Court Opinion

ID: 9498501
Source: CourtListenerOpinion
Date Created: 2023-08-05 17:19:17.464771+00
Date Added: 2024-06-11T17:58:52.263829
License: Public Domain

STRAUB, Circuit Judge,
dissenting.
I respectfully dissent. In my view, the plain language of the policy indicates that rain is not an independent “Covered Cause of Loss” and that damage caused by rain entering through a wind-created opening is properly understood as wind damage subject to the wind deductible. This reading is confirmed by the commonly understood scope and nature of “windstorm” protection in the Texas insurance industry, and, in my view, the majority’s finding of ambiguity (and application of the rule of contra proferentum) is contrary to how a reasonably knowledgeable observer would view the policy.
The majority, in the first instance, focuses on the language of wind deductible, but the threshold issue is whether rain constitutes an independent “Covered Cause of Loss,” as defined in the policy. Paragraph A.3 of the policy provides: “Covered •Causes of Loss means risk of direct physical loss to Covered Property, except those causes of loss listed in the Exclusions.” Paragraph B lists the “Exclusions,” and ¶ B.2 states that the insurer “will not pay for loss caused by or resulting from any of the following,” including:
n. Rain ..., whether driven by wind or not, to Covered Property, unless located within a fully enclosed structure and then only for such loss that is caused by or results from rain ... entering through an opening caused by á Covered Cause of Loss not otherwise excluded. Because rain is listed in the Exclusions
and can never, by itself, create a covered loss, the natural reading of ¶ A and ¶ B.2.n is that rain is not a Covered Cause of Loss. The “unless ... and then only” clause in ¶ B.2.n does not convert “rain ... entering through an opening caused by a Covered Cause of Loss ” into a distinctly covered event. It simply limits the force of the rain exclusion. That is, the clause gives the insured protection from a covered event (in this case, wind) and all the damages flowing from it, despite the fact that some of the damage has also been caused by an excluded event (rain). The “unless ... and then only” clause thus distinguishes the rain exclusion from, for example, the exclusions in ¶ B.l, which apply to “loss caused directly or indirectly by any of the following ... regardless of any other cause of event that contributes concurrently or in any sequence to the loss.” In sum, my wholly logical reading is that rain is never a Covered Cause of Loss as defined under the policy, and even where rain in fact causes damage, that damage is attributed to the Covered Cause of Loss that caused the opening and allowed in the rain.
The majority criticizes my interpretation, in part, because this reading would *57subject rain damage to three different deductibles depending on whether the rain entered through an opening caused by wind, fire, or earth movement. But under my interpretation, there is no such thing as “rain damage” as a separately covered loss. In a case such as this one, there is only one Covered Cause of Loss, which results both in damage to the outside of the structure (the opening directly caused by the covered event, e.g., the wind) and damage to the inside (water allowed in by the wind-blown opening). All things being equal, because there is only one relevant cause of loss, there is only one applicable deductible for any given occurrence.
In contrast, under the majority’s view, “rain damage” is inherently subject to two potential deductibles: one deductible for the rain (the general deductible) and one for the Covered Cause of Loss that caused the opening (the wind deductible). The majority resolves this problem by narrowing the scope of the wind deductible, but the point is that the problem does not need to exist at all. The problem of competing deductibles only arises by viewing “rain damage” as a distinct covered loss despite the fact that rain alone is not a covered event. Overall, it only complicates matters, and is hardly natural, to view rain as an independent Covered Cause of Loss when rain can never independently cause a covered loss.1
Moreover, the practice in Texas’s insurance industry strongly supports the insurer’s position. In the insurance industry, “windstorm” coverage commonly protects against hurricanes (as well as tornados), with a proviso excluding “loss caused by water whether driven by wind or not, unless the building first sustains actual damage by direct force of wind, and water enters the building through openings made by direct action of wind.” 11 Couch on Insurance § 153:19; see also U.S. Fid. & Guar. Co. v. Morgan, 399 S.W.2d 537, 538 (Tex.1966) (involving example of such a wind policy); 46 Tex. Jur.3d: Insurance Contracts and Coverage § 842 (“Frequently, windstorm insurance policies provide that the insurer is not liable for damage to the interior of an insured building from rain or water unless the rain or water enters through openings in the roof or walls made by the direct action of wind or hail.”). See generally 93 A.L.R.2d 145, §§ 2,17 (discussing windstorm policies and issues arising out of standard provisions excluding rain damage unless caused by rain entering through a wind-created opening). Indicative of the industry practice in Texas (though not directly affecting this case), the Texas Legislature has created the Texas Windstorm Insurance Association to provide windstorm, hail, and fire insurance for individuals in designated high-risk areas of the state. See Tex. Ins.Code Ann. art. 21.49, § 1 (2000).2 Insurance issued by that association “must include coverage for wind-driven rain damage, regardless of whether an opening is made by the wind.” Id. § 8B (currently codified as amended at Tex. Ins.Code Ann. § 2210.208).
*58In light of this context, I would find that a reasonable observer knowledgeable of insurance practices in Texas would view damage caused by rain entering through a wind-blown opening as windstorm damage and would view a “wind deductible” as applying to the windstorm-protection aspects of the policy. While Texas law supports use of the contra proferentum rule for ambiguous policies, “[i]nsuranee policies are controlled by rules of interpretation and construction which are applicable to contracts generally,” such that “the primary concern ... is to ascertain the true intent of the parties as expressed in the instrument.” Nat’l Union Fire Ins. Co. v. CBI Indus., Inc., 907 S.W.2d 517, 520 (Tex.1995). A contract is not ambiguous if “it can be given a definite or certain legal meaning,” and in determining whether the contract is ambiguous, a court must look “at the contract as a whole in light of the circumstances present when the contract was entered.” Id. Courts should thus consider the commercial context of the transaction, including the customs and usage in effect in the industry. See Southwestern Bell Tel. Co. v. Pub. Utility Comm’n, 208 F.3d 475, 482 (5th Cir.2000); Sun Oil (Del.) v. Madeley, 626 S.W.2d 726, 731 & n. 5 (Tex.1981); GTE Southwest, Inc. v. Pub. Utility Comm’n, 102 S.W.3d 282, 295 (Tex.App.2003); Intratex Gas Co. v. Puckett, 886 S.W.2d 274, 278 (Tex.App.1994). In light of the scope and nature of windstorm insurance in Texas, I would find that the policy in this case has a definite and certain legal meaning and that the application of the wind deductible to loss caused by rain entering through a wind-created opening is clear and consistent with the parties’ intent as expressed in their written agreement.

. I agree with the majority that damage directly caused by rain may often be distinguished from damage directly caused by wind, fire, and earthquake. Under the policy, however, rain will never cause covered damage unless there is first wind, fire, or an earthquake to allow in the rain. Rain damage can thus always be attributed to the Covered Cause of Loss that caused the opening, and there is no need for the policy to recognize rain as a uniquely covered event or for the insured to bear the burden of distinguishing damages in each case.

. The Texas Legislature recently reorganized and recodified significant portions of the insurance code such that the cited provision is now codified at Tex. Ins.Code Ann. § 2210.001. See 2005 Tex. Sess. Law Serv. ch. 727, § 2.