Court Opinion

ID: 9917339
Source: CourtListenerOpinion
Date Created: 2024-01-12 01:01:03.231923+00
Date Added: 2024-06-11T08:02:24.516791
License: Public Domain

Case: 22-11213         Document: 00517030621             Page: 1      Date Filed: 01/11/2024

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

                                         No. 22-11213
                                                                                       FILED
                                                                                January 11, 2024
                                       ____________
                                                                                  Lyle W. Cayce
   The Pointe Dallas, L.L.C.,                                                          Clerk

                                                                     Plaintiff—Appellant,

                                             versus

   Underwriters at Lloyd’s London; Ironshore Europe
   DAC,

                                               Defendants—Appellees.
                      ______________________________

                      Appeal from the United States District Court
                          for the Northern District of Texas
                                USDC No. 3:21-CV-855
                      ______________________________

   Before Wiener, Willett, and Douglas, Circuit Judges.
   Per Curiam: *
          Plaintiff–Appellant The Pointe Dallas, L.L.C. (“The Pointe”) brings
   contract, tort, and statutory claims against Defendant–Appellees
   Underwriters        at    Lloyd’s     London       and    Ironshore     Europe        DAC
   (“Underwriters”), in conjunction with Underwriters’ denial of insurance
   benefits after The Pointe suffered a fire. The district court granted summary

          _____________________
          *
              This opinion is not designated for publication. See 5th Cir. R. 47.5.
Case: 22-11213     Document: 00517030621            Page: 2   Date Filed: 01/11/2024

                                     No. 22-11213

   judgment in favor of Underwriters on all claims. We reverse in part and
   remand for further proceedings.
                                         --
          The Pointe owns and operates a seventy-one-unit apartment complex
   in Dallas, Texas. Each of the units is equipped with at least three ceiling-
   mounted smoke detectors. When a detector senses smoke, that particular
   device emits an alarm, but no other alarms are triggered. The detectors do
   not send a signal to any public or private fire monitoring system upon alarm.
          In September 2018, The Pointe worked with an insurance broker to
   submit a Commercial Insurance Application for coverage of its apartment
   building to Underwriters Underwriters negotiated with the broker and issued
   Policy No. B1180D170895-084, with an effective date of October 16, 2018.
   An underwriting inspection occurred in early 2019. The Pointe was notified
   that, in order to maintain coverage, it needed to provide proof that its
   electrical panels had been inspected and that fire extinguishers had been
   installed. The Pointe complied with these requests. After the initial policy
   expired, Underwriters issued another policy to The Pointe, No.
   B1180D190004-043 (“the Policy”), effective October 16, 2019.
          Both policies included a Protective Safeguards Endorsement
   (“PSE”), which looked like this, in relevant part:

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   Also attached to both policies was a Commercial Property Insurance
   Schedule (“the CPI Schedule”), which included the following:

          On April 16, 2020, The Pointe submitted a Property Loss Notice to
   Underwriters, indicating that the building had suffered a fire which had
   damaged twelve units. Underwriters investigated the loss and found that The
   Pointe had individual smoke detectors in each apartment, but no automatic
   fire alarm connected to a central station. It concluded that The Pointe had
   failed to satisfy the PSE’s requirements, and therefore refused to cover the
   losses. The Pointe filed suit in Texas state court, bringing claims for breach
   of contract, equitable estoppel, fraud, and violations of the Texas Prompt
   Payment of Claims Act and Chapter 541 of the Texas Insurance Code.

