Court Opinion

ID: 8406522
Source: CourtListenerOpinion
Date Created: 2022-10-28 18:00:49.269703+00
Date Added: 2024-06-11T16:47:15.407884
License: Public Domain

Case: 21-60794     Document: 00516525470          Page: 1    Date Filed: 10/28/2022

              United States Court of Appeals
                   for the Fifth Circuit
                                                                      United States Court of Appeals
                                                                               Fifth Circuit

                                                                             FILED
                                                                      October 28, 2022
                                   No. 21-60794                         Lyle W. Cayce
                                                                             Clerk

   Hudson Specialty Insurance Company,

                                                             Plaintiff—Appellee,

                                       versus

   Talex Enterprises, L.L.C.,

                                                         Defendant—Appellant,

                                       versus

   City of McComb,

                                                                      Appellant.

                  Appeal from the United States District Court
                    for the Southern District of Mississippi
                            USDC No. 5:17-CV-137

   Before Graves, Willett, and Engelhardt, Circuit Judges.
   Per Curiam:*

          *
            Pursuant to 5th Circuit Rule 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   opinion should not be published and is not precedent except under the limited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 Circuit Rule 47.5.4.
Case: 21-60794        Document: 00516525470              Page: 2       Date Filed: 10/28/2022

                                          No. 21-60794

           This insurance dispute concerns the partial collapse of the Jubilee
   Performing Arts Center (“JPAC”) building in McComb, MS (the “City”).
   Defendant Talex Enterprises (“Talex”) owned the building and insured it
   through policies with Plaintiff Hudson Specialty Insurance Company
   (“Hudson”). After the collapse, the City paid for services to limit the danger
   the building posed to citizens and nearby properties. Talex assigned its rights
   under its general liability policy to the City so it could recoup these expenses.
   In a declaratory judgment action brought by Hudson against Talex and the
   City (“Defendants”), the district court granted in part Hudson’s motion for
   partial summary judgment finding that the policy excluded most of the City’s
   claimed expenses. Pursuant to 28 U.S.C. § 1292(b), the court certified the
   following question as an immediately appealable issue: “Whether or not the
   general liability policies issued by Hudson provide coverage for costs and
   damages incurred by [the City] as a result of the collapse of the JPAC
   building.” 1 We granted Defendants’ petition for an interlocutory appeal. We
   now AFFIRM in part, REVERSE in part, and REMAND.
                       I. Facts & Procedural History
           On July 23, 2017, the JPAC building collapsed. The building was
   insured under two Hudson policies—one issued to Talex, the building’s
   owner, and the other issued to Talex’s principal, Terrance Alexander. The
   policies included building property, personal property, and general liability
   coverage, but this appeal concerns only the general liability coverage. After
   the building collapsed, the City paid for services to prevent injury to citizens

           1
              It also characterized it as “whether the property damage exclusion of the general
   liability policies applies to exclude coverage for [the City’s] claimed expenses with the
   exception of those for repairs/restoration to property and equipment separate from the
   building at issue.”

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                                      No. 21-60794

   or damage to nearby properties. In total, the City spent $369,320.39 2 for the
   following services:
      1) $4,234.35 to Neel-Schaffer Engineering for an engineering consulta-
          tion immediately after the collapse.
      2) $25,251.05 to Laird & Smithers for project management of the stabili-
          zation and partial demolition of the building.
      3) $286,353.00 to Eagle Construction:
              a. $186,863.00 for emergency partial demolition, disposal, and
                 cleaning.
              b. $29,700.00 for removal and disposal of asbestos-containing
                 roofing material and air monitoring.
              c. $69,790.00 for stabilization of the walls, emergency partial
                 demolition, and disposal of debris.
      4) $9,566.70 to the City’s Public Works Department.
      5) $557.72 to the City’s Fire Department for keeping people out and pro-
          tecting the integrity of the site.
      6) $32,922.57 to the City’s Police Department for keeping people out
          and protecting the integrity of the site.
      7) $4,063.00 to the City Attorney for attorney’s fees.
      8) $2,222.00 to Little Dixie Yard Works for repairing a city flower bed
          that was damaged.
      9) $4,150.00 to Austin Electric for replacing a city streetlight that was
          damaged.

          2
            Defendants claim the City spent $389,320.39 for these efforts, but only
   $369,320.39 in expenses appear in the record.

