Opinion ID: 26691
Heading Depth: 4
Heading Rank: 6

Heading: SIG Logistics, Inc. (CDC)

Text: 2. It is hereby understood and agreed that Exclusion l is deleted in its entirety and replaced by the following: 1. loss or damage resulting from dissolution of money or securities which benefits any natural person, partnership or corporation (other than the Insured’s bank) acting in the capacity of a broker, factor, commission merchant, consignee, contractor or other agent or representative of the Insured. 3. As respects the aforementioned Agents, the following separate Limit of Liability is provided: $2,500,000.00 4. As respects the aforementioned Agents, the following separate Deductible is provided: $1,000,000.00 ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED. [Emphasis added.] 11 Section 2 above is obviously the problematic provision. Read in a vacuum —— which is precisely how National Union contends it should be read —— its effect would be to delete from the entire insurance policy the phrase that otherwise saves Alfares’s theft from Exclusion “l,” namely, “except any natural person, partnership or corporation who is duly authorized by the Insured to have custody of the money or securities.” But, as with any other contract, single provisions cannot be construed alone and out of context. We cannot, therefore, approbate such a fractured reading of Endorsement #15, which ignores the context in which section 2 appears, as National Union proposes. First, the Endorsement itself is titled “Designated Agents Coverage,” strongly suggesting that the Endorsement will address only that subject. Second —— and more telling —— the entire substantive content of Endorsement #15 is preceded, and restricted, by the words, “Employee in the Definitions section is hereby amended by including the following:”. Like the title of the Endorsement, this signal tells all who have occasion to read Endorsement #15 that everything following the colon will deal exclusively with the definition of the term “employee.” Third, section 1 begins this task by informing the reader that the definition of Employee will be amended only to the extent that employees of six nominate CDCs are concerned: Employees of the listed CDCs will, for purposes of the policy, be treated as employees of 7-Eleven (“deemed 7-Eleven employee”). A continuing analysis of the provisions surrounding the 12 problematic section 2 reflects that the sections following it (sections 3 and 4) are unambiguous. Their effects are unquestionably limited to the CDCs listed in section 1. Construing Endorsement #15 as a whole, then, we conclude that in context, section 2 is most properly understood as limited in its applicability, as well. Section 2 is, in fact, a bewildering provision, but we need not occupy ourselves with solving its precise meaning, because one thing is clear: Section 2 somehow affects the CrimeGuard policy’s coverage only when an employee or a named CDC is involved. Alfares was neither an employee of 7- Eleven nor connected in any way with one or more of the named CDCs. Whatever else the effects of section 2 may be, they cannot be tortured to reach the dissolution of Amex money orders by Alfares. National Union appears to insist that the parties simply “stuck” a broad, generally-applicable section 2 right in the middle of the otherwise-restricted Endorsement #15, instead of bothering to create a separate document drastically reducing the policy’s coverage, thereby excluding Alfares’s dissolution from coverage. Even if there were somehow merit to this suggestion, National Union would be faced with a contractual provision that, when “read in light of the surrounding circumstances” is undeniably “ambiguous.”5 If on the basis of no other legal analysis, 7-Eleven’s success on this appeal is assured by that recognition. 5 Balandran, 972 S.W.2d at 741. 13 As stated above, when we review a district court’s dismissal of an action for failure to state a claim, our focus is narrow indeed: We need only ascertain whether “it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.”6 When we here conclude that at least one reasonable construction of the ambiguous Endorsement #15 would not bar 7-Eleven’s claim under the CrimeGuard policy, our task is complete: We agree with the district court that Exclusion “l” does not preclude 7-Eleven’s recovery under the policy for the dissolution accomplished by —— and benefiting —— its independent contractor, Alfares, who had no connection with any of the six named CDCs and was not an actual employee of 7-Eleven. Therefore, with neither Exclusion “e” nor Exclusion “l” unambiguously barring coverage, 7-Eleven escapes dismissal of its action at the Rule 12(b)(6) stage and can proceed to the next phase of the litigation, whether that be further discovery, summary judgment, or trial. Undaunted, National Union argues in the alternative that even if Endorsement #15 does not amend Exclusion “l” as it pertains to Alfares, 7-Eleven’s claim would still be barred, by the indemnity provision in Exclusion “l.” The provision to which National Union refers explains that if C the Insured has a contract with the natural person, partnership or corporation covering such loss or 6 Conley v. Gibson, 355 U.S. 41, 45-46 (1957). 14 damage, or if C the natural person, partnership or corporation has any indemnity or insurance covering such loss or damage, then [National Union’s] liability for such loss or damage shall only be the excess over the amount of such contract, indemnity or insurance and [National Union] shall not be obligated to pay any amount for such loss or damage until the Insured has been paid under all such contracts, indemnities or insurance. National Union argues that because (1) the Money Order Amendment between Alfares and 7-Eleven expressly requires that Alfares be charged for, inter alia, 7-Eleven’s losses “which [are] the direct or indirect result of any breach of this Money Order Agreement,” and (2) the Store Franchise Agreement provides that “Franchisee [Alfares] shall be responsible for and indemnify 7-Eleven from all losses, except those specifically the responsibility of or indemnified by 7-Eleven,” 7-Eleven must recover its loss from Alfares, not from National Union. 7-Eleven answers this argument definitively: As National Union did not make this argument to the trial court, it cannot do so for the first time on appeal. Our precedent is solidly to that effect, so we shall not consider National Union’s argument.7 It suffices that we agree with the district court’s conclusion that Exclusion “l” will not serve as the basis on which to dismiss 7- Eleven’s action for failure to state a claim for which relief can 7 See, e.g., Wiley v. Offshore Painting Contractors, Inc., 711 F.2d 602, 609 (5th Cir. 1983) (citing Shingleton v. Armor Velvet Corp., 621 F.2d 180, 183 (5th Cir.1980) and United States v. Silva, 611 F.2d 78, 80 (5th Cir.1980)). 15 be granted. 3. Texas Insurance Code Claim In addition to its claims directly under the CrimeGuard policy, 7-Eleven also brought a claim against National Union for violation of the Texas Insurance Code. 7-Eleven’s complaint alleges in part: More specifically, Defendant is guilty of the following unfair insurance practices, which have been and are producing causes of Plaintiff’s damages: (vii) The Defendant misrepresented the terms of the insurance policy, in violation of 28 Tex. Admin. Code §§ 21.3 and 21.203(1); and (23); and Texas Insurance Code Ann. art. 21.21-2, § 2(a).... Article 21.21-2, § 2 of the Texas Insurance Code provides: (a) No insurer doing business in this state under the authority, rules and regulations of this code shall engage in unfair claim settlement practices. (b) Any of the following acts by an insurer shall constitute unfair claim settlement practices:
pertinent facts or policy provisions relating to coverages as issue.... After concluding that Exclusion “e” barred coverage of 7- Eleven’s claims, the district court “ordered, adjudged and decreed that ... 7-Eleven, Inc.’s Complaint is dismissed with prejudice,” without distinguishing between policy-based claims and Texas Insurance Code-based claims. Even if the policy did not actually cover 7-Eleven’s losses, 7-Eleven is entitled to develop facts applicable to its misrepresentation claim. That is, 7-Eleven is entitled to show, if it can, that National Union represented that losses such as those resulting from Alfares’s crime would be 16 covered under the CrimeGuard policy. We therefore reverse the district court’s dismissal of 7-Eleven’s Texas Insurance Code-based claims as well as the policy-based claims.