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

No. 11-20912

GBP PARTNERS, LIMITED, doing business as Gulfbrook Plaza Shopping Center, Plaintiff-Appellant
v. MARYLAND CASUALTY COMPANY, Defendant-Appellee

Appeal from the United States District Court for the Southern District of Texas USDC No. 4:10-CV-4228

Before JONES, GARZA, and PRADO, Circuit Judges. EDITH H. JONES, Circuit Judge: * In September 2008, Hurricane Ike made landfall near Galveston, Texas, devastating most of the Texas coastline and becoming the costliest hurricane in Texas history. A shopping center owned by Appella n t GBP Partners, Limited (“GBP”) and insured by Appellee Maryland Casualty Company (“Maryl a nd Casua l t y”) was severely damaged by the storm. Maryland Casualty paid to replace the center’s roof but denied other claims for coverage submitted by GBP, 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 Janu ary4, 201 3 Lyle W . Cayce Clerk

Pursua nt to 5 T H C IR

. R. 47.5 , the cour t hasd ete rm inedt hat this op inion s houldnot * 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 forth in 5 T H C IR

. R. 47.5 .4. Case: 11-20912 Document: 00512101501 Page: 1 Date Filed: 01/04/2013No. 11-20912

and GBP sued in Texas state court. The case was removed to the federal court for the Southern District of Texas, and the district court granted summary judgment to Maryland Casualty on all of GBP’s claims. GBP appeals the district court’s decision. We AFFIRM in part and REVERSE and REMAND in part. BACKGROUND After removing this case to federal court based on diversity of citizenship, Maryland Casualty filed a no-evidence motion for summary judgment, and the district court granted summary judgment in favor of the insurer on all issues. GBP’s business is to own and rent space in Gulfbrook Plaza. GBP has no employees. GBP Plaza L.L.C. is GBP’s general partner. H SA Commercial Realty Services, L.L.C. (and, previously, a predecessor entity) (c o l lectively,

“ H SA”), is a commercial property management company that manag e s Gulfbrook. Hardam Azad is a 19% limited partner in GBP, the 100% owner of GBP Plaza L.L.C., and a 90% owner of HSA. Hurricane Ike struck Gulfbrook on September 13, 2008. GBP submitted

a claim to Maryland Casualty, and after investigation Maryland Casualty paid GBP over $2,300,000 on its claim for roof damage. Maryland Casualty rejected claims for lost rents, mana g ement fees, additional roof damage, and window damage, however. The roof damage and loss of elec t ri c i t y at Gulfbrook caused some of the tenants to close their stores for weeks after the hurricane. The shopping center itself was closed for about two weeks. Azad offered a twenty-five percent reduction in rent to Gulfbrook tenants for six months in an effort to encourage them to stay at Gulfbrook

. Gulf b rook’s largest tenant, Affordable Furniture, had not paid rent for sometime before the hurricane and did not pay rent afterward. The damage to the roof required it to be completely repla c e d

. Disputes between GBP and the roofing companies, disputes between GBP and Maryland Casualty, and delays by GBP in sending Maryland Casualty documents resulted

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in walk-offs by two roofing contractors and extended the roof replacement to over two years. Signifi c a ntly, a dispute between GBP and its general contractor MRCO, Inc

. (“MRCO”) led MRCO to refuse to endorse a check from Maryland Casualty issued as jointly payable to both (as well as to GBP’s lender and GBP’s public adjuster). Azad forg e d M R C O ’s endorsement and deposited the check. After MRCO filed an affidavit of forgery with Maryland Casualty on April 5, 2010, Maryland Casualty indicated to GBP a desire to interplead funds in the future. GBP refused to execute a proof of loss while M a ryl a nd Casualty continued to consider interpleading the funds. Work stopped in early May after the second roofing company walked off the job. When GBP ultimately executed

a proof of loss for approximately $1 million on June 29, 2010, Maryland Casualty issued a final check on July 26, 2010. Well over two years after Hurricane Ike, GBP commissioned a storefront window damage report, which alleged that the damage was consistent with a “prolonged wind event” like a hurricane. STANDARD OF REVIEW We “revi e w[ ] the district court’s grant of summary judgment de novo , applying the same standards as the district court.” Depree v. Saunders , 588 F.3d 282, 286 (5th Cir. 2009). Summary judgment is warranted if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is

