Snelling & Snelling, Inc. v. Federal Insurance

United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT October 23, 2006
Charles R. Fulbruge III
No. 05-11402 Clerk
SNELLING AND SNELLING, INC.
Plaintiff - Appellee
versus
FEDERAL INSURANCE CO.
Defendant - Appellant
Appeal from the United States District Court
for the Northern District of Texas
(No. 3:03-CV-2948-K)
Before JOLLY, DAVIS, & WIENER, Circuit Judges.
PER CURIAM:*
Plaintiff-Appellant Snelling and Snelling, Inc., (“Snelling”)
appeals the district court’s order granting summary judgment in
favor of Defendant-Appellee Federal Insurance Co. (“Federal”). We
affirm.
I. FACTS & PROCEEDINGS
Snelling, an employment agency, has one of its many offices
located at 150 Broadway in New York, New York, near the site of the
World Trade Center. This office provided personnel to various
*
Under 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opinion should not be published and is not precedent except under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.
businesses located in or near the World Trade Center. On September
11, 2001, many of that Snelling office’s clients sustained physical
loss or damage from the terrorist attack, as a result of which they
were no longer able to accept Snelling’s services.
At the time of the attack, Snelling carried a policy of
commercial property insurance issued by Federal. The policy
covered many of Snelling’s offices, including the one at 150
Broadway. The policy comprises three main sections. The initial
“Declarations” section establishes most of the general,
conventional insurance coverage. The subsequent “Supplementary
Declarations” section establishes additional coverages. The last
section contains definitions and other policy language.
This appeal focuses on one of the additional coverages in the
Supplementary Declarations, viz., that for “Dependent Business
Premises.” The policy defines Dependent Business Premises as
“premises operated by others on whom you depend to . . . accept
your products and services . . . .” The parties agree that
Snelling’s World Trade Center customers fell within this
definition, and that the policy does provide at least some coverage
for losses caused to Snelling by the attack’s injuries to customers
of its 150 Broadway office. The parties vigorously dispute,
however, the monetary extent of such coverage and thus the amount
due Snelling. Snelling maintains that the policy provided up to
$4,000,000 in coverage —— the limit of insurance for damage to
business income and loss of utilities in the Declarations Section
2
—— for damage to Dependent Business Premises. In contrast, Federal
maintains that the policy limited coverage to $250,000 in the
aggregate for Dependent Business Premises damages suffered by any
one Snelling office, the amount set forth in the Supplementary
Declarations Section.
In the weeks and months following September 11, Snelling’s
employees and agents engaged in discussions among themselves
regarding the aggregate limit of the policy for damages to Snelling
for destruction of its customers’ premises. Eventually, in January
2003, Snelling filed a claim for $4,444,733, which included
business income losses caused by damage to Snelling’s customers
serviced from its 150 Broadway office. In early July 2003,
Snelling amended its claim to $3,956,143.1 Several weeks later,
Federal paid Snelling $250,000 as full payment for Snelling’s
claims.
In December 2003, Snelling filed suit against Federal for
breach of state contract law and state insurance law. Snelling
brought the suit in federal district court based on diversity
jurisdiction. The parties conducted discovery and each moved for
summary judgment. The district court made several findings of
undisputed fact and decided, as a matter of law, that the policy
provided a maximum of $250,000 in coverage for all of Snelling’s
1
Although there are varying accounts of the total amount
asserted by Snelling, the parties agree that the claimed amount
was in the millions of dollars.
3
business income losses caused by damage to its 150 Broadway
office’s Dependent Business Premises. As Federal had already paid
Snelling $250,000, the district court granted summary judgment in
favor of Federal, denying recovery by Snelling of any monies in
excess of that amount. Snelling now appeals.