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                                    No. 21-60794

          Talex’s general liability policy with Hudson allows for the recovery of
   some expenses due to property damage. But there is an exclusion (“owned-
   property exclusion”) for damage to:
          Property you own, rent, or occupy, including any costs or
          expenses incurred by you, or any other person, organization or
          entity, for repair, replacement, enhancement, restoration or
          maintenance of such property for any reason, including
          prevention of injury to a person or damage to another’s
          property.
   In this clause, “you” refers to Talex, the named insured of the policy. Talex
   agreed to assign its rights under its general liability policy to the City so it
   could attempt to recoup the above-listed expenses. In its motion for partial
   summary judgment, Hudson argued that the owned-property exclusion
   negated coverage for all of the City’s claimed expenses. The district court
   found that most of the City’s expenses fell under the owned-property
   exclusion. It concluded that the only expenses not falling under this exclusion
   were the $6,372 in repairs for the flower bed and streetlight since those “did
   not result from damage to the property ‘owned, rented, or occupied’ by
   Alexander or Talex.”
                          II. Standard of Review
          We review a district court’s grant of summary judgment de novo.
   Pioneer Expl., L.L.C. v. Steadfast Ins. Co., 767 F.3d 503, 511 (5th Cir. 2014).
   We also review de novo the interpretation of a contract, including
   any questions about whether the contract is ambiguous. Id. at 511–12. The
   parties agree that Mississippi law applies to this action. See EMJ Corp. v.
   Hudson Specialty Ins. Co., 833 F.3d 544, 547 (5th Cir. 2016) (“The arguments
   are assessed under Mississippi law because the parties agree it governs this
   case.”). We have previously recited these general principles of Mississippi
   insurance law:

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          The initial question of whether the contract is ambiguous is a
          matter of law . . . Mississippi courts give effect to the plain
          meaning of an insurance policy’s clear and unambiguous
          language . . . No rule of construction requires or permits
          [Mississippi courts] to make a contract differing from that
          made by the parties themselves, or to enlarge an insurance
          company’s obligations where the provisions of its policy are
          clear.
   Leonard v. Nationwide Mut. Ins. Co., 499 F.3d 419, 429 (5th Cir. 2007)
   (citations and quotations omitted). However, if we determine that ambiguity
   inheres in the policy language, we must “construe ambiguous terms in favor
   of the policyholder.” Id. (citing J&W Foods Corp. v. State Farm Mut. Auto.
   Ins. Co., 723 So.2d 550, 552 (Miss. 1998)). There is ambiguity “when a term
   or provision is susceptible to more than one reasonable meaning.” Id.
   (citation omitted).
                               III. Discussion
          Defendants argue the City’s claimed expenses do not fall under the
   owned-property exclusion for two reasons. First, they argue the exclusion
   does not apply when the purpose of the expenses is to limit third-party
   liability. Second, they claim none of the expenses qualify as “repair,
   replacement, enhancement, restoration or maintenance” of the property.
                                        A.
          Defendants argue the owned-property exclusion should not apply
   because these expenses were incurred to limit liability to third parties. In
   support, they urge us to apply the holdings of Patz v. St. Paul Fire & Marine
   Ins. Co., 15 F.3d 699 (7th Cir. 1994), Allstate Ins. Co. v. Dana Corp., 759
   N.E.2d 1049 (Ind. 2001), and Aetna Cas. & Sur. Co. v. Dow Chem. Co., 28 F.
   Supp. 2d 448 (E.D. Mich. 1998). In Patz and Aetna, courts decided that
   owned-property exclusions did not apply to remediation expenses incurred