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   Underwriters removed the case pursuant to 28 U.S.C. § 1332(a), and then
   moved for summary judgment, contending that The Pointe’s failure to
   employ the appropriate protective safeguards precluded its recovery on all
   claims as a matter of law. The district court agreed and granted
   Underwriters’ motion. The Pointe filed a timely notice of appeal.
                                          --
          On appeal, a district court’s grant of summary judgment is reviewed
   de novo. United States ex rel. Schweizer v. Canon, Inc., 9 F.4th 269, 273 (5th
   Cir. 2021). Summary judgment is proper where the record shows that “there
   is no genuine dispute as to any material fact and that the movant is entitled
   to judgment as a matter of law.” Fed. R. Civ. P. 56(a). All facts and reasonable
   inferences are construed in favor of the nonmovant. Trammell v. Fruge, 868
   F.3d 332, 338 (5th Cir. 2017) (quoting Hanks v. Rogers, 853 F.3d 738, 743 (5th
   Cir. 2017)). A genuine dispute of material fact exists where “the evidence is
   such that a reasonable jury could return a verdict for the nonmoving party.”
   Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
                                         --
          The district court concluded that Underwriters were entitled to
   judgment as a matter of law because The Pointe did not employ the protective
   safeguards required by the Policy. The Pointe asserts that this was error,
   because (1) the PSE table is empty and thus the Policy does not require any
   safeguards, or, in the alternative, (2) the language of the Policy’s
   requirements is ambiguous and therefore it must be construed in favor of
   coverage.
          Texas courts apply the general rules of contract construction to
   insurance policies. Int’l Ins. Co. v. RSR Corp., 426 F.3d 281, 291 (5th Cir.
   2005) (citing Kelley–Coppedge, Inc. v. Highlands Ins. Co., 980 S.W.2d 462, 464

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   (Tex. 1998)). 1 In interpreting an insurance policy, our “primary concern” is
   to “ascertain the parties’ intent as expressed in the language of the policy”
   and to “give effect to all contractual provisions so that none will be rendered
   meaningless.” Id. A policy is ambiguous if it is “reasonably susceptible [to]
   more than one meaning.” Id. Ambiguous policies should be construed in
   favor of the insured. Id. “The policy of strict construction against the insurer
   is especially strong when the court is dealing with exceptions and words of
   limitation.” Am. Nat’l Gen. Ins. Co. v. Ryan, 274 F.3d 319, 323 (5th Cir. 2001)
   (quoting Blaylock v. Am. Guar. Bank Liab. Ins. Co., 632 S.W.2d 719, 721 (Tex.
   1982)).
           The PSE states that, “[a]s a condition of this insurance, you are
   required to maintain the protective devices or services listed in the Schedule
   above.” But, as shown above, there is nothing filled out in the indicated table.
   The Pointe contends that the Policy thus does not require any protective
   safeguards, meaning that Underwriters erred in denying coverage on that
   basis. Alternatively, it asserts that its interpretation of the empty table is at
   least reasonable, rendering the Policy ambiguous and unenforceable.
           An insurance policy, like a contract, should be read as a whole. Am.
   Mfrs. Mut. Ins. Co. v. Schaefer, 124 S.W.3d 154, 159 (Tex. 2003). A review of
   The Pointe’s Policy as a whole reveals that at least some protective safeguards
   were required. At the bottom of the table, the PSE states, “[i]nformation
   required to complete this Schedule, if not shown above, will be shown in the
   Declarations or the Commercial Property Insurance Schedule.” Then, the
   CPI Schedule requires the property to have P–2 and P–9 as protective
   safeguards. Given that the PSE directs the reader to the CPI Schedule, it is

           _____________________
           1
             In this diversity case, we apply the law of the forum state. Liberty Mut. Fire Ins.
   Co. v. Copart of Conn., Inc., 75 F.4th 522, 528 (5th Cir. 2023).

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   unreasonable for an insured—charged with knowing and understanding the
   terms of its policy—to fail to flip to that second document to see if anything
   is required. See Aspen Specialty Ins. Co. v. Muniz Eng’g, Inc., 514 F. Supp. 2d
   972, 983 (N.D. Tex. 2007) (citing Heritage Manor of Blaylock Props., Inc. v.
   Petersson, 677 S.W.2d 689, 691 (Tex. App.–Dallas 1984, pet. denied)).
   Further, the language at the bottom of the table (“if not shown above”)
   anticipates the table not being completed. And if protective safeguards were
   not required simply because the table in the PSE was not filled out, then the
   CPI Schedule would be made meaningless. The Pointe’s interpretation thus
   goes against the fundamental rule of contract construction, which mandates
   that no policy language be rendered superfluous. See Int’l Ins. Co., 426 F.3d
   at 291. Looking at the Policy as a whole “in light of the circumstances present
   when the contract was entered,” the empty table in the PSE does not
   establish that no safeguards are required. See id. Additionally, because this
   construction of the PSE is not reasonable, the Policy is not ambiguous on this
   basis. See In re Deepwater Horizon, 470 S.W.3d 452, 468 (Tex. 2015) (“The
   ambiguity rule comes into play only if there is more than one reasonable
   interpretation of an insurance policy.”).
          Even if the Policy contemplates some required safeguards, The Pointe
   asserts that it is unclear what exactly those safeguards are. It interprets the
   Policy to require a “Fire Alarm: Local,” meaning that the alarm needs to
   sound only at the place of detection, which did occur on the day of the fire.
   In contrast, Underwriters urge us to view the Policy as requiring an alarm
   “connected to a central station,” or an offsite fire monitoring facility, which
   was not present at The Pointe. Simply advancing “conflicting
   interpretations” of a policy does not establish ambiguity. TIG Specialty Ins.
   Co. v. Pinkmonkey.com Inc., 375 F.3d 365, 370 (5th Cir. 2004) (citing Forbau
   v. Aetna Life Ins. Co., 876 S.W.2d 132, 134 (Tex. 1994)). Instead, to defeat