II. ANALYSIS
A. Standard of Review
The district court’s decision to grant summary judgment is
reviewed de novo.2 A motion for summary judgment should be granted
only when there is no genuine issue of material fact.3 In
determining whether there is a genuine issue of material fact, we
view all facts and draw all inferences therefrom in favor of the
non-moving party.4
The sole issue presented in this appeal is the total amount of
coverage provided by the policy to Snelling for damages resulting
from harm caused to the Dependent Business Premises of its 150
Broadway office. The interpretation of an unambiguous insurance
policy is a question of law and is therefore appropriate for
summary judgment.5 If the policy is ambiguous and raises a
2
American Int’l Specialty Lines Ins. Co. v. Canal Indem.
Co., 352 F.3d 254, 260 (5th Cir. 2003).
3
Weeks Marine, Inc. v. Fireman’s Fund Ins. Co., 340 F.3d
233, 235 (5th Cir. 2003).
4
Id.
5
See Royal Ins. Co. of Am. v. Hartford Underwriters Ins.
Co., 391 F.3d 639, 641 (5th Cir. 2004).
4
material issue of fact, however, summary judgment is not proper.6
B. The Merits
The interpretation of Snelling’s insurance policy is governed
by Texas contract law.7 In construing a policy, courts must strive
“to give effect to the parties’ intent as expressed in the policy’s
plain language.”8 If an insurance policy “can be given only one
reasonable construction, the court must enforce the policy as
written.”9
A court views contract language in light of the surrounding
circumstances to ascertain the meaning attached “by a reasonably
intelligent person acquainted with all operative usages and knowing
all the circumstances prior to and contemporaneous with the making
of the integration, other than oral statements by the parties of
what they intended to mean.”10
i. The Policy
Applying these principles of contractual interpretation, our
6
Amoco Prod. Co. v. Texas Meridian Res. Exploration Co.,
Inc., 180 F.3d 664, 669 (5th Cir. 1999).
7
See Kelley-Coppedge, Inc. v. Highlands Ins. Co., 980 S.W.2d
462, 464 (Tex. 1998).
8
de Laurentis v. United Servs. Auto Ass’n, 162 S.W.3d 714,
722-23 (Tex. App. 2005).
9
Finger Furniture Co. v. Commonwealth Ins. Co., 404 F.3d
312, 314 (5th Cir. 2005).
10
Watkins v. Petro-Search, Inc., 689 F.2d 537, 538 (5th Cir.
1982) (quoting Sun Oil Co. v. Madeley, 626 S.W.2d 726, 731 (Tex.
1981)).
5
analysis begins with the express terms of the policy. As noted,
the policy provided coverage for losses incurred by Snelling as a
result of damage to its Dependent Business Premises, i.e.,
Snelling’s customers. The amount of coverage for Dependent
Business Premises is limited by language in the final section of
the policy:
Dependent Business Premises
We will pay for the actual business income loss and extra
expense you incur due to the actual or potential
impairment of your operations during the period of
restoration, not to exceed the Limit of Insurance for
Dependent Business Premises shown under Business Income
in the Declarations.
This actual or potential impairment of operations must be
caused by or result from direct physical loss or damage
by a covered peril to property or personal property of a
dependent business premises at a dependent business
premises.11
Our study of the policy convinces us that there is only one
section in the entire policy that specifies the “Limit of Insurance
for Dependent Business Premises.” That section is not the initial
Declarations but the subsequent Supplementary Declarations. Thus,
it appears that the policy treats its Supplementary Declarations as
a subset of its larger, general set of “Declarations.”
The Supplementary Declarations establish the following limit
for Dependent Business Premises:
Additional Coverage - Business Income
11
Emphasis added.
6
The Limits Of Insurance shown below are provided for the
Coverages shown at no additional cost to you. These
Limits Of Insurance apply separately at each of your
premises unless otherwise shown. You may purchase
additional Limits Of Insurance, and we will charge you an
additional premium. If you purchase additional limits
for any of these Coverages, the Limits Of Insurance shown
in the Declarations will reflect your total limit,
including the Limits Of Insurance shown below.