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   to comply with government orders or prevent imminent harm to third
   parties. See Patz, 15 F.3d at 705 (involuntary clean-up costs incurred due to
   government order are recoverable and not excluded by owned-property
   exclusion); Aetna, 28 F. Supp. 2d at 455 (owned-property provision does not
   bar coverage for remediation of third-party property, remediation to prevent
   imminent damage to third-party property, or government-mandated
   remediation). In Dana Corp., the Indiana Supreme Court determined that an
   owned-property exclusion was ambiguous, so it construed it against the
   insurer and found it did not exclude the company’s government ordered
   clean-up costs. 759 N.E.2d at 1056. But these cases are inapplicable because
   they involved owned-property exclusions that are less broad than the one at
   issue here. See Patz, 15 F.3d at 705 (“the policy excludes coverage for
   property damage to property owned by the insured”); Aetna, 28 F. Supp. 2d
   at 451 (policy excluded “coverage for ‘injury to or destruction, including the
   loss of use of, property owned’ by the insured”); Dana Corp., 759 N.E.2d at
   1055 (“This policy shall not apply: ... to injury to or destruction of or loss of:
   (1) property owned by any INSURED.”).
          By contrast, this policy excludes “repair, replacement, enhancement,
   restoration or maintenance” of the insured’s property “for any reason,
   including prevention of injury to a person or damage to another’s property.”
   (emphasis added). We faced a nearly identical owned-property exclusion in
   Pioneer Exploration. 767 F.3d at 509. (policy excluded “costs or expenses
   incurred by you…for repair, replacement, enhancement, restoration or
   maintenance of such property for any reason, including prevention of injury
   to a person or damage to another’s property.”). That case involved Louisiana
   insurance law, and we noted one decision from the Louisiana Court of
   Appeals, First Circuit finding an owned-property exclusion “did not
   preclude coverage for remediation costs where those remediation costs had
   been incurred to prevent imminent or immediate harm to third-parties.” Id.

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   at 517 (citing Norfolk S. Corp. v. California Union Ins. Co., 2002-0369 (La.
   App. 1 Cir. 9/12/03), 859 So. 2d 167, 194-95). Importantly, that Louisiana
   court “did not reproduce in its opinion the language of the ‘owned’ property
   exclusion at issue.” Id. In any case, we agreed with the district court that the
   oil company’s containment costs after a well blow-out to prevent potential
   third-party liability fell under the clear language of the owned-property
   exclusion. Id. at 518.
          In Taos Ski Valley, Inc. v. Nova Cas. Co., the Tenth Circuit analyzed
   an owned-property exclusion identical to the one here. 705 F. App’x 749, 753
   (10th Cir. 2017) (“[p]roperty you own, rent, or occupy, including any costs
   or expenses incurred by you, or any other person, organization or entity, for
   ... restoration ... of such property for any reason, including prevention of ...
   damage to another’s property.”) (emphasis added by court). In that case, Taos
   Ski Valley (“TSV”) spent over a million dollars to abate contamination to
   and protect nearby water sources after learning of soil contamination. Id. at
   750. Relying on the same cases Defendants urge us to apply here, TSV argued
   the owned-property exclusion was inapplicable to its remediation efforts
   since they were undertaken to limit liability to state and federal
   environmental authorities. Id. at 754. The Tenth Circuit rejected this
   argument since the addition of “for any reason, including prevention of…
   damage to another’s property” plainly narrowed coverage:
          To be covered, the liability cannot be for damage to property
          that the insured party owns, rents, or occupies. Thus, the
          Exclusion defeats coverage for TSV’s remediation costs
          incurred because of soil contamination on the resort’s land, no
          matter that the reason for the costs was third-party liability.
   Id. at 753.
          We reach the same conclusion under Mississippi law: the clause
   unambiguously      excludes   expenses     for   the   “repair,   replacement,

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   enhancement, restoration or maintenance” of Talex’s property for any
   purpose, including mitigating potential harm to the public or adjacent
   buildings and limiting liability to third parties.
                                                 B.
           Now that we have determined that the underlying purpose of the
   expenses does not affect the applicability of the exclusion, the remaining
   question is whether the City’s expenses qualify as “repair, replacement,
   enhancement, restoration or maintenance of such property.” Under
   Mississippi law, we give effect to the plain meaning of unambiguous terms.
   Leonard, 499 F.3d at 429. Since the policy does not define the terms listed in
   the owned-property exclusion, we look for plain meaning in dictionary
   definitions from the time the parties agreed to the policy in 2017. See Reynolds
   v. Allied Emergency Servs., PC, 193 So. 3d 625, 633 (Miss. 2016) (relying on
   Webster’s Dictionary and Black’s Law Dictionary for the plain meaning of
   “Appeal”); Motor Vehicle Cas. Co. v. Atlantic Nat’l Ins. Co., 374 F.2d 601,
   605 (5th Cir. 1967) (the meaning and application of plain words are to be
   judged in the light of the situation of the parties at the time they made the
   agreement). Accordingly, we recite the following relevant dictionary
   definitions:
   Maintenance

       • “The action of keeping something in working order, in repair, etc.;
           the keeping up of a building, institution, body of troops, etc., by
           providing means for equipment, etc.; the state or fact of being so kept
           up; means or provision for upkeep.” Maintenance, The Oxford
           English Dictionary (online ed. 2022). 3

