Saratoga Resources, Inc. v. Lexington Insurance Co

Case: 15-20343 Document: 00513433264 Page: 1 Date Filed: 03/22/2016
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 15-20343 United States Court of Appeals
Fifth Circuit
FILED
SARATOGA RESOURCES, INCORPORATED, March 22, 2016
Lyle W. Cayce
Plaintiff - Appellant Clerk
v.
LEXINGTON INSURANCE COMPANY,
Defendant - Appellee
Appeal from the United States District Court
for the Southern District of Texas
USDC No. 4:14-CV-2270
Before ELROD, GRAVES, and COSTA, Circuit Judges.
PER CURIAM:*
Appellant Saratoga Resources, Incorporated filed a complaint against
Appellee Lexington Insurance Company seeking a declaratory judgment and
damages for breach of contract. The parties submitted cross-motions for
summary judgment. Saratoga appeals the district court’s order granting
Lexington’s motion for summary judgment and denying its motion for
summary judgment. We AFFIRM.
* 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 R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH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.
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No. 15-20343
I.
This case concerns a dispute over the amount of a deductible in an
insurance policy. Lexington issued an insurance policy to Saratoga covering
the period from May 18, 2012 through May 18, 2013. This policy insured
several oil and gas properties owned by Saratoga. Under the policy, each of
the properties had a different insured value. On August 28, 2012, Hurricane
Isaac made landfall in Louisiana and damaged several of Saratoga’s insured
properties. Saratoga submitted a claim for $3,085,047.39 in damages. After
an adjuster inspected the properties, Lexington paid $2,001,191.28 on this
claim. This amount reflected Lexington’s calculation of the applicable
deductible as $912,500. Saratoga disagreed with this calculation of the
deductible, arguing that it should be $400,000, not $912,500. When Lexington
did not relent, Saratoga filed a complaint in the Southern District of Texas
seeking a declaratory judgment and damages for breach of contract. Before
commencing discovery, the parties agreed to file cross-motions for summary
judgment limited to arguments that the language of the insurance policy is
unambiguous. The district court granted Lexington’s motion for summary
judgment and denied Saratoga’s motion for summary judgment. Saratoga
timely appealed to this Court.
II.
“This Court reviews the district court’s grant of summary judgment de
novo. The district court’s interpretation of an insurance contract is a question
of law that we also review de novo. Because this is a diversity case involving
a Texas contract, Texas rules of contract interpretation control.” 1
1 Admiral Ins. Co. v. Ford, 607 F.3d 420, 422 (5th Cir. 2010) (citations omitted)
(internal quotation marks omitted).
2
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III.
The dispute between the parties concerns the following provision of the
insurance policy:
Deductible: Each claim for loss or damage under this policy
shall be subject to a per occurrence retention
amount of $125,000 unless a specific deductible
shown below applies:
Earth Movement/Flood/Named Windstorm :
5% of Total Insurable Values at the time and
place of the loss, subject to a minimum of
$250,000 any one occurrence
If two or more deductible amounts apply to a
single occurrence, the total to be deducted shall
not exceed the largest deductible applicable
unless otherwise stated in the policy.
The parties agree that Hurricane Isaac was a “Named Windstorm.” They also
agree on the identity and insured values of the properties that were damaged.
Their dispute lies in how to calculate the deductible for a “Named Windstorm”
when more than one property is damaged. Lexington argues that the plain
language of “5% of Total Insurable Values” sets the deductible at 5% of the
aggregate sum of the insured value of each damaged property, which is equal
to $912,500. Because this interpretation of the “Named Windstorm” paragraph
only results in one “deductible amount[],” Lexington contends that the “two or
more deductible amounts” paragraph does not come into play. Saratoga
counters that “Total Insurable Values” does not refer to the “Total” of the
“Insurable Values” of the damaged properties, but instead is the plural form of
a term referring to the individual insured value of each property. According to
Saratoga, the “Named Windstorm” paragraph thus requires the calculation of
“mini-deductibles” that represent 5% of the insured value of each damaged
property. Once the $250,000 minimum is reached, so the argument goes, the
“two or more deductible amounts” paragraph applies and the total deductible
3
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may not exceed the highest “mini-deductible,” which in this case is $400,000.
Saratoga argues that any other interpretation would deprive the “two or more
deductible amounts” paragraph of meaning, as it would never apply.
We agree with the district court that only Lexington has advanced a
reasonable interpretation of the insurance policy. Under Texas law, “[t]erms
are given their ordinary meaning unless the insurance policy shows that the
words were meant in a technical or different sense.” 2 The “ordinary meaning”
of “5% of Total Insurable Values” is 5% of the “Total” of the “Insurable Values”
of the damaged properties—that is, 5% of the aggregate sum of the insured
value of each damaged property. Saratoga effectively concedes this point, but
argues that the deductible provision uses “Total” in a “technical or different
sense.” As support for this proposition, Saratoga points to an amendatory
endorsement that lists the insured value of each property under the heading
“Total Insured Value Per Interest.” Saratoga contends that the term “Total
Insurable Value[]” should be equated with the term “Total Insured Value Per
Interest.” Under this interpretation, the term “Total” does not mean
“aggregate” or “sum,” but instead is part of the term “Total Insured Value Per
Interest.” This argument is unpersuasive. The deductible provision refers to
“Total Insurable Values,” not “Total Insurable Values Per Interest.” Putting
aside any difference between “Insurable” and “Insured,” if the drafters of the
deductible provision had intended to refer to “Total Insured Value Per
Interest,” they would have used the qualifier “Per Interest.” We cannot
“rewrite the terms of the Policy” to include these words. 3
2 Id. at 423 (citing Markel Ins. Co. v. Muzyka, 293 S.W.3d 380, 385 (Tex. Ct. App.
2009)).
