Stewart v. Metro Lloyds Ins of TX ( 2021 )

Case: 20-20507 Document: 00515861400 Page: 1 Date Filed: 05/13/2021
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
FILED
May 13, 2021
No. 20-20507
Lyle W. Cayce
Clerk
Beatrice Stewart,
Plaintiff—Appellant,
versus
Metropolitan Lloyds Insurance Company of Texas,
Defendant—Appellee.
Appeal from the United States District Court
for the Southern District of Texas
USDC No. 4:19-CV-5008
Before Jones, Costa, and Duncan, Circuit Judges.
Per Curiam:*
Beatrice Stewart filed an insurance claim after observing damage to
her walls and floors. She says that her policy covers this damage; her insurer
disagrees. To determine who is right, we must decide whether Stewart
experienced an “entire collapse” of part of her home.
*
Pursuant to 5th Circuit Rule 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opinion should not be published and is not precedent except under the limited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 Circuit Rule 47.5.4.
Case: 20-20507 Document: 00515861400 Page: 2 Date Filed: 05/13/2021
No. 20-20507
I.
One evening in late 2017 or early 2018, Stewart was awakened by “a
loud bang” that shook her house, as if “a bomb had gone off in the
neighborhood.” The next morning, she noticed the damage to her home:
cracked sheetrock and sunken floors. A few days later, she cut a hole through
her floor and discovered that a couple of joists below her subfloor had broken
and fallen away. After performing some short-term repairs, Stewart filed a
claim with her home insurer Metropolitan Lloyds Insurance Company of
Texas.
Both Stewart and Metropolitan engaged experts to review the
damage. Metropolitan hired Donan Engineering, which found “broken and
deteriorated floor joists, deteriorated floor decking, walls not plumb, and
gaps in the wall-to-ceiling interface.” By the time of the inspection, Stewart
had already “removed and replaced the soft subfloor decking and reinforced
the floor joist.” The Donan report also described “insect tunnels in the
subfloor decking and floor joists,” as well as “no vapor barrier above the soil
under the house.” 1 It concluded that “rot [in the] floor joists and subfloor
decking [were] caused by a combination of termite damage and exposure to
moisture over the lifespan of the structure,” resulting in the broken floor
joists and unlevel floor. Stewart’s own expert, Pfister Pier & Beam Leveling,
agreed with Donan that “termite damage and wood rot was the cause of the
foundation collapse/failure.”
1
Vapor barriers are meant to prevent the build-up of moisture inside floors and
walls, which can damage a home’s structure. See Moisture Control: Utilizing Vapor
Retarders, N. Am. Insulation Mfg. Ass’n, https://insulationinstitute.org/im-a-building-
or-facility-professional/residential/installation-guidance-2/moisture-management/vapor-retarders/
(last visited May 7, 2021).
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The inspectors took numerous photos that are part of the record. We
use just one (which includes markings made by Donan Engineering) to give a
sense of the damage:
Metropolitan denied Stewart’s claim, determining based on the
Donan report that her policy did not cover the damage. Stewart then sued
for breach of contract in Texas state court. She also brought several other
claims: breach of the duty of good faith and fair dealing, state insurance code
violations, and violations of the Texas Deceptive Trade Practices and
Consumer Protection Act.
Metropolitan removed the case to federal court and moved for
summary judgment on all claims. Stewart sought partial summary judgment
on her breach of contract claim. The district court concluded that Stewart’s
policy did not cover the damage because she did not experience a collapse at
all, much less an “entire collapse,” as the policy required. And because
Stewart’s bad-faith and statutory claims could not go forward “without
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coverage or a contract breach,” the district court granted Metropolitan’s
motion and dismissed the case with prejudice.
II.
This court reviews the district court’s grant of summary judgment de
novo. Lawyers Title Ins. Corp. v. Doubletree Partners, L.P., 739 F.3d 848, 856
(5th Cir. 2014). Summary judgment is proper when, viewing the evidence in
the light most favorable to the nonmoving party, “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.” Id. (quoting Fed. R. Civ. P. 56(a)).
A.
Texas law governs this insurance dispute. See Lawyers Title Ins., 739
F.3d at 856. Under Texas law, insurance contracts are subject to “the same
rules of construction that apply to contracts generally.” Don’s Bldg. Supply,
Inc. v. OneBeacon Ins. Co., 267 S.W.3d 20, 23 (Tex. 2008). The policy’s
“words and phrases . . . should be given their plain and ordinary meaning.”
