te e to p e rfo rm re n o v a tio n w o rk o n th e e x istin g stru ctu re o f th e R itz. H u rrica n e K a trin a ca u se d d a m a g e to th e R itz’s E x te rio r In su la tio n F in ish in g S y ste m a n d te rra co tta fa ca d e
. In A u g u st 2 0 0 7 , W H H o ld in g s file d su it a g a in st A C E in L o u isia n a sta te

co u rt, se e k in g $ 3 ,2 6 4 ,8 1 2 .5 4 , le ss a $ 7 ,5 0 0 d e d u ctib le , in co v e ra g e fo r d a m a g e to th e e x te rio r o f th e R itz. A C E re m o v e d th e ca se to fe d e ra l co u rt. T h e p a rtie s 1 file d cro ss-m o tio n s fo r su m m a ry ju d g m e n t

. T h e p a rtie s d id n o t d isp u te th a t th e ir co n stru ctio n co n tra cts in c o r p o r a te a n d a re g o v e rn e d b y A IA D o cu m e n t A 2 0 1 -1 9 9 7 , G e n e ra l C o n d itio n s o f th e C o n tra ct fo r C o n stru ctio n , a s e x p re ssly

a m e n d e d b y th e p a rtie s (G e n e ra l C o n d itio n s). It w a s a lso u n d isp u te d th a t th e A C E B u ild e r’s R isk P o licy , w h ich A C E issu e d to G o o te e , p ro v id e s co v e ra g e fo r W H H o ld in g s o n ly if W H H o ld i n g s q u a l ifie s a s a n in su re d u n d e r th e p o licy ’s B ro a d N a m e d In su re d e n d o rse m e n t, w h ich p ro v id e s th a t “a n y p a rty in in te re st

w h ich th e in su red is resp o n sib le to in su re ” is a n in su re d (e m p h a s i s a d d e d ). T h u s, th e d istrict co u rt co rre ctly fra m e d th e d e te rm in a t i v e issu e a s “w h e th e r G o o te e w a s co n tra ct u a l ly o b lig a te d , a n d th e re fo re ‘re sp o n sib le ,’ to in su re W H H o ld in g s su ch th a t it b e ca m e a n in su re d o n th e A C E p o licy p u rsu a n t to th e

WH Ho ldi ngs wa s initially the onl y named plai ntif f. The othe r nam ed plainti ff s are 1 WH Ho ldi ngs’ s exces s ins urer s. They pur chas ed all of WH Ho ldi ngs’ s right s to this act ion, and pur sua nt to the dis tri ct cour t’s or der joi ned this ac tio n i n M ay 201 0.
2 Case: 10-31091 Document: 00511878747 Page: 2 Date Filed: 06/06/2012No. 10-31091

B ro a d N a m e d In su re d e n d o rse m e n t.” T h e d istrict co u r t ’ s re so lu tio n o f th a t 2 issu e d e p e n d e d e n tire ly o n its in te rp re ta tio n o f th e G e n e ra l C o n d itio n s. The General Conditions contract is a f o rm contract that contains numerous amendments that the parties negotiated. The parties’ amendments

are readily apparent from the face of the contract. D e l e t ions are indicated by textual strikeouts and additions by underlining and the use of a different ty peface

. The district court granted summary judgment to ACE. It concluded that WH Holdings is not an i nsured under the ACE policy’s Broad Named Insured

e n d o r sement because Gootee was not “responsible” for purchasing property insurance for the renovation work at issue in this case. The district court began its analysis with General Conditions subsection 11.4, entitled “Property Insurance,” and more specifically subsection 11

. 4

. 1, which provides in relevant part: U n l e s s o t h e r w i se provided, the Owner T he Contractor sha l l p u r c h a s e and maintain

. . . property insurance written on a builder’s risk “allrisk” or equivalent policy form in the amount of the initial Contract Sum, plus value of subsequent Contract modifications a n d cost of materials supplied or installed by others, comprising total value for the entire Project at the site on a repl a c e m ent cost basis without optional deductibles.

