Court Opinion

ID: 33318
Source: CourtListenerOpinion
Date Created: 2010-04-25 19:03:36+00
Date Added: 2024-06-11T16:49:51.880011
License: Public Domain

United States Court of Appeals
                                                                                     Fifth Circuit
                                                                                   F I L E D
                     IN THE UNITED STATES COURT OF APPEALS
                                                                                  November 17, 2003
                                FOR THE FIFTH CIRCUIT                           Charles R. Fulbruge III
                                                                                        Clerk

                                        No. 03-30233

       ROY ANDERSON CORP.,

                                                          Plaintiff-Appellee,

                                            versus

       WESTPORT INSURANCE CORP.,

                                                          Defendant-Appellant.

                   Appeal from the United States District Court for
                         the Western District of Louisiana
                             (USDC No. 5:02-CV-719)
           _______________________________________________________

Before REAVLEY, HIGGINBOTHAM and BENAVIDES, Circuit Judges.

PER CURIAM:*

       We reverse and render judgment for Westport Insurance Corp. (Westport) for the

following reasons:

       1. The parties have stipulated to the relevant facts, and both parties rely on

Louisiana law, as did the district court. If the district court and the parties assume that

       *
        Pursuant to 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not be published and is not precedent except under the limited circumstances set forth in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.
the law of the forum state applies in a diversity case, and the parties do not argue

otherwise on appeal, we likewise apply the law of the forum state. See Clemtex, Inc. v.

Southeastern Fidelity Ins. Co., 807 F.2d 1271, 1274 (5th Cir. 1987); N.K. Parrish, Inc. v.

Southwest Beef Indus. Corp., 638 F.2d 1366, 1370 n.3 (5th Cir. 1981).

       2. Louisiana law governing this insurance dispute is well established. General

rules of contract interpretation apply to insurance policies. When the language of an

insurance policy is clear, it must be enforced as written. The ordinary meaning of the text

governs in the absence of an absurd result, and each provision is read in light of the

others. Ambiguities are construed against the insurer and in favor of coverage. See

Peterson v. Schimek, 729 So. 2d 1024, 1028-29 (La. 1999); Reynolds v. Select Props.,

Ltd., 634 So. 2d 1180, 1183 (La. 1994); Louisiana Ins. Guar. Ass’n v. Interstate Fire &

Cas. Co., 630 So. 2d 759, 763-64 (La. 1994). Therefore, if an exclusionary clause is

susceptible to more than one reasonable interpretation, we adopt the interpretation that

provides coverage. Talley v. Blue Cross Blue Shield of La., 760 So. 2d 1193, 1195 (La.

App. 2000).

       3. The rework claim was covered by a primary policy, namely the Zurich policy,

which had a contractor rework endorsement. Because of the underlying primary

coverage, the rework claim made to Westport was a claim for excess liability coverage

(as opposed to umbrella liability coverage) under the Westport excess and umbrella

liability policy. Westport did not issue a strict “following form” excess policy. Instead,

the policy provides, under section I(A) of the “Insuring Agreements” part of the policy,

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excess insurance applicable “to damages covered by the primary insurance . . . except as

it relates to . . . any term, condition, exclusion or limitation included in this policy.”

(Emphasis added). The policy therefore imposed a requirement that the claim must not

only be covered by the primary policy, but it must not fall within any express exclusion

or limitation on excess liability coverage provided in the Westport policy.

       4. Each party has argued on appeal, in briefing or at oral argument, that the

rework costs incurred by appellee Roy Anderson Corp. due to defective subcontractor

performance are not “property damage” under the Westport policy. Regardless, the

rework claim either is or is not a property damage claim under that policy, and we can

find no excess coverage under either characterization of the claim.

       5. If the claim is not a property damage claim, the Westport policy does not cover

it, because section I(A) of the Insuring Agreements part expressly limits coverage,

regardless of the underlying policy, to “those sums in excess of primary insurance, that

the insured becomes obligated to pay as damages for liability imposed on the insured . . .

provided . . . [t]hey are caused by an occurrence . . . .” An “occurrence” is defined in

section J of the Definitions part as “[a]n accident . . . which results during the policy

period in personal injury or property damage . . . .” (Emphasis added). If the rework

claim is not a property damage claim, it does not fall under the definition of an

occurrence and is not covered by the policy.

       6. If, on the other hand, the rework claim can be characterized as a property

damage claim, the contractor’s limitation endorsement in the Westport policy expressly

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excludes coverage for “[p]roperty damage to that portion of any property being installed,

erected, or worked upon by the insured, his agents or subcontractors.” Such a work

product exclusionary clause eliminates coverage for property damage caused by defective

work performed by the insured or, as in this case, an agent or subcontractor of the

insured. See Todd Shipyards Corp. v. Turbine Serv., Inc., 674 F.2d 401, 420 (5th Cir.

1982); Swarts v. Woodlawn, Inc., 610 So. 2d 888, 890 (La. Ct. App. 1992).

       7. Thus, even if the policy is ambiguous as to whether the rework claim is a

property damage claim, we can find no construction of the policy that would provide

coverage for the rework claim in issue. We accordingly reverse the judgment of the

district court and hereby render a take nothing judgment in favor of Westport.

       REVERSED and RENDERED.

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