V.L. Properties, Inc. v. Alleghany Underwriting Risk Services Ltd./Lloyd's of London

United States Court of Appeals Fifth Circuit F I L E D IN THE UNITED STATES COURT OF APPEALS May 6, 2005 FOR THE FIFTH CIRCUIT Charles R. Fulbruge III _____________________ Clerk No. 03-41432 _____________________ V. L. PROPERTIES, INC., Plaintiff-Appellant, versus ALLEGHANY UNDERWRITING RISK SERVICES LTD./ LLOYD’S OF LONDON, Defendant-Appellee.

__________________________________________________ Appeal from the United States District Court for the Southern District of Texas USDC No. G-03-CV-445 __________________________________________________

Before REAVLEY, BENAVIDES and PRADO, Circuit Judges.

PER CURIAM:* This diversity suit under Texas law concerns which

deductible is applicable to an insurance claim. Lloyd’s issued

the policy to V.L. Properties. Summary judgment was rendered for

Lloyd’s. We reverse.

The insured owns a yacht basin on the Gulf Coast. In 2001

strong winds caused property damage to the facility estimated at

$64,410.22. While the parties agree that the damage giving rise * 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 R. 47.5, the Court has determined that this opinion should not be published and is not precedent except under the limited circumstances set forth in 5TH CIR.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. to the insurance claim was caused by wind, the record is limited

regarding the weather conditions accompanying the winds or the

extent or magnitude of the winds. The original petition contains

a paragraph, admitted in Lloyd’s answer, stating only that there

were no witnesses to the “bad weather,” that according to a

newspaper, “a spokesperson for the U.S. Weather Service said that

the wreckage could have been caused by a tornado or straight-line

winds,” that there was no damage to neighboring properties, and

that the damage to the yacht basin “was restricted to a small

portion of the overall property.”

The policy consists of a Certificate of Insurance comprising

the first three pages, followed by a printed set of Marina

Property Insurance Clauses. The Clauses begin with a set of

Definitions. The certificate provides only for insurance of

“Piers & Floating Docks Etc” under “Section 3.” There are no

sections 1 or 2.

The dispute concerns the amount of the deductible. Section

3 of the Certificate includes the following language:

Deductible each accident 1. In respect of Catastrophe which will include wind, wave action, earthquake and flood USD 50,000 2. Any other loss USD 5,000

Although the term “Catastrophe” is capitalized, it is not defined

in the definitions section or elsewhere.

2 In granting summary judgment, the district court held as a

matter of law that the $50,000 deductible applied because the

damage was caused by wind. The court accepted Lloyds’s position

that the policy unambiguously provides that any damage to the

insured property caused by wind was a “catastrophe” under the

policy and subject to the higher deductible.

Under Texas law, insurance policies are interpreted in

accordance with the rules of construction that apply to contracts

generally. Nat’l Union Fire Ins. Co. of Pittsburgh, Pa. v. CBI

Indus., Inc., 907 S.W.2d 517, 520 (Tex. 1995). If an insurance

policy is expressed in unambiguous language, its terms will be

given their plain meaning and it will be enforced as written.

Puckett v. U.S. Fire Ins. Co., 678 S.W.2d 936, 938 (Tex. 1984).

If, however, a contract is susceptible to more than one

reasonable interpretation, a court will resolve any ambiguity in

favor of coverage. Id. “[W]hen the language chosen is

susceptible of more than one construction, such policies should

be construed strictly against the insurer and liberally in favor

of the insured.” Barnett v. Aetna Life Ins. Co., 723 S.W.2d 663,

666 (Tex. 1987). Whether the contract is ambiguous is a question

of law for the court to decide. Nat’l Union, 907 S.W.2d at 520 .

The mere fact that the parties disagree as to coverage does

not create an ambiguity, Forbau v. Aetna Life Ins. Co., 876

S.W.2d 132, 134 (Tex. 1994). Extrinsic evidence cannot be 3 admitted for the purpose of creating an ambiguity. Nat’l Union, 907 S.W.2d at 520 . If the provisions of the insurance contract

can be given a “definite or certain legal meaning,” then the

insurance policy is not ambiguous. Id.