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   summary judgment, The Pointe’s interpretation of the Policy must be shown
   to be reasonable. See In re Deepwater Horizon, 470 S.W.3d at 468.
           As to The Pointe’s construction, it was reasonable for The Pointe to
   consult the CPI Schedule to determine its responsibilities under the Policy.
   Underwriters themselves agree, earlier contending that it would have been
   unreasonable for The Pointe not to look to the CPI Schedule to find the
   Policy’s requirements, given the empty PSE table. The CPI Schedule
   requires The Pointe to maintain “P2 – Fire Alarm: Local.” We give contract
   terms their plain, ordinary meaning. Puckett v. U.S. Fire Ins. Co., 678 S.W.2d
   936, 938 (Tex. 1991). “Local” means “having a definite spatial form or
   location” or “of, relating to, or characteristic of a particular place: not
   general     or   widespread.”        Local,       Merriam–Webster              Online
   Dictionary, http://www.merriam-webster.com/dictionary/local (last
   visited Nov. 15, 2023). We therefore interpret the plain language of “Fire
   Alarm: Local” as requiring an alarm that sounded in the particular place that
   it alerted. This is a reasonable construction of the CPI Schedule’s language
   and the Policy’s overall requirements. 2
           Underwriters instead focus on the PSE’s definition of P–2 as requiring
   a connection to a central station. It asserts that the CPI Schedule’s reference
   to “P2 – Fire Alarm: Local” is shorthand, and that it would have been
   unreasonable for the insured not to refer back to the full definition in the PSE,
   which requires a connection to a central station. As the district court found,

           _____________________
           2
             The Pointe also contends that, even if the definition of P–2 in the PSE controls
   over that in the CPI Schedule, it is impermissibly ambiguous because it does not define the
   terms “central station” and “private fire alarm station.” Because we hold that The
   Pointe’s interpretation of the Policy to require only a “Fire Alarm: Local” was reasonable,
   we do not reach this argument. We note, however, that undefined terms do not in
   themselves render policies ambiguous. Nat’l Union Fire Ins. Co. of Pittsburgh, Pa. v.
   McMurray, 342 F. App’x 956, 959 (5th Cir. 2009).

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   The Pointe had “a duty to read and comply with the policy terms,” and the
   language of “Fire Alarm: Local” did not “eliminat[e] that obligation.” But
   the PSE’s definition of P–2 seems to conflict with the definition in the CPI
   Schedule: “P-2 Automatic Fire Alarm” differs from “P2 - Fire Alarm:
   Local.” For example, a local alarm could sound at the premises but not at a
   central or private station. We find that fire alarms may sound and connect to
   a variety of locations at one time, but absent further information in the Policy,
   these fire alarms are mutually exclusive. Although Underwriters claim that
   the CPI Schedule was complementary to the PSE, the PSE is not merely a
   longer version, but rather a conflicting requirement. When provisions in a
   contract are internally contradictory, we “attempt to harmonize the two
   provisions and assume the parties intended every provision to have some
   effect.” Nexstar Broad., Inc. v. Fidelity Commc’ns Co., 376 S.W.3d 377, 381–
   82 (Tex. App.–Dallas 2012, no pet.) (citation omitted). But there is no way
   to harmonize two terms that embody conflicting requirements. Although
   Underwriters contend that The Pointe’s interpretation “fails to satisfy the
   basic rules of contract interpretation” by reading the PSE language out of the
   Policy, their own construction would do the same to the CPI Schedule. And,
   as long as The Pointe’s interpretation “is not itself unreasonable,” it matters
   not that Underwriters’ own interpretation is also reasonable and even
   possibly “the more likely reflection of the parties’ intent.” Certain
   Underwriters at Lloyds, London v. Law, 570 F.3d 574, 577 (5th Cir. 2009)
   (citation omitted). Given the two different descriptions of P–2, the Policy is
   not “worded [such] that it can be given a certain or definite legal meaning or
   interpretation.” Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983). 3