           3
            “The action of keeping in effective condition, in working order, in repair, etc.;
   the keeping up of (a building, light, institution, body of troops, etc.) by the supply of funds

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       • “The action of upholding or keeping in being a cause, right, state of
           things, government, etc.” Maintenance, The Oxford English
           Dictionary (online ed. 2022). 4
       • “The care and work put into property to keep it operating and
           productive; general repair and upkeep.” Maintenance, Black’s
           Law Dictionary (10th ed. 2014).
   Repair

       • “An act of restoring an object or structure to good condition by
           replacing or fixing parts, or of replacing or fixing parts in order to
           maintain it in good condition.” Repair, The Oxford English
           Dictionary (online ed. 2022). 5
       • “The process of restoring something that has been subjected to decay,
           waste, injury, or partial destruction, dilapidation, etc.; an instance or
           a result of this process  .” Repair, Black’s Law Dictionary (10th ed. 2014).

   or needful provision; state or fact of being so kept up; means or provision for keeping up.”
   Maintenance, The Oxford English Dictionary (2d ed. 1989). The Oxford
   English Dictionary (“OED”) online edition includes entries from the Third Edition (2000)
   but is also updated every three months with “further revisions to definitions,
   pronunciation, etymology, headwords or variant spellings, quotations, dating or styling of
   citations.” Each OED online entry is accompanied by its analogous entry in the Second
   Edition (1989) to underline the definition’s consistency during the relevant time frame.
           4
           “The action of upholding or keeping in being (a cause, right, state of things,
   government, etc.).” Maintenance, The Oxford English Dictionary (2d ed.
   1989).
           5
           “The act of restoring to a sound or unimpaired condition; the process by which
   this is accomplished; the result attained.” Repair, The Oxford English
   Dictionary (2d ed. 1989).

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   Restoration

       • “The action of restoring a thing to a former state or position; the fact
           of being restored or reinstated.” Restoration, The Oxford
           English Dictionary (online ed. 2022). 6
   With these definitions in mind, we now turn to each of the City’s expenses.
                      i. Stabilization and Demolition Expenses
           After the collapse, the City paid Eagle Construction to stabilize the
   walls of and demolish portions of the JPAC building. Eagle’s stabilization
   efforts fall under the plain meaning of repair because they fixed the walls in
   order to restore the building to a good condition. The need for these efforts
   only arose because the building was subjected to partial destruction—the
   collapse. Granted, the stabilization efforts did not return the building to its
   original condition, but their purpose was to restore the building to a better
   condition so it would not do more damage to neighboring properties. The
   Eighth Circuit reached the same conclusion in Clarinet, LLC v. Essex Ins. Co.,
   712 F.3d 1246 (8th Cir. 2013). That case involved an insurance dispute over
   a building that was seriously damaged by a storm. Id. at 1248. The building
   remained structurally unsound after both emergency and ongoing efforts to
   stabilize the building, so it was demolished. Id. The building owner sought
   coverage of both the stabilization and demolition costs under its general
   liability policy, but the Eighth Circuit found that an owned-property
   exclusion identical to the one at issue here “patently excludes such repairs,
   even when undertaken to prevent harm to third parties or property.” Id. at
   1250. Likewise, we find that wall stabilizations qualify as repairs.

           6
             “The action of restoring to a former state or position; the fact of being restored
   or reinstated.” Restoration, The Oxford English Dictionary (2d ed. 1989).