We think it is unreasonable to construe the language to make

any wind damage a catastrophe. The terms used in the policy

should be given their plain, ordinary meaning unless the policy

itself shows that the parties intended terms to have a different,

technical meaning. Gonzalez v. Mission Am. Ins. Co., 795 S.W.2d

734, 736 (Tex. 1990). The word “catastrophe” has a plain and

ordinary meaning: a momentous tragic event or an utter failure.

See MERRIAM-WEBSTER’S COLLEGIATE DICTIONARY 179 (10th ed. 2002). It is

not given a contrary meaning in the definitions section of the

policy. Further, if Lloyds as the drafter intended the higher

deductible to apply to any event resulting in damages caused by

wind, and not otherwise excluded from coverage, it could have

used the term “any Insured Event caused by” instead of

“Catastrophe which will include.” Insured Event is a term

included in the definitions section, and means “[a]n event which

causes loss or damage which is recoverable under this insurance.”

Or Lloyds could have substituted “loss” for catastrophe, which in

context would more clearly indicate that losses caused by wind

and the other stated causes are subject to the higher deductible

of subpart 1 of the deductible provision, regardless of the 4 amount of loss, while “[a]ny other loss” is subject to the lower

deductible of subpart 2.

We will not decide on this summary judgment record whether

this particular event could be held to be a catastrophe to the

insured’s facility, and we leave that to further development in

the district court.

REVERSED and REMANDED.

5 BENAVIDES, Circuit Judge, dissenting:

I respectfully dissent from the majority’s decision which

concludes that it is unreasonable to construe the policy language

to make any wind damage a catastrophe. In my view, the policy

unambiguously provides that any damage to the insured property

caused by wind is a “catastrophe” under the policy and,

therefore, subject to the higher deductible.

The policy explicitly states that the higher deductible will

apply to “Accidents . . . In respect of Catastrophe, which will

include wind, wave action, earthquake and flood.” Because a

plain reading of the contract demonstrates that the definition of

catastrophe specifically includes loss caused by wind, there can

be no ambiguity as to whether the higher deductible applies to

damage caused by wind; the parties clearly contemplated that

where damage to the insured property is caused by wind, the

higher deductible applies. Where, as here, the policy terms are

unambiguous, the language of the policy alone expresses the

parties’ intent, and the contract must be enforced as written.

See Puckett v. U.S. Fire Ins. Co., 678 S.W.2d 936, 938 (Tex.

1984). Therefore, because the catastrophe deductible provision

unambiguously applies to damage caused by wind, and the parties

do not dispute that the damage to the yacht basin facility was

caused by wind, the higher deductible applies.

The majority notes that the word “catastrophe” has a plain 6 and ordinary meaning and that a contrary meaning is not given in

the definitions section of the policy. While the plain meaning

of “catastrophe” does take the magnitude of an event or the

quantum of damages caused by an event into account, in my view

the policy clearly gives “catastrophe” a different, and more

general, definition. Under Texas state law, where an insurance

policy clearly gives a word a different meaning than its ordinary

meaning, the meaning contemplated by the policy governs and the

ordinary meaning of that word does not apply. See Security Mut.

Cas. Co. v. Johnson, 584 S.W.2d 703, 704 (Tex. 1979). Therefore,

the ordinary meaning of the word “catastrophe” should be

irrelevant to our analysis because the parties clearly

contemplated that, for purposes of the policy, the higher

deductible would apply to damage caused by wind, wave,

earthquake, and flood – irrespective of the amount or extent of

the damage caused by such loss.

Moreover, the parties to the policy did not include any

express words of limitation limiting the applicability of the

higher deductible to only certain types of wind damage. Because

the parties can choose the language used in the contract, and the

parties here did not include express words of limitation in the

policy, we are powerless to alter the parties’ original intent,

as manifested in the clear and explicit language of the contract.

Std. Constructors, Inc. v. Chevron Chem. Co., Inc., 101 S.W.3d 7 619, 625 (Tex. App. - Houston 2003); see also Nat’l Union Fire

Ins. Co. v. CBI Indus., Inc., 907 S.W.2d 517 (Tex. 1995)

(concluding that where express words of limitation do not appear

on the face of an insurance policy, there is no ambiguity and the

contract will be enforced as written).

In my view, the policy language dictates that all loss

caused by, inter alia, wind damage amounts to a “catastrophe,”

subject to the higher deductible. Accordingly, I would affirm

the judgment of the district court, which held as a matter of law

that the higher deductible applied because the damage was caused

by wind.

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