Court Opinion

ID: 6117403
Source: CourtListenerOpinion
Date Created: 2022-02-03 19:00:43.971711+00
Date Added: 2024-06-11T08:22:13.573803
License: Public Domain

Case: 20-20389     Document: 00516190414         Page: 1    Date Filed: 02/03/2022

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

                                                                              FILED
                                                                       February 3, 2022
                                  No. 20-20389
                                                                         Lyle W. Cayce
                                                                              Clerk
   Landmark American Insurance Company,

                                                           Plaintiff—Appellant,

                                       versus

   SCD Memorial Place II, L.L.C.,

                                                           Defendant—Appellee.

                  Appeal from the United States District Court
                      for the Southern District of Texas
                           USDC No. 4:19-CV-00838

   Before Elrod, Willett, and Engelhardt, Circuit Judges.
   Jennifer Walker Elrod, Circuit Judge:
          This case is about whether an insurance policy covered flood-related
   damage sustained by a building during Hurricane Harvey. The district court
   determined that the policy provided coverage and granted summary
   judgment in favor of the insured. Because we conclude that the text of the
   insurance policy does not support this result, we REVERSE and RENDER
   judgment in favor of the insurer.
Case: 20-20389      Document: 00516190414           Page: 2     Date Filed: 02/03/2022

                                     No. 20-20389

                                          I.
          In 2016, Landmark American Insurance Company (“Landmark”)
   issued an insurance policy to SCD Memorial Place II, L.L.C. (“SCD”) that
   covered several SCD properties and was effective from August 31, 2016 to
   September 7, 2017.
          The Landmark policy was a “deductible buy back policy,” a type of
   insurance policy that an insured may choose to purchase when the insured’s
   primary insurance policy has a high deductible. If the insured makes a claim
   on the primary insurance policy, the deductible buy back policy may cover all
   or a portion of the deductible required by the primary policy, reducing the
   insured’s out-of-pocket costs.
          In this case, SCD’s primary insurance policy was a policy issued by
   the Lexington Insurance Company. The Lexington policy was a “all risks”
   policy that covered “all risks of direct physical loss or damage including
   flood, earth movement, and equipment breakdown.” The Lexington policy
   had a high deductible and thus, the insured purchased the separate Landmark
   policy to help cover the cost of that deductible.
          The “Insuring Clause” of the Landmark policy outlines the type of
   damage for which it would cover the deductible of the primary insurance
   policy. Specifically, Landmark agreed to indemnify the insured for damage
   “caused by any of such perils as are set forth in item 3 of the schedule, and
   which are also covered by . . . the ‘Primary Insurer(s).’”
          Item 3, in turn, states:     “Perils Covered:       Windstorm or Hail
   associated with a Named Storm.”             Beneath this, it states that it is
   “[e]xcluding Terrorism.” Finally, it specifies that “Named Storm” is
   “[f]ollowing Named Storm definition in Lexington Insurance Company’s
   policy.” The “Named Storm” definition from the Lexington policy that is
   expressly incorporated into Item 3 is “a storm that has been declared by the

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                                         No. 20-20389

   National Weather Service to be a Hurricane, Typhoon, Tropical Cyclone,
   Tropical Storm or Tropical Depression.”
           In August 2017, Hurricane Harvey made landfall. The parties agree
   that Hurricane Harvey was a “Named Storm,” as defined under the
   Lexington and Landmark policies and also that it caused tremendous damage
   to one of SCD’s insured properties.
           The damage occurred when Buffalo Bayou overflowed its banks and
   water flowed onto SCD’s property.1 An independent adjuster retained by
   Lexington confirmed to the in-house claims handler at Landmark that there
   was no reported wind damage to the property. Likewise, there is no evidence
   that the property suffered damage from hail.
           SCD submitted a claim under the Lexington policy, which paid out
   millions of dollars for physical loss or damage in excess of the “Windstorm
   deductible” in that policy. SCD also submitted a claim to Landmark to cover
   its deductible under the Lexington policy.
           Shortly after receiving a letter from SCD stating a claim for the
   deductible, Landmark filed this lawsuit against SCD, seeking a declaration
   that the policy it issued to SCD did not apply to the loss sustained.
           The parties filed cross-motions for summary judgment. The motions
   were referred to a magistrate judge, whose memorandum and
   recommendation recommended granting SCD’s motion for summary

           1
             SCD contends that the water damage to the property was due not to natural
   overflow but rather to the decision of the Army Corps of Engineers to purposefully release
   water from the Addicks and Barker reservoirs into the bayou to prevent those reservoirs
   from overflowing. But SCD does not suggest that the true cause was wind- or hail-related;
   as such, whether the water damage is due to a “flood” or a “controlled release” is not
   material to the issues on appeal.

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Case: 20-20389      Document: 00516190414           Page: 4    Date Filed: 02/03/2022

                                     No. 20-20389

   judgment and denying Landmark’s.            The district court adopted the
   memorandum and recommendation in full. Landmark timely appealed.