          _____________________
          3
             Underwriters also maintain that The Pointe’s interpretation is unreasonable
   because, even if “Fire Alarm: Local” supplants the more expansive definition in the PSE,
   the Policy unambiguously required the presence of two protective safeguards (P–2 and P–

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          Because the Policy is “reasonably susceptible of more than one
   meaning,” depending on whether the PSE or the CPI is given more weight,
   we conclude that it is ambiguous. See Int’l Ins. Co., 426 F.3d at 291. And
   because we must adopt “the construction that favors the insured,” the
   district court’s grant of summary judgment was in error. See id.
                                             --
          The district court held that, in the absence of contractual coverage,
   The Pointe’s statutory claims failed as a matter of law. It declined to engage
   with these causes of action on the merits because it saw coverage—success
   on the breach of contract claim—as a prerequisite to recovery. This was
   incorrect as a matter of law. See USAA Tex. Lloyds Co. v. Menchaca, 545
   S.W.3d 479, 489 (Tex. 2018) (detailing multiple exceptions to the general
   rule that an insured may not recover statutorily without a contractual right to
   benefits). Regardless, because we have found that the court’s grant of
   summary judgment on The Pointe’s contract claim was in error, we will
   remand the case to the district court for consideration of these claims as well.
   See U.S. ex rel. Branch Consultants v. Allstate Ins. Co., 560 F.3d 371, 381 (5th
   Cir. 2009) (“The district court did not reach this ground. Because the district
   court should have the opportunity to address the facts underpinning the
   claim . . . and make any necessary findings in the first instance, we do not
   reach this ground.”).
          The Pointe also brought tort claims against Underwriters for equitable
   estoppel and fraud. It alleges the inspector’s failure to warn it about the need
   for a central alarm system was a material misrepresentation as to its coverage.
   The district court granted Underwriters’ motion for summary judgment as

          _____________________
   9), and The Pointe only had one: smoke detectors. However, it is possible that a single
   device might serve as both a smoke alarm and a fire alarm.

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                                    No. 22-11213

   to these claims because it found that Underwriters had made no such
   misrepresentations. As an initial matter, we note that equitable estoppel is
   not a cause of action, as asserted by The Pointe, but instead a bar against a
   defendant raising a particular defense. Torres–Aponte v. JP Morgan Chase
   Bank, N.A., 639 F. App’x 272, 274 (5th Cir. 2016) (quoting Doe v. Roman
   Cath. Archdiocese of Galveston–Hous., 362 S.W.3d 803, 810 (Tex. App.–
   Houston [14th Dist.] 2012, no pet.)). Nevertheless, we will affirm the district
   court’s holding because (1) the inspection occurred in conjunction with the
   2019 Policy, not the 2020 Policy operative at the time of the fire; (2) the
   inspector had no duty to inform The Pointe of all possible issues with its
   coverage; and (3) The Pointe is charged with knowledge of its policy. See
   Jeffries v. Pat A. Madison, Inc., 269 S.W.3d 689, 692 (Tex. App.–Eastland
   2008, no pet.) (“[A] misrepresentation claim cannot stand when the party
   asserting the claim is legally charged with knowledge of the true facts.”).
                                         --
          The district court erred in granting summary judgment in favor of
   Underwriters on the Pointe’s contract and statutory claims, but not on its
   tort claims. We therefore REVERSE IN PART and REMAND the case
   for further proceedings consistent with this opinion.

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