no genuine issue as to a ny material fact and that the movant is entitled to judgment as a matter of law. Id. A motion for summary judgment c annot be defeated “by submitting an affidavit which directly contradicts, without explanation, [an affiant’s] previous testimony.” Powell v. Dallas Morning News, L.P. , 776 F. Supp. 2d 240, 246–4 7 (N.D. Tex. 2011). Under controlling Texas law, GBP has th e b ur de n of e s t ab li shing that each of its claims was covered under the Policy. Markel Am. Ins. Co. v. Lennar Corp. , 342 S.W.3d 704, 708–09 (Tex. App.—Houston, 2011, pet. filed). “When covered

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and non-covered perils combine to create a loss, the insured is entitled to recover only that portion of the damage caused solely by the covered peril.” Id. at 709. A failure to establish the amount of loss attributable to covered peril—as opposed to uncovered peril—is fatal to recovery. Id. As an i n s u r a nce policy is a contract, the overall agreement must be

e v al u a t e d to determine the purposes the parties had in mind at the time t h e y f o r m e d the contract. Kirby Lake Dev., Ltd. v. Clear Lake City Water Aut h

. , 320 S.W.3d 829, 841 (Tex. 2010). “Terms in insurance contracts that are subject to more than one reasonable construction are interpreted in favor of coverage.” Gilbert Tex. Constr., L.P. v. Underwriters at Lloyd’s Lon do n , 3 27 S.W.3d 118, 133 (Tex. 2010) (citation omitted). “However, courts s h o uld not strain to find an ambiguity, if, in doing so, they defeat the probable intentions of the parties, even though the insured may suffer an apparent harsh result as a consequence.” Quality Oilfield Prods., Inc. v. Mich

. M u t

. Ins. Co. , 971 S.W.2d 635, 637 (Tex. App.—Houston, 1998). DISCUSSION On appeal, GBP chall e n ge s th e di s trict court’s grant of summary judgment to Maryland Casualty on the following disputed claims. We reverse and remand in part the district court’s decision in regard to lost rent. We affirm the denial of management fees, roof damage, and window damage. I. Lost Rents GBP submitted a claim to Maryland Casualty for rents lost when tenants

were offered a six-month rent abatement in an effort to retain them as tenants and f o r an anchor tenant that was not offered a rent abatement, but that nonetheless was unable to pay its rent and eventually closed. The district court held that GBP could not show a “ s uspension of operations,” that the rent

r e d u c tions would not qualify as “extra expense” because they were n o t “necessary costs,” and that losses due to the loss of power were not covered. GBP

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argues on appeal that the clo s u r e of the shopping center qualified as a “suspension of operations,” that no s u s p e n sion of operations need be shown to

recover “extra expense,” and that the rent abatements were required to mitigate loss. Maryland Casualty reiterates the arguments accepted by the district court and argues that GBP failed to establish causation. A. Suspension of Operations The Policy states that Maryland Casualty “will pay for the actual loss of ‘business income’ [Gulfbrook] sustai n[s] due to the necessary suspension of ‘operations’ during t h e ‘period of restoration,’ but not to exceed 12 consecutive months

. ” (R. at 551.) “Operations” is defined by the Policy as the “business activities occurring at [Gulfbrook].” (R. at 563.) It is undisputed that GBP is in the business of owning and renting shopping center space. It is also undisputed that at least some of the tenants at Gulfbrook continued to pay rent, including

one that continued to pay r e n t w i th no abatement. Under Texas law, a suspension of operations clause requires business to have completely ceased for

s o m e i nt erval. See, e.g. , Apartment Movers of Am., Inc. v. One Beacon Lloyds , No

. 0 5

- 10354, 2006 WL 678675, at *1 (5th Cir. Mar. 16, 2006) (requiring complete interruption where the policy required a “necessary suspension of your operations”); H & H Hospitality LLC v. Discover Specialty Ins. Co. , No. H-10- 1886, 2011 WL 6372825, at *3 (S.D. Tex. Dec. 20, 2011) (requiring complete i n terruption where the policy required a “necessary suspension of your ‘operations’”); Quality Oilfield Prods. , 971 S.W.2d at 638–39 (requiring complete interruption where the policy required a “necessary interruption of business”). GBP never ceased its operations, nor has it proved or establis h e d a m aterial question of fact as to whether there was a complete suspension of operations at the center.

