Court Opinion

ID: 24426
Source: CourtListenerOpinion
Date Created: 2010-04-25 08:21:38+00
Date Added: 2024-06-11T16:47:03.950432
License: Public Domain

REVISED - June 14, 2001

                  UNITED STATES COURT OF APPEALS
                       FOR THE FIFTH CIRCUIT
                      _______________________

                           No. 00-11034
                      _______________________

      RAN-NAN INC., doing business as Vinces Imports, doing
                  business as Guy’s Drive In #3,

                                                   Plaintiff-Appellee,

                                versus

         GENERAL ACCIDENT INSURANCE COMPANY OF AMERICA,
              also known as CGU Insurance Company,

                                                  Defendant-Appellant.

_________________________________________________________________

          Appeal from the United States District Court
                for the Northern District of Texas
_________________________________________________________________

                           May 24, 2001

Before JONES, DeMOSS and BENAVIDES, Circuit Judges.

Per Curiam:

          This   contractual   dispute   arises   from   an     “Employee

Dishonesty Coverage” insurance policy issued by Appellant General

Accident Insurance Company (“General Accident”) to Appellee Ran-

Nan, Inc. (“Ran-Nan”).   The district court concluded that Ran-Nan

was the victim of two separate “occurrences” of employee dishonesty

and that General Accident had breached the insurance contract by

refusing to compensate Ran-Nan for both incidents.            Because the
district court properly interpreted             the term “occurrence” under

Texas law, we affirm.

              Ran-Nan operates a convenience store in Plano, Texas,

which includes a Western Union and check cashing business.               Ran-

Nan    purchased    Employee    Dishonesty    Coverage     blanket   insurance

policies issued by General Accident.            Each policy had a limit of

$25,000 with a $500 deductible.            The events in question occurred

over the course of policies running from April 10, 1996 to April

10, 1997 (the fourth renewal policy) and from April 10, 1997 to

April 10, 1998 (the fifth renewal policy).

              Toward the end of 1997, Ran-Nan’s owners became aware

that the store was the victim of employee dishonesty and submitted

a claim to General Accident. Two Ran-Nan employees, Robert Griffis

and Angela Patillo, caused losses through entirely independent

thefts.       Robert Griffis stole a total of $32,250.00, and Angela

Patillo stole a total of $31,600.00.             The thefts occurred during

both    the    fourth   and   fifth   renewal    periods   in   approximately

proportionate amounts.

              In response to Ran-Nan’s claim, General Accident paid the

policy limit less the deductible on the fifth renewal, but it

refused to pay anything on the fourth renewal despite the fact that

much of the theft had occurred during the earlier policy period.

General Accident reasoned that there had only been one “occurrence”

of employee dishonesty within the meaning of the policy.

                                       2
            Ran-Nan sued General Accident for breach of contract1 and

General Accident removed the case to federal district court on

diversity grounds.      The district court held that there were two

separate “occurrences” of employee dishonesty and that Ran-Tan was

entitled to recover for both.       It therefore awarded Ran-Nan the

amount due under the fourth renewal policy.         General Accident now

appeals.

                               DISCUSSION

            The interpretation of the word “occurrence” as used in

the insurance contract is a question of law.              See Rutgers State

Univ. v. Martin Woodlands Gas Co., 974 F.2d 659, 661 (5th Cir.

1992).     This court reviews questions of law de novo.            See Empire

Fire and Marine Ins. Co. v. Brantley Trucking Co., 220 F.3d 679

(5th Cir. 2000).    In this diversity case governed by Texas law, an

insurance    contract   is   analyzed   by   the   same    rules    as   other

contracts.     Upshaw v. Trinity Cos., 842 S.W.2d 631, 633 (Tex.

1992).     While “occurrence” has often been construed in general

liability policies, there appear to be few cases interpreting the

term in employee dishonesty policies.

            The General Accident policy, like many similar policies,

states that an “occurrence” is “all loss caused by, or involving,

     1
      Ran-Nan also asserted a bad faith denial of coverage, but it
has not cross-appealed the district court’s adverse summary
judgment on that claim.