Property Coverages Limit of Insurance
BUSINESS INCOME-
ANY OTHER LOCATION $10,000
AUDITORS FEES $10,000
CONTRACTUAL PENALTIES $10,000
DEPENDENT BUSINESS PREMISES $250,000
LOSS OF UTILITIES $25,000
POLLUTION CLEAN-UP & REMOVAL $10,00012
The policy defines the terms “you” and “your” as referring only to
Snelling.
When we consider these provisions together, we agree with the
district court that the plain language of the policy supports only
one conclusion —— that the limit of coverage for damage to Snelling
caused by injury to or destruction of its Dependent Business
Premises is $250,000 per Snelling office —— here, 150 Broadway.
The policy provides coverage of $250,000 for damage to Dependent
Business Property, with the following restriction: “These Limits Of
Insurance apply separately at each of your premises unless
otherwise shown.”13 Both the policy’s definition and the plain
meaning of the quoted language indicate that “your” refers to
12
Emphasis added.
13
Emphasis added.
7
Snelling. To argue that the offices of Snelling’s customers
somehow qualify as “your premises,” as Snelling now asserts, is too
great a stretch. Ultimately, Federal and Snelling, both
sophisticated parties, must abide by the plain language of the
policy as reflecting their intent.
Further supporting the conclusion that $250,000 is the
relevant limit, the “Limits of Insurance” provision states: “The
most we will pay in any one occurrence, is the amount of loss, not
to exceed the applicable Limit of Insurance shown in the
Declarations.”14 As previously discussed, the policy appears to use
the term “Declarations” to include both the initial Declarations
and the subsequent Supplementary Declarations. In this case, the
applicable limit of insurance for Dependent Business Premises
losses is the $250,000 set forth in the Supplementary Declarations.
Snelling is thus entitled to collect no more than $250,000 for all
of its income losses resulting from injury to or destruction of its
150 Broadway customers’ premises in the 9/11 attack.
ii. Snelling’s Arguments
Snelling raises many counter-arguments, but none overcome the
plain meaning of the policy. First, Snelling asserts that the
“applicable Limit of Insurance” shown in the Declarations is the
$4,000,000 figure appearing in the initial Declarations under the
heading “Business Income [&] Loss of Utilities[:] Limit of
14
Emphasis added.
8
Insurance.”15 Based on its interpretation of the plain meaning of
the term “Declarations,” Snelling insists that it is entitled to
recover up to $4,000,000 for all of the business income losses it
sustained from damage to Dependent Business Premises serviced from
its 150 Broadway office, subject only to the limit of $250,000 for
any one Dependent Business.
Snelling’s argument is not persuasive. If the Limit of
Insurance provision were intended to refer only to the $4,000,000
coverage limit in the Declarations section, the limits in the
Supplemental Declarations Section would be superfluous. The only
logical interpretation of this provision is Federal’s, i.e., that
the $4,000,000 figure in the Declarations covers only business
income and loss of utilities caused by direct damage to Snelling’s
own offices. Indeed, the $4,000,000 figure refers only to business
income and loss of utilities generally and says nothing about
business loss resulting from injury to Dependent Business Premises.
In fact, “Dependent Business Premises” are discussed only in the
subsequent Supplementary Declarations, in which coverage for damage
to such premises is fully defined and limited by the “your
premises” language previously discussed.
Second, Snelling insists that Federal knew how to use more
specific language in writing its policy but did not. Therefore,
Snelling argues, Federal’s failure to limit the language more
15
Emphasis added.
9
narrowly should be construed against it. Specifically, Snelling
argues that Federal lazily used the broad language of “at each of
your premises unless otherwise shown” when it limited Dependent
Business Premises coverage to $250,000, but used specific language,
like “at each covered premises shown in the Declarations,”
elsewhere in the policy. This variance is insufficient to create
an ambiguity: As discussed, the plain (and only reasonable) meaning
of “your premises” is Snelling’s offices, not those of its
customers.