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B. Necessary Extra Expense The Policy also covers any “necessary ‘extra expense’” GBP incurred “during the ‘period of restoration’ that [GBP] would not have incurred if there had been no direct physical loss of or damage to such property caused by or resulting from a Covered Cause of Loss.” (R. at 551.) “Extra expense” is defined by the Policy as “necessary costs i n c u r r e d t o . . . [a]void

. . . the suspension of business and contin u e ‘ o p e rations.’” (R. at 563.) The “period of restoration” begins with “the date of the direct physical loss or damage caused by or resulting from any Covered Cause of Loss” and ends on the “date when the property

. . . should be repaired, rebuilt or replaced.” (R. at 564.) The Policy covers not just extra expense associated with a suspension of operations but e xtr a expense necessary to avoid the suspension of operations. GBP argues just such a purpose behind the rent abatements. T h e r e n t abatements were, according to Azad’s 1

evi d e n c e , designed to prevent a possible closure of the entire shopping center caused by an exodus of tenants due to the h u r ri c a n e d amage. This created a genuine issue concerning the business necessity of the abatements. 2 C. Covered Loss GBP must still establish that the extra expense was due to a covered loss. Power loss is not covered “if the failure occurs away” from Gulfbrook, “however caused.” (R. at 546.) GBP did not submit any evidence of this type of power loss. GBP s ub m itted an affidavit from Azad stating that even if the power had not failed, GBP would have had to close the building due to the roof damage. (R. at 1297.) Maryland C asualty argues that this affidavit conflicts with previous

sworn statements Azad made during his deposition. On the cont r a ry , Azad’s

The Polic y only cover s extr a expens e duri ng the periodof res tor atio n. The peri od of 1
res tor atio n, thou gh, is tie d not to a sus pens ion of ope rations but to the dat e of a cover ed los s. Maryland Casua lty cit es n o a u t h orit y for its app aren t pr opo sit ion that suc h rent 2 abate me nts m ustbec ontr act ually obligat ed. 6 Case: 11-20912 Document: 00512101501 Page: 6 Date Filed: 01/04/2013No. 11-20912

later affidavit does not directly contradict his deposition testimony. Azad’s affidavit is in agreement with his deposition testimony: b o t h the electrical outage and the roof damage affected operations. 3 GBP did not establish how long the shopping center or parts of it w e r e closed beyond an admittedly unverifiable statement th at in divi du al tenants may have been closed between two and four weeks. (R. at 336.) Although GBP did not submit additional evidence in support, a sworn a f f i davit, especially given that it is undisputed that Gulfbrook s u s t a i ned significant roof damage from Hurricane I k e , i s s u fficient to create a genuine dispute of material fact as to whether the extra expens e w a s d u e to the roof damage. Similarly, Azad’s affidavi t i s s u fficient to establish a genuine dispute of material fact as to whether the roof damage was sufficient by itself to necessitate closing all or part of the shopping center, regardless of any power loss. Accordingly, we reverse and remand to the district court on the question whether the rent abatements were a “necessary extra expense” due to a “covered loss.” D. Affordable Furniture GBP did not submit evidence that it incurred an extra expense to avoid a suspension of operations tied to Affordable Furniture. GBP made no change to its informal policy regarding Affordable Furniture after Hurricane Ike. Rather, it continued its existing practice of allowing Affordable Furniture to pay rent late. Absent a suspension of operations or an expense tied to an attempt to avoid

a suspensi o n o f o perations, there is no covered loss. Accordingly, the district

Azad rep lied “Yes ” wh en ask ed if Gu lfb roo k “s usp ende d ope rat ions for tw o we ek s due 3 to the los s of elec tri city[. ]” (R. at 335. ) But in ans we ring the very next ques tio n (r egard ing the exact per iod o per atio ns we re sus pend ed) , Azad ref ere nced a roo f that wa s “to tall y com pr om ise d. ” Id. Shor tly ther eaf ter , Azad st ates that “even wh en [G ulfb roo k’ s tena nts ] are ope n, they arec onti nue [s ic] t o s ust ain dam agesbe caus e t he roo f is cons tant ly le ak ing.” Id. In his aff