Based on this amended language, and buttressed by the partie s ’ deletion of section 11.4.1.2, which instructs the owner what specific action it must take if it does not intend to purchase the property insurance required by subsection 11.4.1, the distri c t c o u r t c o n cluded that it is “clear

. . . that WH Holdings and Gootee intended to reverse th[e] roles of insurance responsibility [for procuring

Ha d the dist ric t cour t det erm ined that WH Ho ldi ngs wa s an ins ured , it wo uld have 2 had t o add res s ACE’s alte rnat ive argum ent that its pol icy is exces s to the cover age WH Ho ldi ngs has thr ough its othe r ins urer s. Gi ven our conc lus ion that the dis tri ct cour t err ed in grant ing sum mar y judgm ent to ACE, the dis tri ct cour t may have to add res s ACE’s alte rnat ive argum ent on rem and.
3 Case: 10-31091 Document: 00511878747 Page: 3 Date Filed: 06/06/2012No. 10-31091

builder’s risk property insurance] in their amended and customized version of the General Conditions.” “Thus,” the district court rea s o n ed, “if subsection
11.4.1 existed in a vacuum, ACE would hav e no basis to contest the assertion that Gootee was the party responsible to insure WH Holdings with respect to the renovations at the Ritz.” Nev e r t heless, the district court concluded that the General Conditions unamb i guously obligated WH Holdings, not Gootee, to purchase the property insurance. It reached that conclusion by determining that subsection
1 1

. 1

. 5 ( g )

— a n o p a q u e p r o v i s i o n f r o m a d i f

f e r e n t s e c t i o n o f t h e contract—unambiguously creates an exception to 11.4.1’s general requirement that Gootee purchase property insurance, obligating WH Holdings to carry the insurance “when the construction is an addition or renovation.” Despi t e appearing in section 11.1, which is entitled “Co n t ractor’s Liability Insur ance,”

a n d despite following lead-in language in section 11.1.5 that states that “[t]he insurance covered by paragraph 11.1.1 [which specifies certain types of liability
coverage Gootee must carry] shall be written for not less than the following limits[:],” subsection 11.1.5(g) provides:

g. Builder’s Risk Insurance Limits
Full Replacement Cost Value on the W ork being in s talled as described in the Construction Contract

T his policy shall name as an [ sic ] named insured the Ow ner and any other entity requi r e d by the Contract betw een the Contractor and the Ow ner
T his p olicy shall w aiv e subrogation against O wn er and any other Ow ner related entity w hether or not required by the Contract betw een the Contractor and the Ow ner
T his cov erage w i l l be placed by the Contractor on an “All Risk” replacement cost basis for the

4 Case: 10-31091 Document: 00511878747 Page: 4 Date Filed: 06/06/2012No. 10-31091
full v a lue of the construction unless the construction is an addition or renovation t o an existing structure. If t h i s c onstruction is an addition or renovation than [ sic ] the Ow ner shall be responsible for providing this coverage and w ill add the Contractor and its subcontractors and sub-subcontractors as additional insured[s] and w aiv e subrogation against the Contractor and its subcontractors and sub-subcontractors as regards any structur es being built or renov ated and already

ex isting at the site. (Italics added.) R e ly in g o n th e ita licize d la n g u a g e , th e d istrict co u rt co n clu d e d
t h a t 1 1 .1 .5 (g ) u n a m b ig u o u sly q u a lifie s 1 1 .4 .1 a n d o b lig a te s W H H o ld in g s t o
p u rch a se p ro p e rty in su ra n ce fo r re n o v a t i o n w o rk

. B e ca u se th e d istrict co u rt fo u n d th e co n tra ct to b e u n a m b ig u o u s, it d id n o t co n sid e r th e co u rse o f co n d u ct

e v id e n ce su b m itte d b y W H H o ld in g s. T h is a p p e a l tim e ly fo llo w e d

. II. W e re v ie w “th e d istrict co u rt’s su m m a ry ju d g m e n t d e n o v o , a p p ly in g th e

sa m e le g a l sta n d a rd s u se d b y th e d i s t r i c t co u rt.” A p a ch e C o rp
. v
. W & T O ffsh o re, In c. , 6 2 6 F .3 d 7 8 9 , 7 9 3 (5 th C ir

. 2 0 1 0 ). A d istrict co u rt “sh a ll g ra n t

su m m a ry ju d g m e n t if th e m o v a n t sh o w s th a t th e re is n o g e n u in e d isp u te a s to

a n y m a te ria l fa ct a n d th e m o v a n t i s e n t itle d to ju d g m e n t a s a m a tte r o f la w .” F e d

. R

. C iv

. P

. 5 6 (a ). “‘[T ]h e co u rt v ie w s a ll fa cts a n d e v id e n ce in th e lig h t

m o st fa v o ra b le to th e n o n -m o v in g p a rty ,’ a n d ‘[m ]e re co n clu so ry a lle g a tio n s a re in su fficie n t to d e fe a t su m m a ry ju d g m e n t.’” A p a ch e C o rp
. , 6 2 6 F

. 3 d a t 7 9 3 (q u o tin g M

o ss v . B M C

S o ftw a re, In c. , 6 1 0 F .3 d 9 1 7 , 9 2 2 (5 th C ir. 2 0 1 0 )).