Finally, Snelling contends that another form policy drafted by
Federal in 1998 demonstrates that the 1994 form policy at issue in
this case is ambiguous.16 This argument likewise fails. Snelling
was not aware of the 1998 Form when it purchased its policy, so it
was not relying on any difference between the language of the two
policies when it chose its coverage.17 More importantly, even
assuming that the 1998 form demonstrates an ambiguity, this type of
extrinsic evidence cannot be admitted for the purpose of
16
At the time Snelling agreed to the policy with Federal,
there existed a similar policy form drafted by Federal (the “1998
Form”) which stated that “[t]he Limit of Insurance for Dependent
Business Premises applies . . . separately to each occurrence,
regardless of the number of dependent business premises that
sustain covered direct physical loss or damage.”
17
Indeed, Federal asserts that, once a state’s rating
commission approved the new 1998 language, Federal stopped
selling policies with the 1994 language in that state and began
selling only policies with the new 1998 language. Therefore,
Federal never presented both the 1994 Snelling policy and the
1998 Form policy to customers for them to chose between the two.
10
demonstrating the presence of an ambiguity; that must be apparent
within the four corners of the policy at issue.18
iii. Number of Occurrences
Snelling further advances that, even if $250,000 is the
applicable limit of coverage for all damage to Dependent Business
Premises of its 150 Broadway location, it is entitled to recover up
to $250,000 separately for damage to each 150 Broadway customer,
with total recovery limited to $4,000,000, because the policy does
not state otherwise. This argument fails as well: The policy’s
Supplementary Declarations unambiguously state that $250,000 is
“the most” Federal will pay for Dependent Business Premises in any
one occurrence. Snelling’s only facially viable counterargument is
that the Limits of Insurance, which are defined in the final
section of the policy, explicitly refer back to the Declarations
and not to the Supplemental Declarations. This counterargument is
meritless. As already discussed, we are satisfied that the
policy’s references to the Declarations includes the Supplementary
Declarations as a subset.
As an additional basis for its insistence that it may recover
up to $250,000 for each damaged customer, Snelling asserts that the
damage to each Dependent Business Premises can be characterized as
a separate occurrence. Snelling cites cases and provides several
18
See Sydlik v. REEIII, Inc., 195 S.W.3d 329, 334 (Tex. App.
2006) (citing Sun Oil Co. v. Madeley, 626 S.W.2d 726, 732 (Tex.
1981)).
11
hypothetical situations in support of this argument, but these
cases and hypothetical situations are inapposite. For example,
Snelling points to Goose Creek Consolidated Independent School
District v. Continental Casualty Co., in which an arsonist started
two separate fires at two separate places and two separate times.19
Goose Creek does not support Snelling’s argument, as it instructs
that the number of occurrences is determined by the cause of the
damage.20 Likewise, in U.E. Texas One-Barrington, Ltd. v. General
Star Indemnity Co., relying on Goose Creek, we held that Texas law
focuses on the immediate cause of damage when determining the
number of occurrences.21 Here, injury or destruction to Snelling’s
150 Broadway customers in or near each tower resulted from the same
cause —— airplanes flying into the Twin Towers. Although Goose
Creek and U.E. Texas One-Barrington, Ltd. could support an argument
that the destruction of the towers by separate planes and at
different times were two separate occurrences rather than one
produced by a single terrorist attack —— a theory under which
Snelling might be entitled to recover up to $250,000 for damage to
Dependent Business Premises in each tower —— Snelling concedes that
19
658 S.W.2d 338 (Tex. App. 1983).
20
Id. at 341. Specifically, Goose Creek held that “where
there are two fires at two different places with two separate
causal factors, there are two loss occurrences.” Id.
21
332 F.3d 274, 278 (5th Cir. 2003) (finding that pipe
leaks were nineteen separate occurrences even though they were
potentially caused by same event —— installation of defective
pipes).
12
it has never advanced this argument. Under Texas law, the damage
to each 150 Broadway customer cannot constitute a separate
occurrence when, as here, the damage resulted from a single cause.
III. CONCLUSION
For the foregoing reasons, the order of the district court
granting summary judgment to Federal is
AFFIRMED.
13