Court Opinion

ID: 46296
Source: CourtListenerOpinion
Date Created: 2010-04-25 22:56:30+00
Date Added: 2024-06-11T17:17:37.190373
License: Public Domain

United States Court of Appeals
                                                                 Fifth Circuit
                                                              F I L E D
               IN THE UNITED STATES COURT OF APPEALS
                       FOR THE FIFTH CIRCUIT                  October 23, 2006

                                                          Charles R. Fulbruge III
                             No. 05-11402                         Clerk

SNELLING AND SNELLING, INC.

                                                 Plaintiff - Appellee
versus

FEDERAL INSURANCE CO.

                                                 Defendant - Appellant

          Appeal from the United States District Court
               for the Northern District of Texas
                      (No. 3:03-CV-2948-K)

Before JOLLY, DAVIS, & WIENER, Circuit Judges.

PER CURIAM:*

     Plaintiff-Appellant Snelling and Snelling, Inc., (“Snelling”)

appeals the district court’s order granting summary judgment in

favor of Defendant-Appellee Federal Insurance Co. (“Federal”).          We

affirm.

                        I. FACTS & PROCEEDINGS

     Snelling, an employment agency, has one of its many offices

located at 150 Broadway in New York, New York, near the site of the

World Trade Center.     This office provided personnel to various

     *
      Under 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opinion should not be published and is not precedent except under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.
businesses located in or near the World Trade Center.      On September

11, 2001, many of that Snelling office’s clients sustained physical

loss or damage from the terrorist attack, as a result of which they

were no longer able to accept Snelling’s services.

     At the time of the attack, Snelling carried a policy of

commercial property insurance issued by Federal.                The policy

covered many of Snelling’s offices, including the one at 150

Broadway.    The policy comprises three main sections.      The initial

“Declarations”    section     establishes   most   of     the     general,

conventional insurance coverage.       The subsequent “Supplementary

Declarations” section establishes additional coverages.           The last

section contains definitions and other policy language.

     This appeal focuses on one of the additional coverages in the

Supplementary Declarations, viz., that for “Dependent Business

Premises.”     The policy defines Dependent Business Premises as

“premises operated by others on whom you depend to . . . accept

your products and services . . . .”          The parties agree that

Snelling’s    World   Trade   Center   customers   fell    within     this

definition, and that the policy does provide at least some coverage

for losses caused to Snelling by the attack’s injuries to customers

of its 150 Broadway office.        The parties vigorously dispute,

however, the monetary extent of such coverage and thus the amount

due Snelling.    Snelling maintains that the policy provided up to

$4,000,000 in coverage ——      the limit of insurance for damage to

business income and loss of utilities in the Declarations Section

                                   2
—— for damage to Dependent Business Premises. In contrast, Federal

maintains that the policy limited coverage to $250,000 in the

aggregate for Dependent Business Premises damages suffered by any

one Snelling office, the amount set forth in the Supplementary

Declarations Section.

     In the weeks and months following September 11, Snelling’s

employees   and     agents   engaged     in   discussions   among   themselves

regarding the aggregate limit of the policy for damages to Snelling

for destruction of its customers’ premises.            Eventually, in January

2003,    Snelling    filed   a   claim   for   $4,444,733,   which   included

business income losses caused by damage to Snelling’s customers

serviced from its 150 Broadway office.                In early July 2003,

Snelling amended its claim to $3,956,143.1            Several weeks later,

Federal paid Snelling $250,000 as full payment for Snelling’s

claims.

     In December 2003, Snelling filed suit against Federal for

breach of state contract law and state insurance law.                 Snelling

brought the suit in federal district court based on diversity

jurisdiction.       The parties conducted discovery and each moved for

summary judgment.        The district court made several findings of

undisputed fact and decided, as a matter of law, that the policy

provided a maximum of $250,000 in coverage for all of Snelling’s

     1
      Although there are varying accounts of the total amount
asserted by Snelling, the parties agree that the claimed amount
was in the millions of dollars.

                                         3
business income       losses     caused    by   damage     to   its   150   Broadway

office’s Dependent Business Premises.             As Federal had already paid

Snelling $250,000, the district court granted summary judgment in

favor of Federal, denying recovery by Snelling of any monies in

excess of that amount.          Snelling now appeals.