Aggreko, L.L.C. v. Chartis Specialty Ins. Co., 942 F.3d 682, 688 (5th Cir.
2019). “An interpretation that gives each word meaning is preferable to one
that renders one surplusage.” U.S. Metals, Inc. v. Liberty Mut. Grp., Inc., 490
S.W.3d 20, 23–24 (Tex. 2015). If a contract is unambiguous, it will be
enforced as written. Don’s Bldg. Supply, 267 S.W.3d at 23. A contract is not
ambiguous, though, just because the parties disagree about the scope of its
coverage. ACE Am. Ins. Co. v. Freeport Welding & Fabricating, Inc., 699 F.3d
832, 842 (5th Cir. 2012). Only when “a contract is susceptible to more than
one reasonable interpretation” must the court “resolve any ambiguity in
favor of coverage.” Don’s Bldg. Supply, 267 S.W.3d at 23. As the insured,
Stewart bears the initial burden of proving that her policy covers the damage.
Guar. Nat’l Ins. Co. v. Vic Mfg. Co., 143 F.3d 192, 193 (5th Cir. 1998).
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The dispute hinges on whether Stewart’s losses fall under the policy’s
provision covering damage involving an “entire collapse.” The policy
defines collapse as “an abrupt falling down or caving in of a building or any
part of a building.” This definition excludes “settling, cracking, sagging,
bowing, bending, leaning, shrinking, bulging, or expansion” as well as the
mere “danger of falling down or caving in.”
Stewart’s policy does not, however, cover every collapse.
Metropolitan “will pay for sudden and accidental direct physical loss to
covered property involving the entire collapse of a building or any part of a
building caused only by one or more” specified causes, which include
“hidden decay of the structure” and “hidden insect or hidden vermin
damage.” 2 No other damage resulting from collapse is covered.
Additionally, “[l]oss to . . . foundation” is excluded from coverage “unless
the loss is a direct result of the collapse of a building.”
In sum, Stewart’s losses are only covered if (1) they involved an
“entire collapse” of all or part of a building, (2) that collapse was solely
caused by an enumerated peril such as hidden structural decay or insect
damage, and (3) any damage to Stewart’s foundation was directly attributable
to “the collapse of a building.” Unfortunately for Stewart, she cannot meet
her burden under the first requirement because no “entire collapse”
occurred.
B.
While Stewart’s policy defines “collapse,” it does not separately
explain what it means by “entire collapse.” The word “entire,” however,
should not be read out of Stewart’s policy. See U.S. Metals, 490 S.W.3d at
2
The collapse provisions are central to this case because Stewart’s policy
otherwise excludes coverage for damage caused by “wear and tear” or “insects.”
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23–24 (expressing preference against surplusage). It should instead be given
effect according to its plain meaning. Aggreko, 942 F.3d at 688.
“Entire” means “with no element or part excepted” or “complete in
degree.” Entire, Webster’s Third New International
Dictionary (2002); see also Entire, Black’s Law Dictionary (9th
ed. 2009) (“Whole; complete in all its parts.”). Courts from California to
Connecticut interpreting similar insurance provisions have therefore held
that an “entire collapse” unambiguously refers to a collapse that is total or
complete. See, e.g., Jordan v. Allstate Ins. Co., 11 Cal. Rptr. 3d 169, 181 (Ct.
App. 2004) (“For a building or a portion thereof to sustain an ‘entire
collapse’ must mean that it has entirely collapsed, that is ‘wholly,’
‘completely,’ or ‘fully.’” (citing Entirely, Webster’s Third New
International Dictionary (1966)); Agosti v. Merrimack Mut. Fire
Ins. Co., 279 F. Supp. 3d 370, 379 (D. Conn. 2017) (same).
Whether a structure has “entirely” collapsed depends on the extent
to which it has fallen down or caved in. A structure merely in danger of future
collapse has not yet fallen down or caved in at all, so it has not suffered an
entire collapse. Jordan, 11 Cal. Rptr. 3d at 181 (“It seems self-evident that
the policy’s use of the term ‘entire’ collapse necessarily must refer to an
actual, not an imminent collapse.”); Agosti, 279 F. Supp. 3d at 378–79
(“[T]he gradual deterioration of the basement walls cannot yet be
characterized as an ‘entire collapse.’”). An entire collapse must also go
beyond the deterioration of just one small piece of a larger structural
component. See Ass’n of Unit Owners of Nestani v. State Farm Fire & Cas. Co.,
670 F. Supp. 2d 1156, 1161–64 (D. Or. 2009) (holding that decay of “stud
ends [or] four-by-four bottom plates” did not amount to “the collapse of an
entire structural member”). A contrary interpretation “would render the
term ‘entire’ meaningless.” Id. at 1164.