                                    3
one or more ‘employees,’ whether the result of a single act or

series of acts.”

           In     arguing   that   there    was    but   one   “occurrence”    of

employee dishonesty.        General Accident urges that there was only

one loss, specifically Ran-Nan’s loss of a single sum of cash.                The

company also argues that the “involving one or more employees”

clause of the “occurrence” definition means that regardless how

many employees steal from the insured, there was only one loss of

cash and therefore only one “occurrence.” The more natural reading

of the policy, however, is that the “involving” clause signifies

that a group of employees conspiring together to steal.

           General Accident invokes Bethany Christian Church v.

Preferred Risk Mutual Insurance Company, 942 F. Supp. 330, 335 (S.D.

Tex. 1996) (applying Texas law), in which a federal magistrate

judge found that a church employee’s series of thefts of cash over

the course of three different renewal periods of an employee

dishonesty    insurance     policy   was    a   single   “occurrence.”        The

policies     in   Bethany   and    in   this      case   contained   identical

definitions of “occurrence.”         We find this case distinguishable.

           First, Bethany is critically different from this case

because it involved a series of thefts by a single employee,

whereas the present dispute involves independent pilfering schemes

by two different employees working separately.             To   accept General

Accident’s proffered definition of “occurrence” this court would

have to find that the independent nature of these two series of

                                        4
thefts is irrelevant and that one loss with two unrelated causes is

one “occurrence.” The more natural reading of the policy, however,

is that the “involving” clause signifies a group of employees

conspiring together to steal is a single “occurrence.”

           Second, Texas law does not support the definition of

“occurrence” proffered by General Accident because “the proper

focus in interpreting ‘occurrence’ is on the events that cause the

injuries and give rise to the insured’s liability, rather than on

the number of injurious effects.”               H.E. Butt Grocery Co. v.

National Union Fire Insurance Co., 150 F.3d 526, 530 (5th Cir.

1998)   (applying     Texas    law).   The   few   Texas    cases   that   have

addressed this issue apply a “cause” analysis in determining

whether a set of facts involves one or several occurrences.                See

Goose Creek Consol. ISD v. Continental Cas. Co., 658 S.W.2d 338,

339 (Tex. App. 1983--Houston [1st Dist.], no writ) (holding that

“where there are two fires at two different places with two

separate causal factors, there are two loss occurrences.”).                This

“cause” approach to analyzing the number of “occurrences” is

utilized   by   the    great    majority   of   courts     and   jurisdictions

nationwide.     See Transport Insurance Co. v. Lee Way Motor Freight,

Inc., 487 F. Supp. 1325, 1330 (N.D. Tex. 1980) (cataloging law of

other jurisdictions).          This court has also utilized the “cause”

method when determining the number of “occurrences” under a general

liability insurance policy and Texas law.          Maurice Pincoffs Co. v.

                                       5
St. Paul Fire and Marine Insurance Co., 447 F.2d 204, 206 (5th Cir.

1971).

            General      Accident     contends          that     decisions     utilizing

“cause” analysis       such    as    H.E.       Butt    and     Maurice   Pincoffs    are

distinguishable     as    construing         of    general       liability     insurance

policies instead of employee dishonesty insurance policies. Not

only does the company neglect to cite any authority supporting this

contention, but it also fails to explain why, in determining the

number of “occurrences”, employee dishonesty policies are different

than general liability policies.                  It is true that no Texas case

specifically     applies      “cause”    analysis          to    employee      dishonesty

policies, but this widely accepted method for calculating the

number of “occurrences” is consistent with the general principles

of Texas law.

            On the facts before us, two independent causes exist for

Ran-Nan’s total loss.          Because there are two causes, there have

been two “occurrences” of employee dishonesty. Ran-Nan is entitled

to recover for both occurrences.                   The district court correctly

concluded    that     Ran-Nan       should       be    awarded       $24,500    for   the

“occurrence” during the fourth renewal period of the policy in

addition    to   the     $24,500      already          paid     to   Ran-Nan    for   the

“occurrence”     during    the      policy’s       fifth      renewal     period.     The

district court’s judgment is therefore AFFIRMED.

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