                                  II. ANALYSIS

A.     Standard of Review

       The district court’s decision to grant summary judgment is

reviewed de novo.2     A motion for summary judgment should be granted

only when     there   is   no    genuine      issue   of   material    fact.3    In

determining whether there is a genuine issue of material fact, we

view all facts and draw all inferences therefrom in favor of the

non-moving party.4

       The sole issue presented in this appeal is the total amount of

coverage provided by the policy to Snelling for damages resulting

from harm caused to the Dependent Business Premises of its 150

Broadway office.      The interpretation of an unambiguous insurance

policy is a question of law and is therefore appropriate for

summary judgment.5         If    the policy is ambiguous and raises a

       2
      American Int’l Specialty Lines Ins. Co. v. Canal Indem.
Co., 352 F.3d 254, 260 (5th Cir. 2003).
       3
      Weeks Marine, Inc. v. Fireman’s Fund Ins. Co., 340 F.3d
233, 235 (5th Cir. 2003).
       4
        Id.
       5
        See Royal Ins. Co. of Am. v. Hartford Underwriters Ins.
Co.,    391 F.3d 639, 641 (5th Cir. 2004).

                                          4
material issue of fact, however, summary judgment is not proper.6

B.   The Merits

     The interpretation of Snelling’s insurance policy is governed

by Texas contract law.7   In construing a policy, courts must strive

“to give effect to the parties’ intent as expressed in the policy’s

plain language.”8    If an insurance policy “can be given only one

reasonable construction, the court must enforce the policy as

written.”9

     A court views contract language in light of the surrounding

circumstances to ascertain the meaning attached “by a reasonably

intelligent person acquainted with all operative usages and knowing

all the circumstances prior to and contemporaneous with the making

of the integration, other than oral statements by the parties of

what they intended to mean.”10

     i.      The Policy

     Applying these principles of contractual interpretation, our

     6
      Amoco Prod. Co. v. Texas Meridian Res. Exploration Co.,
Inc., 180 F.3d 664, 669 (5th Cir. 1999).
     7
      See Kelley-Coppedge, Inc. v. Highlands Ins. Co., 980 S.W.2d
462, 464 (Tex. 1998).
     8
      de Laurentis v. United Servs. Auto Ass’n, 162 S.W.3d 714,
722-23 (Tex. App. 2005).
     9
      Finger Furniture Co. v. Commonwealth Ins. Co., 404 F.3d
312, 314 (5th Cir. 2005).
     10
      Watkins v. Petro-Search, Inc., 689 F.2d 537, 538 (5th Cir.
1982) (quoting Sun Oil Co. v. Madeley, 626 S.W.2d 726, 731 (Tex.
1981)).

                                  5
analysis begins with the express terms of the policy.                  As noted,

the policy provided coverage for losses incurred by Snelling as a

result     of   damage   to   its    Dependent    Business   Premises,     i.e.,

Snelling’s      customers.     The    amount     of   coverage   for   Dependent

Business Premises is limited by language in the final section of

the policy:

     Dependent Business Premises

     We will pay for the actual business income loss and extra
     expense you incur due to the actual or potential
     impairment of your operations during the period of
     restoration, not to exceed the Limit of Insurance for
     Dependent Business Premises shown under Business Income
     in the Declarations.

     This actual or potential impairment of operations must be
     caused by or result from direct physical loss or damage
     by a covered peril to property or personal property of a
     dependent business premises at a dependent business
     premises.11

     Our study of the policy convinces us that there is only one

section in the entire policy that specifies the “Limit of Insurance

for Dependent Business Premises.”           That section is not the initial

Declarations but the subsequent Supplementary Declarations.                Thus,

it appears that the policy treats its Supplementary Declarations as

a subset of its larger, general set of “Declarations.”

     The Supplementary Declarations establish the following limit

for Dependent Business Premises:

     Additional Coverage - Business Income

     11
          Emphasis added.

                                        6
     The Limits Of Insurance shown below are provided for the
     Coverages shown at no additional cost to you.       These
     Limits Of Insurance apply separately at each of your
     premises unless otherwise shown.       You may purchase
     additional Limits Of Insurance, and we will charge you an
     additional premium. If you purchase additional limits
     for any of these Coverages, the Limits Of Insurance shown
     in the Declarations will reflect your total limit,
     including the Limits Of Insurance shown below.