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The damage Stewart describes does not rise to level of an entire
collapse. She contends that part of her home entirely collapsed because the
floor “caved in.” She points to her testimony that in the days after hearing
a loud bang, she found that her floors were sunken, joists beneath her subfloor
had broken and fallen away, and the frame underneath her home sat several
feet lower than before. But the undisputed evidence shows that the floor did
not entirely cave in. While the floor was “unlevel,” Stewart continued to
live in her house and walk its hallways after the damage occurred. As the
district court noted, there was “no hole or gap in the floor” until Stewart cut
into it herself. Though the floor sagged, “sagging” is one of those gerunds
excluded from her policy’s definition of collapse.
Stewart relies on an Illinois state court decision to support her
argument that she experienced a covered collapse. In Gulino v. Economy Fire
& Casualty Co., a portion of the insured’s basement ceiling sagged eight
inches, disabling the heating system and damaging pipes. 971 N.E.2d 522,
525–28 (Ill. Ct. App. 2012). Much like Stewart’s policy, the insurance
agreement in Gulino covered “the entire collapse of a building or any part of
a building,” defining “collapse” as “an abrupt falling down or caving in of a
building or part of a building,” and excluding “settling, cracking, sagging,
[and] bowing,” among other things. Id. at 524. Still, the Gulino court found
that “a portion of the basement ceiling did cave in,” providing the insured
with coverage even though “the facts undeniably show[ed] that [his] house
or any part of it had not completely fallen down.” Id. at 528. But the Gulino
court never analyzed whether an entire collapse occurred; it instead leapt
from the determination that the insured experienced a cave-in to the
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conclusion that there was a covered collapse. 3 We are not, therefore,
convinced that Gulino sheds light on how this court must interpret the
“entire collapse” language of Stewart’s policy.
The conclusion that Stewart urges us to draw from Gulino fares no
better. She argues that her policy covers her damage even though there was
“something less than a complete falling down” because it involved the
undermining of her home’s structure. Gulino, 971 N.E.2d at 528. This
reading of her policy, however, overlooks the word “entire.” When the word
“entire” is missing from an insurance agreement, courts may find coverage
for only partial collapses because the policy is “not written in terms of how
far a building must fall down or to what degree a building must cave in to
constitute collapse.” See, e.g., Malbco Holdings, LLC v. AMCO Ins. Co., 629
F. Supp. 2d 1185, 1196 (D. Or. 2009). Here, by contrast, the extent to which
part of Stewart’s home has fallen down (or caved in) is the whole ball game—
it must have suffered an entire collapse. “Something less than a complete
falling down” is not enough.
III.
Because Stewart’s breach of contract claim fails, her allegations of
bad-faith and statutory violations based on the coverage denial cannot go
forward. See USAA Tex. Lloyds Co. v. Menchaca, 545 S.W.3d 479, 490 (Tex.
2018) (“[T]here can be no claim for bad faith denial of an insured’s claim for
policy benefits when an insurer has promptly denied a claim that is in fact not
covered.” (cleaned up)); id. at 490–91 (same for statutory claims arising out
of the denial of coverage); State Farm Lloyds v. Page, 315 S.W.3d 525, 532
3
The decision also failed to explain why damage it repeatedly described as
“sagging” warranted coverage despite the explicit exclusion of “sagging” from the
definition of collapse. See Gulino, 971 N.E. 2d at 532 (Quinn, P.J., dissenting).
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(Tex. 2010) (“When the issue of coverage is resolved in the insurer’s favor,
extra-contractual claims do not survive.”).
***
As the district court recognized, Stewart “has conscientiously
obtained and maintained [her] policy and there is damage that must be
repaired at considerable cost.” But her policy is inflexible. To recover,
Stewart must show that part of her home wholly, completely, or totally
collapsed. She has not done so.
The judgment of the district court is therefore AFFIRMED.
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