Opinion ID: 2654478
Heading Depth: 2
Heading Rank: 1

Heading: Application of the Anti-Technicality Statute

Text: Alterra argues that the district court erred in applying Texas Insurance Code § 862.054, also known as the Anti-Technicality Statute, to Rowland’s insurance claim because, according to Alterra, the statute applies only to property insurance coverage and not to liability insurance coverage. The AntiTechnicality Statute provides: Unless the breach or violation contributed to cause the destruction of the property, a breach or violation by the insured of a warranty, condition, or provision of a fire insurance policy or contract of insurance on personal property, or of an application for the policy or contract: (1) does not render the policy or contract void; and (2) is not a defense to a suit for loss. Tex. Ins. Code Ann. § 862.054 (emphasis added). The district court applied the Anti-Technicality Statute to Rowland’s insurance claim, explaining that the statute uses the phrase “personal property” in contrast to “real property,” and 4 Case: 13-20341 Document: 00512541689 Page: 5 Date Filed: 02/24/2014 No. 13-20341 the stolen property at issue was “clearly” not real property, so the statute applied. The district court also found that Rowland, as a common carrier, acted as a bailee for the cargo owner, so Rowland maintained all of the rights and responsibilities of a legal owner. Such rights include “the right to recover the full value of bailed goods as though it was the owner.” Additionally, in response to Alterra’s claim that the statute did not apply to liability policies, the district court commented that none of the legal sources on which Alterra relied expressly supported its position, but did not ultimately decide this question. The district court interpreted the statute to mean that “recovery depends on the loss suffered—as opposed to the type of insurance chosen.” Since Alterra had not shown that the pre-existing gaps in the fence aided in the theft, under the statute, the Policy was still valid and Alterra’s failure to pay Rowland for the claim amounted to a breach of contract. On appeal, Alterra argues that the insurance contract with Rowland is a liability policy and, as such, the Anti-Technicality Statute does not apply. 2 2 This argument assumes that application of the Anti-Technicality Statute depends on the nature of the insurance policy, not the nature of the loss. Rowland contends that the opposite is true—that the application of the statute depends on the nature of the loss. According to Rowland, since the loss here was of personal property, the statute applies. We disagree and find Rowland’s interpretation of the statute unconvincing based on the plain text of the statute. The statute applies to “a fire insurance policy or a contract of insurance on personal property.” Tex. Ins. Code Ann. § 862.054 (emphasis added). This language clearly refers to the type of policy and not simply the type of loss. See generally Tex. Adjutant Gen.’s Office v. Ngakoue, 408 S.W.3d 350, 362 (Tex. 2013) (holding when interpreting statutes, courts must give “words their plain, ordinary meaning unless the statute indicates an alternative meaning”). The district court’s conclusion was based only in part on the interpretation of the statute that Rowland argues for, and as to that part, we respectfully disagree. Alterra’s challenge also claims that a liability policy would be excluded from the AntiTechnicality Statute. We note that a liability policy is not included in the plain language of the statute. See Tex. Ins. Code Ann. § 862.054. However, since we find that the relevant coverage in Rowland’s insurance contract amounts to property insurance, we need not address Alterra’s assertion that the Anti-Technicality Statute does not apply to a liability policy. 5 Case: 13-20341 Document: 00512541689 Page: 6 Date Filed: 02/24/2014 No. 13-20341 Rowland counters that the Policy is a property policy. 3 Whether a policy is a property policy, liability policy, or both, depends on the policy’s language. See Highlands Ins. Co. v. City of Galveston, 721 S.W.2d 469, 471 (Tex. App.— Houston [14th Dist.] 1986, writ ref’d n.r.e.). Texas law distinguishes between property insurance and liability insurance. “A policy of property insurance is a personal contract for indemnity for the insurable interest possessed by the insured at the time of the issuance of the policy, and also at the time of the loss.” Id. “Coverage in a property policy is commonly provided by reference to causation, such as ‘loss caused by . . .’ certain enumerated forces. It is precisely these physical forces that bring about the loss.” Warrilow v. Norrell, 791 S.W.2d 515, 527 (Tex. App.