Cicciarella v. Amica Mut. Ins. Co., 66 F.3d 764, 768 (5th Cir. 1995); U.S. Fire Ins.
3
Co. v. Scottsdale Ins. Co., 264 S.W.3d 160, 170 (Tex. Ct. App. 2008) (“We will not rewrite
contracts to insert provisions that parties could have included themselves.”).
4
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The presence of the “two or more deductible amounts” paragraph does
not compel a different conclusion. Although Saratoga is correct that we must
“striv[e] to give meaning to every sentence, clause, and word” of the insurance
policy “to avoid rendering any portion inoperative,” 4 Lexington’s interpretation
does not render the “two or more deductible amounts” paragraph inoperative.
Under the insurance policy, “[i]f more than one event for Wind & Hail, Named
Storm, Riot Strike or Civil Commotion, Vandalism & Malicious Mischief, Earth
Movement, Flood or Terrorism . . . occurs within any period of seventy-two (72)
hours . . . such covered events shall be deemed to be a single Occurrence.” As
the district court noted, the “two or more deductible amounts” paragraph
applies when there is such a multi-event occurrence. If, for instance, one event
falls within the “Named Windstorm” paragraph and the other within the
general deductible paragraph, then the “two or more deductible amounts”
paragraph requires that the total deductible not exceed the deductible for the
“Named Windstorm” event. 5
Saratoga counters that this hypothetical scenario would not trigger the
“two or more deductible amounts” paragraph because an occurrence either falls
within the general deductible paragraph or the “Named Windstorm”
paragraph—not both. This interpretation of the deductible provision, however,
is inconsistent with both the language of this provision and the other terms of
the insurance policy. 6 Though the deductible provision provides that “[e]ach
claim for loss or damage” falls within either the general deductible paragraph
4 Admiral Ins. Co., 607 F.3d at 423 (quoting Balandran v. Safeco Ins. Co. of Am., 972
S.W.2d 738, 741 (Tex. 1998)).
5 The “Named Windstorm” event will always have the larger deductible because the
minimum deductible for such an event is $250,000 while the maximum, and only, deductible
for all other events is $125,000.
6 See Admiral Ins. Co., 607 F.3d at 423 (“Texas law instructs that we are to ascertain
the scope of coverage by examining the policy as a whole . . . .” (citing Utica Nat’l Ins. Co. of
Tex. v. Am. Indem. Co., 141 S.W.3d 198, 202 (Tex. 2004)).
5
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or the “Named Windstorm” paragraph, the upshot of the provision defining
multi-event occurrences is that an insured may have multiple claims for one
occurrence. 7 In this situation, each individual claim will fall within either the
general deductible paragraph or the “Named Windstorm” paragraph, but the
overall occurrence may fall within both.
Accordingly, we conclude that the district court properly relied upon the
“ordinary meaning” of the term “Total Insurable Values.” Because Saratoga
seeks to depart from this “ordinary meaning”—and is unable to establish that
a “technical or different” meaning is warranted—its interpretation of the policy
is unreasonable. 8 Under Texas law, when there is only one reasonable
interpretation of an insurance policy, the court must “construe it as a matter
of law.” 9 We agree with the district court that this is the case here and adopt
Lexington’s interpretation of the deductible provision. 10
IV.
For the reasons stated above, we AFFIRM.
7 This conclusion is further supported by the section of the insurance policy that
provides that “each claim . . . shall be reported and adjusted separately.”
8 See Certain Underwriters at Lloyds, London v. Law, 570 F.3d 574, 580-81 (5th Cir.
2009); V.L. Props., Inc. v. Alleghany Underwriting Risk Servs. Ltd./Lloyd’s of London, 130 F.
App’x 675, 677 (5th Cir. 2005). For this reason, we do not consider the “Texas maxim favoring
the insured.” See Certain Underwriters, 570 F.3d at 577.
9 See Martin Res. Mgmt. Corp. v. Axis Ins. Co., 803 F.3d 766, 768 (5th Cir. 2015).
10 Saratoga also challenges the district court’s decision to grant Lexington’s motion to
strike. Like the district court, we conclude that the stricken evidence is “immaterial” to the
interpretation of the policy. As a result, even assuming error, we need not address this claim
because any error was harmless. See Matador Petroleum Corp. v. St. Paul Surplus Lines Ins.
Co., 174 F.3d 653, 661 n.4 (5th Cir. 1999).
6