                                         II.
          We review a grant of summary judgment “de novo, applying the same
   standard on appeal that is applied by the district court.” See Tiblier v. Dlabal,
   743 F.3d 1004, 1007 (5th Cir. 2014) (quoting Coliseum Square Ass’n, Inc. v.
   Jackson, 465 F.3d 215, 244 (5th Cir. 2006)). Under Rule 56, “[t]he court
   shall grant summary judgment if the movant shows that there is no genuine
   dispute as to any material fact and the movant is entitled to judgment as a
   matter of law.” Fed. R. Civ. P. 56(a).
          “Because Texas law governs this claim, we employ the principles of
   Texas contract construction” in interpreting the policy here. Am. Int’l
   Specialty Lines Ins. Co. v. Rentech Steel LLC, 620 F.3d 558, 562 (5th Cir.
   2010). Under Texas law, “insurance policies are construed according to
   common principles governing the construction of contracts, and the
   interpretation of an insurance policy is a question of law for a court to
   determine.” Id. We interpret insurance policies to “effectuate the intent of
   the parties at the time the contracts were formed.” Amerisure Ins. Co. v.
   Navigators Ins. Co., 611 F.3d 299, 309 (5th Cir. 2010) (quoting Mid-Continent
   Cas. Co. v. JHP Dev., Inc., 557 F.3d 207, 212 (5th Cir. 2009)).
          If an insurance policy “is worded so that it can be given only one
   reasonable construction, it will be enforced as written.” John M. O’Quinn,
   P.C. v. Lexington Ins. Co., 906 F.3d 363, 367 (5th Cir. 2018) (quoting Nat’l
   Union Fire Ins. Co. of Pittsburgh v. Hudson Energy Co., 811 S.W.2d 552, 555
   (Tex. 1991)). When an insurance contract is ambiguous—meaning that it is
   susceptible to more than one reasonable interpretation—we adopt the
   interpretation that affords coverage. See Amerisure Ins. Co., 611 F.3d at 309.
   But a policy is not ambiguous “merely because different parties—or

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                                        No. 20-20389

   judges—offer conflicting interpretations.” Pan Am Equities, Inc. v. Lexington
   Ins. Co., 959 F.3d 671, 674 (5th Cir. 2020). If the policy’s wording “can be
   given a definite or certain legal meaning, [then] it is not ambiguous.” Tesoro
   Ref. & Mktg. Co., L.L.C. v. Nat’l Union Fire Ins. Co. of Pittsburgh, 833 F.3d
   470, 474 (5th Cir. 2016) (alterations in original) (quoting American Mfrs. Mut.
   Ins. Co. v. Schaefer, 124 S.W.3d 154, 157 (Tex. 2003)).                 Furthermore,
   ambiguity “cannot be fashioned via parol evidence.” Pan Am Equities, 959
   F.3d at 674.

                                            III.
          Both parties agree that the Landmark policy is unambiguous. Namely,
   they contend that the phrase “Perils Covered: Windstorm or Hail associated
   with a Named Storm” has only one reasonable interpretation. Naturally,
   both parties contend that the only reasonable interpretation cuts their way.
          Landmark argues that the policy covers the specified perils of
   “Windstorm or Hail” that are “associated with a Named Storm [here,
   Hurricane Harvey]” but not all perils associated with a Named Storm. In
   other words, it is a “named perils” rather than “all risks” policy—it covers
   only the perils specified in the policy and does not need to use additional
   exclusionary language.
          SCD cites Pan Am Equities, Inc. v. Lexington Insurance Company for the
   proposition that, under Fifth Circuit law, Hurricane Harvey was a
   “Windstorm” and therefore the policy covers all perils associated it. 959
   F.3d at 677. Under SCD’s interpretation, Landmark is on the hook to cover
   all damage from “[f]lood, wind, wind gusts, storm surges, tornados,
   cyclones, hail or rain”2 that are associated with Named Storms; the only time

           2
            SCD imports this understanding from its primary insurance policy (the Lexington
   policy’s) “Windstorm” deductible. Because the Windstorm deductible from the

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   the policy would not apply to a hurricane would be if it did not rise to the level
   of becoming a Named Storm.
           We agree with Landmark because its interpretation aligns with the
   plain meaning of the text of the policy.3 Landmark’s interpretation, unlike
   SCD’s, makes sense of the framing phrase “Perils Covered.” This framing
   sets up “Windstorm” and “Hail” as specific perils that may be associated
   with a number of weather events rather than as weather events that may
   encompass any number of perils. If SCD’s interpretation of the policy were
   correct, then the Landmark policy simply could have stated that all damage
   from a Named Storm is covered (regardless of the peril that caused the
   damage). But the Landmark policy does not state this. Instead, the policy
   frames its coverage as applying to specific “[c]overed perils.”
           Furthermore, the listing of “Windstorm” and “Hail” separately
   supports Landmark’s interpretation that the policy covers specific perils but
   not others. If “Windstorm” includes all that SCD says it does (again,
   “[f]lood, wind, wind gusts, storm surges, tornados, cyclones, hail or rain”),
   there would be no need to list “Hail” separately. Texas law requires that we
   “give effect to all contract provisions so that none will be rendered
   meaningless.” Kelley-Coppedge, Inc. v. Highlands Ins. Co., 980 S.W.2d 462,
   464 (Tex. 1998).           Landmark’s interpretation is the only one that
   accomplishes this.