     Property Coverages                            Limit of Insurance

     BUSINESS INCOME-
          ANY OTHER LOCATION                                    $10,000
          AUDITORS FEES                                         $10,000
          CONTRACTUAL PENALTIES                                 $10,000
          DEPENDENT BUSINESS PREMISES                          $250,000
          LOSS OF UTILITIES                                     $25,000
          POLLUTION CLEAN-UP & REMOVAL                          $10,00012

The policy defines the terms “you” and “your” as referring only to

Snelling.

     When we consider these provisions together, we agree with the

district court that the plain language of the policy supports only

one conclusion —— that the limit of coverage for damage to Snelling

caused by injury to or destruction of its Dependent Business

Premises is $250,000 per Snelling office —— here, 150 Broadway.

The policy provides coverage of $250,000 for damage to Dependent

Business Property, with the following restriction: “These Limits Of

Insurance     apply   separately   at       each   of   your   premises     unless

otherwise shown.”13      Both the policy’s definition and the plain

meaning of the quoted language indicate that “your” refers to

     12
          Emphasis added.
     13
          Emphasis added.

                                        7
Snelling.         To argue that the offices of Snelling’s customers

somehow qualify as “your premises,” as Snelling now asserts, is too

great      a    stretch.     Ultimately,       Federal     and    Snelling,       both

sophisticated parties, must abide by the plain language of the

policy as reflecting their intent.

      Further      supporting   the    conclusion        that    $250,000    is     the

relevant limit, the “Limits of Insurance” provision states: “The

most we will pay in any one occurrence, is the amount of loss, not

to   exceed       the   applicable    Limit    of    Insurance      shown    in     the

Declarations.”14 As previously discussed, the policy appears to use

the term “Declarations” to include both the initial Declarations

and the subsequent Supplementary Declarations.                   In this case, the

applicable limit of insurance for Dependent Business Premises

losses is the $250,000 set forth in the Supplementary Declarations.

Snelling is thus entitled to collect no more than $250,000 for all

of its income losses resulting from injury to or destruction of its

150 Broadway customers’ premises in the 9/11 attack.

      ii.       Snelling’s Arguments

        Snelling raises many counter-arguments, but none overcome the

plain meaning of the policy.               First, Snelling asserts that the

“applicable Limit of Insurance” shown in the Declarations is the

$4,000,000 figure appearing in the initial Declarations under the

heading        “Business   Income    [&]   Loss     of   Utilities[:]       Limit    of

      14
           Emphasis added.

                                           8
Insurance.”15     Based on its interpretation of the plain meaning of

the term “Declarations,” Snelling insists that it is entitled to

recover up to $4,000,000 for all of the business income losses it

sustained from damage to Dependent Business Premises serviced from

its 150 Broadway office, subject only to the limit of $250,000 for

any one Dependent Business.

      Snelling’s argument is not persuasive.               If the Limit of

Insurance provision were intended to refer only to the $4,000,000

coverage limit in the Declarations section, the limits in the

Supplemental Declarations Section would be superfluous.               The only

logical interpretation of this provision is Federal’s, i.e., that

the $4,000,000 figure in the Declarations covers only business

income and loss of utilities caused by direct damage to Snelling’s

own offices. Indeed, the $4,000,000 figure refers only to business

income and loss of utilities generally and says nothing about

business loss resulting from injury to Dependent Business Premises.

In fact, “Dependent Business Premises” are discussed only in the

subsequent Supplementary Declarations, in which coverage for damage

to   such     premises   is   fully   defined   and   limited   by   the   “your

premises” language previously discussed.

      Second, Snelling insists that Federal knew how to use more

specific language in writing its policy but did not.                 Therefore,

Snelling argues, Federal’s failure to limit the language more

      15
           Emphasis added.

                                        9
narrowly should be construed against it.             Specifically, Snelling

argues that Federal lazily used the broad language of “at each of

your premises unless otherwise shown” when it limited Dependent

Business Premises coverage to $250,000, but used specific language,

like    “at   each   covered   premises      shown   in   the     Declarations,”

elsewhere in the policy.       This variance is insufficient to create

an ambiguity: As discussed, the plain (and only reasonable) meaning

of   “your    premises”   is   Snelling’s     offices,      not   those    of   its

customers.

