Meth Hosp v. Affiliated FM Ins Co

Case: 21-10424 Document: 00516148082 Page: 1 Date Filed: 12/29/2021
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
FILED
December 29, 2021
No. 21-10424
Summary Calendar Lyle W. Cayce
Clerk
Methodist Hospitals of Dallas, doing business as
Methodist Health System,
Plaintiff—Appellant,
versus
Affiliated FM Insurance Company,
Defendant—Appellee.
Appeal from the United States District Court
for the Northern District of Texas
USDC No. 3:20-CV-1504
Before King, Costa, and Ho, Circuit Judges.
Per Curiam:*
This insurance dispute arose after Methodist Hospitals of Dallas
(“Methodist”) lost $8 million in sterile medical supplies. The loss occurred
after a thunderstorm cut off the power at a Methodist hospital, which in turn
*
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opinion should not be published and is not precedent except under the limited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: 21-10424 Document: 00516148082 Page: 2 Date Filed: 12/29/2021
No. 21-10424
caused two of the hospital’s chiller units to shut down. The resulting rise in
temperature and humidity rendered certain medical supplies unfit for use.
Methodist filed a claim with Affiliated FM Insurance Co. (“AFM”)
for the damaged supplies. Under the insurance policy, AFM covered “all
risks of physical loss or damage” to the hospital’s property, subject to certain
exclusions. Among those exclusions: losses caused by or resulting from
changes in temperature or humidity. AFM invoked this exclusion and denied
Methodist’s claim. Methodist then sued, arguing that the exclusion applies
only if a change in temperature or humidity is the sole cause of the loss, rather
than one of several causes in a chain of events.
The district court, sitting in diversity, granted AFM’s motion for
summary judgment. In doing so, the court noted that Texas follows the
concurrent-causation doctrine when covered and non-covered perils
combine to cause a loss. Under that doctrine, a policy exclusion is
triggered—and the insurer owes nothing—when the covered and non-
covered perils cannot be separated into independent causes. Dillon Gage, Inc.
of Dallas v. Certain Underwriters at Lloyds Subscribing to Policy No. EE1701590,
992 F.3d 401, 405 (5th Cir. 2021).
Here, the covered and non-covered perils were interdependent—a
storm caused the power surge, the power surge caused the chillers to shut
down, and the disabled chillers caused the temperature and humidity to rise.
The district court thus held that the concurrent-causation doctrine bars
recovery. We affirm.
On appeal, Methodist argues that the concurrent-causation doctrine
does not apply, and it asks us to certify the question to the Texas Supreme
Court. In Methodist’s view, Texas law is unsettled on whether the doctrine
applies to an all-risk insurance policy like the one here. But the Texas
Supreme Court has discussed concurrent causation in the context of all-risk
2
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No. 21-10424
policies. See JAW The Pointe, L.L.C. v. Lexington Ins. Co., 460 S.W.3d 597,
608 (Tex. 2015); Dillon Gage, Inc. of Dallas v. Certain Underwriters at Lloyds
Subscribing to Policy No. EE1701590, No. 21-0312, _ S.W.3d _, 2021 WL
5750553, at *4 (Tex. Dec. 3, 2021). Texas appellate courts have likewise
applied the doctrine to such policies. See All Saints Catholic Church v. United
Nat’l Ins. Co., 257 S.W.3d 800, 802–04 (Tex.App.—Dallas 2008, no pet.);
Wallis v. United Servs. Auto. Ass’n, 2 S.W.3d 300, 302–03 (Tex.App.—San
Antonio 1999, pet. denied). And so have we. See Seahawk Liquidating
Trust v. Certain Underwriters at Lloyds London, 810 F.3d 986, 994–96 (5th Cir.
2016) (explaining that the concurrent-causation doctrine is a default rule
under Texas law that “applies whenever a policy delineates covered and
excluded perils and such perils combine to cause a loss”).
Accordingly, this case does not present an unsettled question of state
law meriting certification. We hold that the concurrent-causation doctrine
applies, and under that doctrine, the temperature/humidity exclusion bars
recovery, because the other events in the causal chain did not independently
harm Methodist’s medical supplies. 1
Affirmed.
1
A central theme of Methodist’s brief is that we would nullify the structure of the
insurance policy by applying the concurrent-causation doctrine to the
temperature/humidity exclusion. That is because the policy has another group of
exclusions subject to an anti-concurrent-causation clause, and according to Methodist, this
clause would be superfluous if we apply the default rule of concurrent causation elsewhere
in the policy. Not so. As the name suggests, an anti-concurrent-causation clause displaces
the default rule of concurrent causation where the clause applies. See JAW The Pointe, 460
S.W.3d at 608. And here, the clause applies to one set of exclusions, but not to the
temperature/humidity exclusion.
3