   Lexington policy includes perils such as “[f]lood, wind, wind gusts, storm surges, tornados,
   cyclones, hail or rain,” SCD argues that the Landmark policy “expressly covers the perils
   of flood and rain associated with Windstorms.”
           3
              We do not consider the affidavit from one of Landmark’s underwriters attesting
   that there was no intent to cover flood damage. The policy is unambiguous, and an extrinsic
   affidavit need not be considered.

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                                         No. 20-20389

           We do not accept SCD’s argument that Landmark needed to
   expressly exclude flood-related damage from its policy in order not to cover
   it. By its text, the policy is a “named perils” policy. The Insuring Clause
   covers only those perils “set forth in item 3,” and Item 3 states “Perils
   Covered: Windstorm or Hail associated with a Named Storm.” This policy
   defines carefully which perils it covers; all others can be understood to be
   excluded. As such, it insures “against all the risks named in the perils clause
   (and, by implication, risks not named [are] not covered).” Ingersoll-Rand Fin.
   Corp. v. Emp’rs Ins. Of Wausau, 771 F.2d 910, 912 (5th Cir. 1985).4
           Furthermore, contrary to SCD’s contention, Pan Am Equities does not
   stand for the proposition that, as a matter of law, the peril of “Windstorm”
   includes the peril of flood. Instead, Pan Am Equities further supports
   Landmark’s interpretation.
           Pan Am Equities also dealt with an insurance dispute following
   Hurricane Harvey. In that case, the dispute concerned which deductible the
   insured needed to pay. 959 F.3d at 672. There were two competing
   deductibles: a generic “flood” deductible favored by the insured and a
   steeper “Windstorm” deductible favored by the insurer. Id. A clause in the
   policy specified that when multiple deductibles applied, the largest one
   would trump. Id.
           The “Windstorm” deductible in the Pan Am Equities policy applied
   to all “loss due to Windstorm.” Id. at 675. The Windstorm deductible
   included a sub-provision that expressly included “the loss or damage arising

           4
              The other exclusions in the Landmark policy that SCD points to (i.e., those
   relating to Terrorism, electronic data, and fungus) do not transform the Landmark policy
   into an “all risks” policy subject to only those exclusions. Rather, those exclusions refine
   what types of damage Landmark will cover when that damage is caused by covered perils.
   They do not implicitly expand the number of covered perils.

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                                          No. 20-20389

   out of a Named Storm.” Id. at 673. The so-called “Named Storm provision”
   in that policy was thus very different from the term “Named Storm” as it is
   used in this case. In Pan Am Equities, the Named Storm provision enlarged
   what qualified as a loss under the “Windstorm deductible,” id. at 675,
   whereas here the term “Named Storm” is the overarching occurrence, and
   the policy expressly describes which perils associated with that occurrence
   are covered.
           Furthermore, Pan Am Equities differentiated between the perils of
   windstorm and flood, and included flood damage within the “Windstorm
   deductible” only because the “[p]olicy’s ‘Named Storm’ provision sweeps
   in a slew of associated perils explicitly untethered from wind, specifically
   ‘Flood.’” Id. at 676 (emphasis added). In other words, only because of
   express language in the policy at issue in Pan Am Equities was “Windstorm”
   enlarged to include flood-related damage.5
           Although “Windstorm” in another policy could include flood and hail
   damage, in the specific context of the instant policy, it is a specific peril
   “associated with a Named Storm.” See Fireman’s Ins. Co. of Newark v.
   Weatherman, 193 S.W.2d 247, 248 (Tex. Civ. App.—Eastland 1946, writ

           5
              SCD also argues that the “Windstorm deductible” in the Pan Am Equities
   decision is relevant to the Landmark policy. It is true that the policy in Pan Am Equities was
   also issued by Lexington Insurance Company, the primary insurer in this case. But the
   Landmark policy is not the Lexington policy, and the Landmark policy specifies the extent
   to which it incorporates any definitions from the Lexington policy. It does not incorporate
   the “Windstorm” deductible. SCD points to the “Maintenance of Primary Insurance”
   section as incorporating the Windstorm deductible, but that section in no way expands the
   perils insured by the Landmark policy. That section, in relevant part, states: “In respect of
   the perils hereby insured against, this Policy is subject to the same warranties, terms, and
   conditions . . . as are contained in [the Lexington policy].” (emphasis added).

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   ref’d n.r.e.) (interpreting “windstorm” to refer to damage caused by “a
   wind of unusual violence” that “must assume aspects of a storm” (internal
   quotation marks omitted)). “Windstorm” did not expand the Landmark
   policy to include all the perils wrought by Hurricane Harvey.
         Under its plain language, the Landmark policy does not apply to the
   type of damage that the SCD property sustained in connection with
   Hurricane Harvey. Therefore, we REVERSE the district court’s grant of
   summary judgment in favor of SCD and RENDER judgment for Landmark.

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