IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

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:*

The sole question presented by this diversity action is whether the

construction contract at issue obligated the building owner, WH Holdings, or its

contractor, Gootee Construction Company, to purchase property insurance to

cover damage to renovation work. The district court determined that WH

Holdings bore that obligation under the contract and entered summary

United States Court of Appeals

Fifth Circuit

F I L E D

June 6, 2012

Lyle W. Cayce

Clerk

Pursuant to 5th Cir. R. 47.5, the court has determined that this opinion should not *

be published and is not precedent except under the limited circumstances set forth in 5th Cir.

R. 47.5.4.

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judgment in favor of Gootee’s insurer, defendant ACE American Insurance

Company. We VACATE the judgment of the district court and REMAND for

further proceedings.

I.

Prior to Hurricane Katrina, WH Holdings, owner ofthe Ritz Carlton Hotel

complex in New Orleans, contracted with Gootee to perform renovation work on

the existing structure of the Ritz. Hurricane Katrina caused damage to the

Ritz’s Exterior Insulation Finishing System and terra cotta facade.

In August 2007, WH Holdings filed suit against ACE in Louisiana state

court, seeking $3,264,812.54, less a $7,500 deductible, in coverage for damage

to the exterior of the Ritz. ACE removed the case to federal court. The parties

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filed cross-motions for summary judgment. The parties did not dispute that

their construction contracts incorporate and are governed by AIA Document

A201-1997, General Conditions of the Contract for Construction, as expressly

amended by the parties (General Conditions). It was also undisputed that the

ACE Builder’s Risk Policy, which ACE issued to Gootee, provides coverage for

WH Holdings only if WH Holdings qualifies as an insured under the policy’s

Broad Named Insured endorsement, which provides that “any party in interest

which the insured is responsible to insure” is an insured (emphasis added). 

Thus, the district court correctly framed the determinative issue as “whether

Gootee was contractually obligated, and therefore ‘responsible,’ to insure WH

Holdings such that it became an insured on the ACE policy pursuant to the

WH Holdings was initially the only named plaintiff. The other named plaintiffs are 1

WH Holdings’s excess insurers. They purchased all of WH Holdings’s rights to this action, and

pursuant to the district court’s order joined this action in May 2010.

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Broad Named Insured endorsement.” The district court’s resolution of that

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issue depended entirely on its interpretation of the General Conditions.

The General Conditions contract is a form contract that contains

numerous amendments that the parties negotiated. The parties’ amendments

are readily apparent from the face of the contract. Deletions are indicated by

textual strikeouts and additions by underlining and the use of a different typeface. 

The district court granted summary judgment to ACE. It concluded that

WH Holdings is not an insured under the ACE policy’s Broad Named Insured

endorsement 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:

Unless otherwise provided, the Owner The Contractor shall purchase

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 and cost of

materials supplied or installed by others, comprising total value for

the entire Project at the site on a replacement cost basis without

optional deductibles.

Based on this amended language, and buttressed by the parties’ 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 district court concluded that it is “clear . . . that WH Holdings and

Gootee intended to reverse th[e] roles of insurance responsibility [for procuring

Had the district court determined that WH Holdings was an insured, it would have 2

had to address ACE’s alternative argument that its policy is excess to the coverage WH

Holdings has through its other insurers. Given our conclusion that the district court erred in

granting summary judgment to ACE, the district court may have to address ACE’s alternative

argument on remand.

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builder’s risk property insurance] in their amended and customized version of

the General Conditions.” “Thus,” the district court reasoned, “if subsection

11.4.1 existed in a vacuum, ACE would have no basis to contest the assertion

that Gootee was the party responsible to insure WH Holdings with respect to the

renovations at the Ritz.”

Nevertheless, the district court concluded that the General Conditions

unambiguously obligated WH Holdings, not Gootee, to purchase the property

insurance. It reached that conclusion by determining that subsection

11.1.5(g)—an opaque provision from a different section of the

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.” Despite

appearing in section 11.1, which is entitled “Contractor’s Liability Insurance,”

and 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 Work being

installed as described in the Construction

Contract

This policy shall name as an [sic] named insured

the Owner and any other entity required by the

Contract between the Contractor and the Owner

This policy shall waive subrogation against

Owner and any other Owner related entity

whether or not required by the Contract between

the Contractor and the Owner

This coverage will be placed by the Contractor

on an “All Risk” replacement cost basis for the

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full value of the construction unless the

construction is an addition or renovation to an

existing structure. If this construction is an

addition or renovation than [sic] the Owner shall

be responsible for providing this coverage and

will add the Contractor and its subcontractors

and sub-subcontractors as additional insured[s]

and waive subrogation against the Contractor

and its subcontractors and sub-subcontractors

as regards any structures being built or

renovated and already existing at the site.

(Italics added.) Relying on the italicized language, the district court concluded

that 11.1.5(g) unambiguously qualifies 11.4.1 and obligates WH Holdings to

purchase property insurance for renovation work. Because the district court

found the contract to be unambiguous, it did not consider the course of conduct

evidence submitted by WH Holdings. This appeal timely followed.

II.