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          The Eighth Circuit also found that demolition qualified as repair, but
   we conclude that demolition falls under the plain meaning of maintenance.
   Defendants argue that partial demolition “cannot be construed as efforts to
   repair, replace, enhance, restore or maintain the insured building.” But this
   argument narrows the exclusion—it applies not just to the building but to the
   property. Demolition or partial demolition does not keep the building in
   working order. But according to the City, the controlled demolition of
   portions of the JPAC building was to preserve surrounding property and
   public safety. Thus, the demolition qualifies as maintenance because it was
   required to keep the property operating or in working order—without the
   demolition efforts, the property would continue to pose a threat to people
   and nearby buildings.
                              ii. Clean-Up Expenses
          The City also paid Eagle to clean and dispose of debris and roofing
   material from the collapse site. In Taos Ski Valley, the Tenth Circuit
   concluded that “‘restoration’ accurately describes the process TSV initiated
   to clean up its soil contamination and to prevent its spread.” 705 F. App’x at
   755. In reaching this conclusion, it relied on the OED definition of
   restoration: “The action of restoring a thing to a former state or position; the
   fact of being restored or reinstated.” Id. (citing The Oxford English
   Dictionary (3d ed. 2010)). It also relied on a Wisconsin Court of Appeals
   case involving a fire at a tire recycling plant that left the property
   “contaminated with debris and pools of fire suppression water.” Watertown
   Tire Recyclers, LLC v. Nortman, 788 N.W.2d 384, 2010 WL 2403094, at *1
   (Wis. Ct. App. 2010) (unpublished table decision). In that case, the EPA and
   Wisconsin’s Department of Natural Resources ordered the removal of the
   on-site debris and water to address risks posed to public groundwater in a
   nearby river. Id. After performing this clean-up, the plant sought to recover
   these expenses under its general liability policy, but it was faced with an

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   owned-property exclusion identical to the one at issue here. Id. at *2. That
   court stated, “[g]iving the term ‘restoration’ its ordinary meaning, it is
   apparent that returning contaminated property to something much closer to
   its former non-contaminated state is ‘restoration’,” so it held that
   restoration encompassed the plant’s clean-up activities. Id. at *3.
          Both clean-up efforts here qualify as restoration based on the
   definition listed above and the reasoning in Watertown and Taos Ski Valley.
   By clearing and removing debris from the site, the City was returning the
   property to a former state. By removing and disposing of asbestos-infested
   roofing materials and monitoring the air, the City was returning the property
   to something closer to a non-contaminated state.
                       iii. Engineering Consultation Fees
          The City paid Neel-Schaffer for an engineering consultation after the
   collapse and Laird & Smithers for project management of the partial
   demolitions and stabilization. Since the projects themselves qualify as repair,
   maintenance, or restoration, the consulting expenses for those projects fall
   under the same terms as the projects.
                           iv. Police and Fire Expenses
          The City paid for the around-the-clock presence of its fire and police
   personnel to protect the integrity of the site and keep people out. On the one
   hand, it is reasonable to read this police and fire department presence as
   maintenance. By keeping watch over the site and keeping people out, these
   public safety officials were “upholding or keeping in being” the property in
   its current state. This aligns with one of the definitions of maintenance listed
   above. On the other hand, the definitions of maintenance as “[t]he action of
   keeping something in working order” or “[t]he care and work put into
   property” both imply that actions are taken upon the property to keep it in
   working order. Keeping watch is an action, but it is not performed upon the

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   property and does not involve putting work into the property. Thus, there
   are at least two reasonable meanings for the term maintenance—one where
   these expenses would fall under the exclusion and one where they would not.
   With this ambiguity, we read the owned-property exclusion against Hudson
   and find that it does not exclude these expenses. See J&W Foods Corp., 723
   So.2d at 552.
                            v. Public Works Expenses
          The City paid $9,566.70 to its Public Works Department, but there is
   no record evidence explaining what role these employees performed. On
   remand, the district court should determine their role and decide whether it
   falls within the exclusion consistent with this opinion.
                                vi. Attorney’s Fees
          There is also no record evidence explaining the purpose of the
   $4,063.00 in attorney’s fees. If like the engineering consultations, this
   consultation was directed toward repair, maintenance, or restoration efforts,
   then the fees would fall under the exclusion. But these attorney’s fees would
   not fall under the exclusion if this consultation was regarding issues that
   would not themselves fall under the exclusion. On remand, the district court
   should determine the basis for these fees and decide whether they fall within
   the exclusion consistent with this opinion.
                     vii. Flower Bed and Streetlight Repairs
          Finally, the district court correctly found that the repairs to the flower
   bed and streetlight do not fall under the owned-property exclusion because
   both were on property not owned, rented, or occupied by Talex.
                                IV. Conclusion
          For the reasons discussed above, the district court correctly found
   that the partial demolition, stabilization, clean-up, and engineering fees fall

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   under the owned-property exclusion. It also correctly found that the flower
   bed and streetlight expenses do not fall under the exclusion. We reverse the
   district court’s finding that the fire and police department expenses fall under
   the exclusion. Finally, we remand with respect to the public works
   department expenses and attorney’s fees.
          AFFIRMED in part; REVERSED in part; and REMANDED.

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