       Finally, Snelling contends that another form policy drafted by

Federal in 1998 demonstrates that the 1994 form policy at issue in

this case is ambiguous.16       This argument likewise fails.             Snelling

was not aware of the 1998 Form when it purchased its policy, so it

was not relying on any difference between the language of the two

policies when it chose its coverage.17               More importantly, even

assuming that the 1998 form demonstrates an ambiguity, this type of

extrinsic     evidence    cannot   be    admitted     for     the   purpose      of

       16
      At the time Snelling agreed to the policy with Federal,
there existed a similar policy form drafted by Federal (the “1998
Form”) which stated that “[t]he Limit of Insurance for Dependent
Business Premises applies . . . separately to each occurrence,
regardless of the number of dependent business premises that
sustain covered direct physical loss or damage.”
       17
      Indeed, Federal asserts that, once a state’s rating
commission approved the new 1998 language, Federal stopped
selling policies with the 1994 language in that state and began
selling only policies with the new 1998 language. Therefore,
Federal never presented both the 1994 Snelling policy and the
1998 Form policy to customers for them to chose between the two.

                                        10
demonstrating the presence of an ambiguity; that must be apparent

within the four corners of the policy at issue.18

     iii. Number of Occurrences

     Snelling further advances that, even if $250,000 is the

applicable limit of coverage for all damage to Dependent Business

Premises of its 150 Broadway location, it is entitled to recover up

to $250,000 separately for damage to each 150 Broadway customer,

with total recovery limited to $4,000,000, because the policy does

not state otherwise.     This argument fails as well: The policy’s

Supplementary Declarations unambiguously state that $250,000 is

“the most” Federal will pay for Dependent Business Premises in any

one occurrence. Snelling’s only facially viable counterargument is

that the Limits of Insurance, which are defined in the final

section of the policy, explicitly refer back to the Declarations

and not to the Supplemental Declarations.      This counterargument is

meritless.   As   already   discussed,   we   are   satisfied   that   the

policy’s references to the Declarations includes the Supplementary

Declarations as a subset.

     As an additional basis for its insistence that it may recover

up to $250,000 for each damaged customer, Snelling asserts that the

damage to each Dependent Business Premises can be characterized as

a separate occurrence.    Snelling cites cases and provides several

     18
      See Sydlik v. REEIII, Inc., 195 S.W.3d 329, 334 (Tex. App.
2006) (citing Sun Oil Co. v. Madeley, 626 S.W.2d 726, 732 (Tex.
1981)).

                                  11
hypothetical situations in support of this argument, but these

cases and hypothetical situations are inapposite.       For example,

Snelling points to Goose Creek Consolidated Independent School

District v. Continental Casualty Co., in which an arsonist started

two separate fires at two separate places and two separate times.19

Goose Creek does not support Snelling’s argument, as it instructs

that the number of occurrences is determined by the cause of the

damage.20    Likewise, in U.E. Texas One-Barrington, Ltd. v. General

Star Indemnity Co., relying on Goose Creek, we held that Texas law

focuses on the immediate cause of damage when determining the

number of occurrences.21    Here, injury or destruction to Snelling’s

150 Broadway customers in or near each tower resulted from the same

cause —— airplanes flying into the Twin Towers.       Although Goose

Creek and U.E. Texas One-Barrington, Ltd. could support an argument

that the destruction of the towers by separate planes and at

different times were two separate occurrences rather than one

produced by a single terrorist attack —— a theory under which

Snelling might be entitled to recover up to $250,000 for damage to

Dependent Business Premises in each tower —— Snelling concedes that

     19
          658 S.W.2d 338 (Tex. App. 1983).
     20
      Id. at 341. Specifically, Goose Creek held that “where
there are two fires at two different places with two separate
causal factors, there are two loss occurrences.” Id.
     21
          332 F.3d 274, 278 (5th Cir. 2003) (finding that pipe
leaks were nineteen separate occurrences even though they were
potentially caused by same event —— installation of defective
pipes).

                                   12
it has never advanced this argument.         Under Texas law, the damage

to   each   150   Broadway   customer     cannot   constitute   a   separate

occurrence when, as here, the damage resulted from a single cause.

                             III.   CONCLUSION

      For the foregoing reasons, the order of the district court

granting summary judgment to Federal is

AFFIRMED.

                                     13