idavit , Azad st ates that “[ e]ve n if por tabl e elec tri cal genera tor s had been brou ght into the pr ope rty, t he roo f dam age its elf c aus ed a t otals usp ens ion of ope rat ions .” (R. at129 7.) 7 Case: 11-20912 Document: 00512101501 Page: 7 Date Filed: 01/04/2013No. 11-20912

court correctly granted summary judgment to Maryland Casualty for lost rents from Affordable Furniture. II. Management Fees As GBP had no employees, it p ai d H SA (and an HSA-predecessor company) to manage its properties. A new management agreement was signed

on January 1, 2009, shortly after Hurricane Ike struck. The new management 4 agreement raised HSA’s compensation for work on insurance claims from $75 to $100 an hour. (R. at 2012.) Maryland Casualty refused to pay GBP’s claim for these fees, and the district court granted Maryland summary judgment on the basis t h a t t h e Policy did not cover that type of work and the fees were not an extra expense because there was no suspension of operations. GBP argues that

some of the fees fall within th e c o m p o n e nt of business income coverage for “[c]ontinuing normal operating expenses” and some of the f e e s w e re a covered “extra expense.” Maryland Casualty responds that the new agreement was not necessary to obtain the repairs or negot i ate insurance matters, and the managemen t f

e e s ar e not a proper business income claim. We agree with Maryland Casualty. First, the Policy only covers “[c]ontinuin g n o r mal operating expenses incurred,” (R. at 562), if there is a suspension of operations. B e c ause no suspension of operations o c c u r red, the recurring management fees cannot be fully recoverable. Second, GB P o f

f ered no evidence explaining what portion of the fees directly related to making emergency repairs and securing recovery from insurance claims or legal proceedings. As explained above, GBP can recover as extra expense only costs necessary to avoid a suspension of operations. Although it s b ri ef m e ntions “emergency repairs (necessary to protect the property or saf ety

As ow ner of GBP’ s genera l par tner and majo rit y ow ner of HSA, Azad signe d for both 4 par tie s. 8 Case: 11-20912 Document: 00512101501 Page: 8 Date Filed: 01/04/2013No. 11-20912

of tenants)” and that “managemen t f e e s n ecessary to initiate and manage the repair process were incurred by GBP during the period of restoration and would not have been incurred had there been no property damage from a covered cause,” (Appellant’s Br. 17–18), GBP did not submit evidence tying fees directly to its efforts to prevent a suspension of operations due to an exodus of tenants,

as o p p o sed to non-covered costs. On the contrary, GBP references those management fees in conjunction with fees directly related to non-covered costs. 5 III. Roof Damage Gulfbrook’s roof sustained additional damage due to delays i n its replacement. G B P w as also unable to obtain a warranty on the new roof and sought recovery of the loss in warranty value. Maryland Casualty refused to pay for either. The district court agreed with Maryland Casualty that GBP caused the delay that led to the damage. The relevant facts are undisputed. MRCO served as GBP’s initial roof contractor. GBP fired MRCO on October 9, 2009 after a dispute. Maryland Casualty’s third check to GBP for the roof claims was issued on October 6, 2009, and GBP apparently did not receive it until after firing MRCO. Like t h e f i r s t t w o checks, this check was jointly payable to GBP, MRCO, GBP’s lender, and GBP’s public adjuster. When MRCO refused to endorse the check, Azad forged MRCO’s endorsement and deposited

“[ C]ons ide rable tim e has been (and rem ains to be) expe nded on GBP’ s behalf to find , 5 evaluat e, hire , and overs ee the public adjus ter s, cont rac tor s, att orne ys, and othe rs need ed to w o rk thr ough the pr oce ss of ide ntif ying and es tim ating the cos ts to rep air the dam ag e , com pil ing the info rm atio n nece ss ary to pursue the ins uranc e clai ms , and cond uct ing the rep air wo rk .” (App ellant ’s Br

. 17.) GBP als o fai ls to cit e any autho rity in sup por t of the pr opo sit ion that the man agem ent fee s are not an exclud ed “ot her cons equent ial los s. ” Contra Southeast Rea l Estate Inves t. Corp