III. F o r th is d iv e rsity a ctio n , L o u isia n a la w co n tro ls. U n d e r L o u isia n a la w , “[w ]h e n th e w o rd s o f a co n t r a c t a r e cle a r a n d e x p licit a n d le a d to n o a b su rd

co n se q u e n ce s, n o fu rth e r in te rp re ta tio n m a y b e m a d e in se a rch o f th e p a rtie s’ in te n t.” L a . C iv

. C o d e a rt. 2 0 4 6

. E x trin sic e v id e n ce is a d m issib le o n ly if “‘th e

5 Case: 10-31091 Document: 00511878747 Page: 5 Date Filed: 06/06/2012No. 10-31091

te rm s o f a w ritte n co n tra ct a re su sce p tib le to m o re th a n o n e in te rp re ta tio n , o r th e re is u n ce rta in ty o r a m b ig u ity a s to its p ro v isio n s, o r th e in te n t o f th e p a rtie s

ca n n o t b e a sce rta in e d fro m th e la n g u a g e e m p lo y e d .’” B ro w n v
. D riller’s, In c. , 6 3 0 S o
. 2 d 7 4 1 , 7 4 8 n .1 0 (L a
. 1 9 9 4 ) (q u o tin g D ix ie C a m p ers, In c. v
. V

esely C o
. , 3 9 8 S o
. 2 d 1 0 8 7 , 1 0 8 9 (L a
. 1 9 8 1 )). If a co n tra ct is a m b ig u o u s, a c o u r t m u st

co n sid e r a n y p ro ffe re d co u rse o f co n d u ct e v id e n ce
. L a
. C iv

. C o d e a rt. 2 0 5 3 (“A d o u b tfu l p ro v i s i o n m u st b e in te rp re te d in lig h t o f th e n a tu re o f th e co n tra ct,

e q u ity , u sa g e s, th e co n d u ct o f th e p a rtie s b e fo re a n d a fte r th e fo rm a tio n o f th e

co n tra ct, a n d o f o th e r co n tra cts o f a lik e n a tu re b e tw e e n th e sa m e p a rtie s.”); see

a lso C ro o k s v
. P la cid O il C o
. , 9 8 1 S o
. 2 d 1 2 5 , 1 2 8 n .1 (L a
. C t. A p p
. 2 0 0 8 ) (“‘[O ]n e

o f t h e b e st w a y s to d e te rm in e w h a t th e p a rtie s in te n d e d in a co n tra ct is t o

e x a m in e th e m e th o d in w h ich th e co n tra ct is p e rfo rm e d , p a rticu la r l y i f

p e rfo rm a n ce h a s b e e n co n siste n t fo r a p e rio d o f m a n y y e a rs.’” (q u o tin g T o ta l M in a to m e C o rp
. v
. U

n io n T ex
. P ro d s. C o rp
. , 7 6 6 S o
. 2 d 6 8 5 , 6 8 9 (L a
. C t. A p p
. 2 0 0 0 ))), w rits d en ied , 9 8 9 S o . 2 d 1 0 4 (L a . 2 0 0 8 ). W H H o ld in g s a rg u e s th a t th e co n tra ct d id n o t u n a m b ig u o u sly re q u ire it
t o p u rch a se p ro p e rty in su ra n ce fo r th e re n o v a tio n w o rk a t issu e a n d th a t t h e d istrict co u rt e rre d in so co n clu d in g
. W e a g re e
. The district court relied entirely

o n s ubsection 11.1.5(g) in finding the contract unambiguous, but subsecti o n 11.1.5(g) is not nearly as “crystal clear” as the district court t h o u g h t it to be. Whereas section 1 1

. 4 of the contract deals with “Property Insurance,” as its heading reflects, su b se ctio n 1 1 .1 .5 (g ) is lo ca te d in se c t i o n 1 1 .1 , e n title d “C o n tra cto r’s L ia b ility In su ra n ce .” C o n siste n t w ith its h e a d in g , se ctio n 1 1 .1 d e a ls e x clu siv e ly w ith G o o te e ’s o b lig a tio n to ca rry th ird -p a rty lia b ility in su ra n ce —with the arguable exception of subsection 11.1.5( g ). Moreover,

su b se ctio n 1 1 .1 .5 (g ) is o n e o f se v e n su b se ctio n s th a t fo llo w th e le a d -in cla u se in
1 1 .1 .5 , w h ich p ro v id e s, “th e in su ra n ce co v e re d b y p a ra g ra p h 1 1