We review “the district court’s summary judgment de novo, applying the

same legal standards used by the district court.” Apache Corp. v. W & T

Offshore, Inc., 626 F.3d 789, 793 (5th Cir. 2010). A district court “shall grant

summary judgment if the movant shows that there is no genuine dispute as to

any material fact and the movant is entitled to judgment as a matter of law.” 

Fed. R. Civ. P. 56(a). “‘[T]he court views all facts and evidence in the light

most favorable to the non-moving party,’ and ‘[m]ere conclusory allegations are

insufficient to defeat summary judgment.’” Apache Corp., 626 F.3d at 793

(quoting Moss v. BMC Software, Inc., 610 F.3d 917, 922 (5th Cir. 2010)).

III.

For this diversity action, Louisiana law controls. Under Louisiana law,

“[w]hen the words of a contract are clear and explicit and lead to no absurd

consequences, no further interpretation may be made in search of the parties’

intent.” La. Civ. Code art. 2046. Extrinsic evidence is admissible only if “‘the

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terms of a written contract are susceptible to more than one interpretation, or

there is uncertainty or ambiguity as to its provisions, or the intent of the parties

cannot be ascertained from the language employed.’” Brown v. Driller’s, Inc.,

630 So. 2d 741, 748 n.10 (La. 1994) (quoting Dixie Campers, Inc. v. Vesely Co.,

398 So. 2d 1087, 1089 (La. 1981)). If a contract is ambiguous, a court must

consider any proffered course of conduct evidence. La. Civ. Code art. 2053 (“A

doubtful provision must be interpreted in light of the nature of the contract,

equity, usages, the conduct of the parties before and after the formation of the

contract, and of other contracts of a like nature between the same parties.”); see

also Crooks v. Placid Oil Co., 981 So. 2d 125, 128 n.1 (La. Ct. App. 2008) (“‘[O]ne

of the best ways to determine what the parties intended in a contract is to

examine the method in which the contract is performed, particularly if

performance has been consistent for a period of many years.’” (quoting Total

Minatome Corp. v. Union Tex. Prods. Corp., 766 So. 2d 685, 689 (La. Ct. App.

2000))), writs denied, 989 So. 2d 104 (La. 2008).

WH Holdings argues that the contract did not unambiguously require it

to purchase property insurance for the renovation work at issue and that the

district court erred in so concluding. We agree. The district court relied entirely

on subsection 11.1.5(g) in finding the contract unambiguous, but subsection

11.1.5(g) is not nearly as “crystal clear” as the district court thought it to be. 

Whereas section 11.4 of the contract deals with “Property Insurance,” as its

heading reflects, subsection 11.1.5(g) is located in section 11.1, entitled

“Contractor’s Liability Insurance.” Consistent with its heading, section 11.1

deals exclusively with Gootee’s obligation to carry third-party liability

insurance—with the arguable exception of subsection 11.1.5(g). Moreover,

subsection 11.1.5(g) is one of seven subsections that follow the lead-in clause in

11.1.5, which provides, “the insurance covered by paragraph 11.1.1 shall be

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written for not less than the following limits, or greater if required by law . . . .” 

Paragraph 11.1.1 lists eight types of common third-party claims against which

Gootee must insure itself. Thus, to read subsection 11.1.5(g) as modifying

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 the scope of the subsections that follow, including 11.1.5(g), to the thirdparty liability insurance set forth in subsection 11.1.1. 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

the contractunambiguously required Gootee to purchase the property insurance. 

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 obligation

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 Holdings 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 consideration of the parties’ course of

conduct evidence. La. Civ. Code art. 2053. We therefore remand this case for 3

We reject ACE’s argument that the contract’s merger clause renders the course of 3

conduct evidence inadmissible. Subsection 1.1.2 of the General Conditions provides that the

written contract is the entire integrated agreement of the parties and that “[n]o course of

conduct between the parties, no matter how consistent and no matter how violative of the

terms or conditions of the Contract for Construction will amend or otherwise modify the

Contract for Construction.” WH Holdings is not, however, introducing course of conduct

evidence to “amend or otherwise modify” the contract, but rather to clarify the parties’ intent

with respect to an ambiguous provision of the contract. See Liljeberg Enters., Inc. v. Lifemark 

Hosps. of La., Inc., 620 So. 2d 1331, 1335–36, 1347 (La. Ct. App. 1993) (holding parol evidence

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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 La. Civ. Code art. 2053

(“A doubtful provision must be interpreted in light of the nature of the contract,

equity, usages, the conduct of the parties before and after the formation of the

contract, and of other contracts of a like nature between the same parties.”).

IV.

We VACATE the judgment of the district court and REMAND for further

proceedings consistent with this opinion.

admissible to clarify parties’ intent where contract at issue contained a similar merger clause),

writs denied, 621 So. 2d 818 (La. 1993). Moreover, inasmuch as ACE invokes the parol

evidence rule, that rule is inapplicable where extrinsic evidence is introduced to clarify an

ambiguity. See La. Civ. Code art. 1848 (“Testimonial or other evidence may not be admitted

to negate or vary the contents of an authentic act or an act under private signature.” (emphasis

added)); see also McCarroll v. McCarroll, 701 So. 2d 1280, 1286 (La. 1997) (although

inadmissible to vary the terms of a written instrument, parol evidence is admissible to clarify

an ambiguity).

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