. v. Na tionw ide Mut. Ins. Co. , No. 1:07 cv1197, 2008 WL 4939748 , at *5 (S .D

. M i s s . N o v . 17, 2008) (h o l d i n g that per cent age man agem ent fee s we re “‘u nques tio nably’ any othe r cons equent ial los s” ). The dis cus sio n in GBP’ s rep l y brie f about cons equent ial dam ages is inap pos ite beca use it dea ls enti rely wi th dam ages fr om a brea ch, and GBP doe s not allege that the man agem ent fee s we re incur red beca use of a brea ch of cont rac t b y M a r yl a n d Casualty. (Ap pel lant’ s Repl y Br. 6–7 .) 9 Case: 11-20912 Document: 00512101501 Page: 9 Date Filed: 01/04/2013No. 11-20912

the check. MRCO provided an affidavit of forgery to Maryland Casualty on April 5, 2 0 1 0 , and Maryland Casualty informed GBP it would need to file an interpleader. Marylan d C a s u alty ultimately never did so. GBP, GBP’s public adjuster, and M a ryl a nd Casualty continued to work together, and Maryland C a s u a lty sent GBP a proposed proof of loss on May 5, 2010. GBP’s s e c o n d roofing contractor walked off the job in early May of 2010. GBP did not execute

a proof of loss until June 29, 2010. Maryland Casualty issued a check based on the proof of loss within the thirty-day time frame required under the Policy. GBP argues that the additional damages to the roof resu l t e d f r o m those delays. Many of the delays were caused by GBP. GBP argues, however, that Maryland Casualty i s nonetheless responsible for GBP’s own dilatory actions beca u s e Maryland Casualty considered interpleading further payments after GBP’s principal forged an endorsement on a check issued by Maryland Casualty, and GBP was thus justified in not executing a proof of loss to avoid an interpleader. Even interpreting the facts in the light most favorable to GBP as the non-movant, the district court correctly granted Maryland Casualty summary judgment on this issue. Also, because, by GBP's own admission, the loss of warranty value was caused by t h e d e l a y s to the roof replacement, the question of whether the loss warranty value would have otherwise been covered need not be reached. Maryland Casualty did not breach its payment obligation. IV. Window Damage GBP’s consultant did not inspect the windows at Gulfbrook u nt i l early 2011, and GBP did not file a proof of loss for the alleged window damage until June of 2011. Maryland Casualty then performed its own inspection and denied G B P ’ s claim. The district court granted summary judgment for Maryland Casualty because GBP did not provide timely notice of loss or create a genuine

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issue that the damage to the windows was caused by Hurricane Ike rather than a non-covered peril. 6 Regardless of the timeliness of its notice, GBP’s claim for window damage must fail because GBP did not offer e vi d e nce to establish what part of the damage to the windows was caused by Hurricane Ike as opposed to some other non-covered event. Markel , 342 S.W.3d at 709. Moreover, GBP has waived the argument by inadequate ly briefing the issue on appeal. See F E D

. R. AP P

. P. 28(a)(9)(A); Beaumont , 972 F.2d at 563. An allegation o f allocation without further explanation than this: “the wear and tear, etc., are the part that did not require replacement; the hurricane damage is the part that did”–is insufficient as a matter of law. (Appellant’s Reply Br. 9–10.) 7 CONCLUSION The district c o u r t did not err in granting summary judgment in favor of Maryland Casualty on any issue other than the rent abatements. Accordingly,

we AFFIRM the judgment on all other issues and REVERSE and REMAND to the district court for further proceedings in connection with the rent abatement.

The Poli c y exclud es dam age res ulti ng fr om we ar and tear , det erio ration, hidd en or 6 late nt def

ect , se ttl ing, cra ck ing, shr ink ing expans ion, cont inu o u s or rep eate d se epa ge or leak age o f wa tert hat occ urs ove r a p erio d of 14 d ays or mo re. (R. at 546- 48.)

GBP rais ed a number of non- cont rac tual iss ues to the dis tri ct cour t and so ught 7 extr a-c ontr act ual dam ages
. The dis tri ct cour t grant ed GBP sum mary judgm ent on all of thes e iss ues , and GBP chos e not to argue them o n app eal. Failur e to rais e an iss ue on app eal cons tit utes wa iver of that argum ent. Unit ed Sta tes v. Thibod eaux, 211 F.3d 910, 912 (5t h Cir. 2000) ; Yo hey v. Col lins , 985 F.2d222 , 224–25 (5t h Cir

. 1993)

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