. 1

. 1 sh a ll b e

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w ritte n fo r n o t le ss th a n th e fo llo w in g lim its, o r g re a te r if re q u ire d b y la w
. . . .” P a ra g ra p h 1 1 .1 .1 lists e ig h t ty p e s o f co m m o n th ird -p a rty cla im s a g a in st w h ich G o o te e m u st in su re itse lf. Thus, to read subsection 11.1.5(g) as modi fying subsection 11.4.1’s general requirement that Gootee purchase property insurance , rather than setting forth parameters for the liability insurance required by 11.1.1, is to ignore the prefatory language in 11.1.5, which expressly limits th e sco p e o f th e su b se ctio n s th a t fo llo w , in clu d in g 1 1 .1 .5 (g ), to th e th ird

p a rty lia b ility in su ra n ce se t fo rth in su b se ctio n 1 1 .1 .1

. Given these difficulties with the district court’s interpretation of the contract, we cannot conclude, as did the district court, that subsection 11.1.5(g) unambiguously obligated WH Holdings to purchase property insurance for renovation work. Neither do we agree, however, with WH Holdings’s further argument that
t h e c o n t r a c t u n a m b i g u o u s l y r e q uired Gootee to purchase the property insuran c e
. WH Holdings has not persuasively explained what 11.1.5(g) could mean if the
contract is construed as assigning to Gootee the property insurance obli g a t i o n for all projects, renovation or otherwise. Given the difficulties with each party’s contention that the contract unambiguously supports its position, we conclude that the contract is ambiguous as to whether WH Holding s or Gootee bore the obligation to purchase property insurance to cover the renovation work. Given our conclusion that the contract is ambiguous, WH Holdings is
correct that Louisiana law requires c o n sideration of the parties’ course of conduct evidence. La. Civ. Code art. 2053. We therefore remand this case for 3

We rejec t ACE’s argum ent that the cont rac t’s me rger claus e rend e r s the cour se of 3 cond uct evidenc e i nadm iss ible. S ubs ect ion 1.1. 2 of the G ener al Condit ions provid es that the
wr itt en cont rac t is the enti re i n t e g r a t e d agree me nt of the par tie s and that “[ n]o cour se of cond uct betw een the par tie s, no mat ter how cons ist ent and no mat ter how violat ive of the ter ms or cond itio ns of the Contr act for Cons tru cti on wi ll ame nd or othe rw ise m odi fy the Contr act for Co nst ruc tio n.” WH Ho ldi ngs is not, how ever, intr oduc ing cour se of cond uct evide nce to “am end or othe rw ise mo dif y” the cont rac t, but rat her to clar ify the par tie s’ inte nt wi th res pec t to an amb iguous pr ovis ion of the cont rac t. See Lil jebe rg Enters ., Inc. v. Lif em ar k Ho sp s. of La. , Inc. , 620 So. 2d 1331, 1335–36 , 1347 (La. Ct. App

. 1993) (ho ldi ng par ol evide nce 7 Case: 10-31091 Document: 00511878747 Page: 7 Date Filed: 06/06/2012No. 10-31091

the district court to consider that evidence. In addition to such course of conduct evidence, the parties may proffer, and the district court consider, other forms of extrinsic evidence in accordance with Louisiana law. See L a
. C iv

. C o d e a rt. 2 0 5 3 (“A d o u b tfu l p ro v isio n m u st b e in te rp re te d in lig h t o f th e n a tu re o f th e co n tra ct,

e q u ity , u sa g e s, th e co n d u ct o f th e p a rtie s b e fo re a n d a fte r th e fo rm a tio n o f th e

co n tra ct, a n d o f o th e r co n tra cts o f a lik e n a tu re b e tw e e n th e sa m e p a rtie s.”). IV. We VACATE the judgment of the district court and REMAND for further proceedings consistent with this opinion.

adm iss ible to clar ify par tie s’ inte nt wh ere cont rac t at iss ue cont ained a sim ilar me rger claus e),
wr its deni ed , 621 So. 2d 818 (La. 1993)

. Mo reo ver, inas muc h as ACE invok es the p a r o l evide nce ru l e , t hat rule is inap pli cable wh ere extr ins ic evide nce is intr oduc ed to clar ify an amb iguity. See La. C iv. C ode art

. 1848 (“ Tes tim onial or othe r evide nce m ay not be adm itt ed to negate or va ry the cont ents of an authe ntic act or an act unde r pr ivate signa tur e.” (em phas is add ed) ); s ee al so Mc Carr oll v. Mc Carr oll , 701 So. 2d 1280, 1286 (La. 1997) (al thou gh inad mi ss ible to vary the ter ms of a wr itt en ins tru me nt, par ol evide nce is adm iss ible to clar ify
an a mbi guity)

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