—Corpus Christi 1989, writ denied) (citation omitted) (alteration in original). Liability insurance provides coverage based on “traditional tort concepts of fault, proximate cause, and duty.” Id. at 528; see also Highlands, 721 S.W.2d at 471 (“Liability policies . . . insure against loss arising out of legal liability, usually based upon the assured’s negligence.”). Policies that reference the insured’s “legal liability” are not by default liability insurance contracts. See, e.g., Hudiburg Chevrolet, Inc. v. Globe Indem. Co., 394 S.W.2d 792, 796–97 (Tex. 1965). In Texas, “[p]olicy provisions covering property contained in specific places and ‘for which the insured is liable,’ have been held to insure against loss of the property and not to indemnify insured against his legal responsibility in tort or by contract to the owners of the property.” Id. (citing 29 Am. Jur. Insurance § 295). This is because an insured bailee may sue for losses and account to the owner. See id. at 797. In fact, absent limiting language in an insurance policy, “Texas law 3 Alterra argues that Rowland has waived this argument since it is raised for the first time in Rowland’s response brief. Yet, Alterra argues here, and argued before the district court, that the policy was a liability policy, not a property policy. Thus, we find that Alterra sufficiently raised this issue and it has not been waived. 6 Case: 13-20341 Document: 00512541689 Page: 7 Date Filed: 02/24/2014 No. 13-20341 presumes that a bailee has insured both its interest and the bailor’s interest when the bailee takes an insurance policy on the bailed goods.” United Nat’l Ins. Co. v. Mundell Terminal Servs., Inc., --- F.3d ----, 2014 WL 260595, at  (5th Cir. Jan. 23, 2014) (citing Cumis Ins. Soc’y, Inc. v. Republic Nat’l Bank of Dall., 480 S.W.2d 762, 764–65 (Tex. Civ. App.–Dallas 1972, writ ref’d n.r.e.)). Policies that insure against the theft of property belonging to a third party while under the control of the insured have previously been considered property policies under Texas law. In Hudiburg, the insured, Hudiburg Chevrolet, had a contract with a third party to store a truck, and the truck was stolen from the premises. See 394 S.W.2d at 793–94. Hudiburg Chevrolet’s insurance policy covered “all sums which the insured shall become obligated to pay by reason of liability imposed by law for direct loss of or damage including loss of use by theft . . . to automobiles which are the property of others and in the custody of the insured for storage . . . .” Id. at 796. The insurance company argued that the policy covered Hudiburg Chevrolet only “in the event of the insured’s legal liability.” Id. However, the Texas Supreme Court disagreed, explaining that the policy covered “the property itself and not by way of indemnity only,” and that the policy amounted to property insurance, even though the insured did not own the property and was only “liable” for the property. Id. at 796–97. Although the property was owned by a third party, and Hudiburg had a legal duty to that third party, the loss was still covered by the terms of the property policy. We recently decided United National, which involved similar facts to those before us here, and in so doing, we described the nature of the applicable insurance policy. In United National, a company owned a warehouse which stored copper sheeting pursuant to a contract with the owner. 2014 WL 260595, at . The company that owned the warehouse had an insurance policy that covered “direct physical loss of or damage to Covered Property at 7 Case: 13-20341 Document: 00512541689 Page: 8 Date Filed: 02/24/2014 No. 13-20341 the premises described in the Declarations caused by or resulting from any Covered Cause of Loss.” Id. The policy covered the theft of the personal property of others that was in the insured’s “care, custody, or control.” Id. We discussed the nature of the insurance policy and concluded that since the warehouse was a bailee of the copper sheeting, the insurance policy covering the loss of the sheeting due to theft was a “first-party property policy.” Id. at . Alterra urges us to apply Esco Transportation Company v. General Insurance Company of America, 75 F. App’x 936, 939 (5th Cir. 2003), to the present case, arguing that Esco held that a policy with similar language to the policy at issue here constituted a liability policy. This is a misstatement of the case. The legal question at issue in Esco was whether the insured had provided sufficient proof to the insurance company to establish its loss. Id. In discussing this issue, we repeatedly referred to the insured’s “legal liability” to a thirdparty owner of property for the loss of that property. Id. We did not, however, explicitly characterize the underlying insurance policy as a liability policy, as opposed to a property policy. Id. Like the policies at issue in Hudiburg and United National, Rowland’s Policy clearly states that it covers the “loss of property of others . . . while in due course of ‘transit’ including loading and loading.” Moreover, just as in Hudiburg and United National, Rowland’s claim is based on the theft of property owned by a third party while in Rowland’s custody. Although the Coverage section of the Policy states that it covers Rowland’s “legal liability for loss to the covered property,” the use of “legal liability” and the fact that a third-party owned the property does not transform the policy into a liability policy. See, e.g., Hudiburg 394 S.W.2d at 796–97. As a bailee, Rowland had an insured interest in the stolen video game consoles. Thus, the relevant portions of Rowland’s Policy covering those consoles amount to property 8 Case: 13-20341 Document: 00512541689 Page: 9 Date Filed: 02/24/2014 No. 13-20341 insurance, not liability insurance. Therefore, we hold that the district court properly applied the Anti-Technicality Statute.