Landmark Am. Ins. Co. v. SCD Mem'l Place Ii, L. L.C.

25 F.4th 283

LANDMARK AMERICAN INSURANCE COMPANY, Plaintiff—Appellant,

v.SCD MEMORIAL PLACE II, L.L.C., Defendant—Appellee.

No. 20-20389

United States Court of Appeals, Fifth Circuit.

Filed: February 3, 2022

Jay W. Brown, Esq., Hilary Channing Borow, Shackelford, Bowen, McKinley & Norton, L.L.P., Houston, TX, for Plaintiff-Appellant.

Mark E. Miller, Tae Edward Andrews, Miller Friel, P.L.L.C., Washington, DC, Scot Clinton, Wilson, Cribbs & Goren, P.C., Houston, TX, for Defendant - Appellee.

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.

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 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 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 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 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.

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...