Evanston Insurance Company v. OPF Enterprises, L.L

Case: 20-20095 Document: 00515546710 Page: 1 Date Filed: 08/31/2020
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
FILED
August 31, 2020
No. 20-20095 Lyle W. Cayce
Clerk
Evanston Insurance Company,
Plaintiff—Appellant,
versus
OPF Enterprises, L.L.C.,
Defendant—Appellee.
Appeals from the United States District Court
for the Southern District of Texas
USDC No. 4:17-CV-2048
Before Owen, Chief Judge, and Dennis and Haynes, Circuit Judges.
Per Curiam:*
Evanston Insurance Company appeals the district court’s grant of
summary judgment in favor of OPF Enterprises, L.L.C. For the reasons set
forth below, we AFFIRM.
*
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opinion should not be published and is not precedent except under the limited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: 20-20095 Document: 00515546710 Page: 2 Date Filed: 08/31/2020
No. 20-20095
I. Background
Evanston issued OPF two professional liability insurance policies.
The first (“2016 Policy”) ran from March 20, 2016, until March 20, 2017,
and the second (“2017 Policy,” and together with the 2016 Policy, “the
Policies”) ran from March 20, 2017, until March 20, 2018. The Policies
contained identical language covering general and professional liability
insurance for claims made against OPF during the policy periods.
The Policies included a “Discovery Clause,” which provided
coverage for claims made against OPF after the end date of the policy period
if OPF provided written notice to Evanston during the policy period. More
specifically, this clause stated that
[i]f during the Policy Period, [OPF] first becomes aware of a
specific Wrongful Act, Personal Injury or offense which is
reasonably expected to result in a Claim within the scope of
coverage of this Coverage Part, then [OPF] may provide
written notice as stated in Item 11 . . . . If such written notice is
received by the Company1 during the Policy Period, then any
Claim subsequently made against [OPF] shall be deemed . . . to
have been first made on the date on which such written notice
is received by the Company.
Item 11 provided an email address, physical address, and fax number where
notice could be sent.
In January 2017, OPF purchased five million pounds of ceramic
proppant—a solid material used in oil extraction operations—and resold the
proppant to Apache Corporation. In February 2017, during the coverage
period of the 2016 Policy, Apache notified OPF that some of Apache’s
equipment sustained damage from material found in OPF’s proppant.
1
In the Policies, “the Company” refers to Markel Corporation, which owns
Evanston and underwrites its policies.
2
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No. 20-20095
On March 1, 2017, OPF provided written notice of the potential claim
to its insurance agent, Porter Insurance Agency, Inc. Shortly after, on March
3, 2017, Porter notified AmWINS Brokerage of Texas, LLC of the incident
stating, “This is for your information only at this time, since there is no claim
demand made against [OPF].” AmWINS did not forward this message to
Evanston.
AmWINS had authority to complete a number of insurance brokerage
tasks on Evanston’s behalf. AmWINS could “receive and accept proposals
for insurance”; “effect, issue, countersign and deliver [insurance] policies”;
“collect, receive and give receipts for premiums”; and “cancel or non-renew
[insurance] policies.” Notably, the Producer Agreement required AmWINS
to “immediately notify [Evanston] of all claims, suits, and notices.”
In April 2017, during the coverage period of the 2017 Policy, Apache
demanded that OPF pay approximately $1.5 million in damages caused by the
contaminated proppant. OPF gave the demand letter to Porter, which then
forwarded it to AmWINS, which in turn forwarded it to Evanston. Evanston
received the demand letter on April 7, 2017.
Evanston filed suit against OPF, alleging that it had no duty to defend
or indemnify OPF for the damage caused by the contaminated proppant
because the claim was not covered by either of the Policies. After the parties
filed cross-motions for summary judgment, the district court granted
summary judgment in OPF’s favor. Evanston timely appealed.
II. Legal Standard
“We review a district court’s grant of summary judgment de novo,
applying the same standard as did the district court.” Stults v. Conoco, Inc.,
76 F.3d 651, 654 (5th Cir. 1996). When parties have filed cross-motions for
summary judgment, “we review each party’s motion independently, viewing
the evidence and inferences in the light most favorable to the nonmoving
party.” Ford Motor Co. v. Tex. Dep’t of Transp., 264 F.3d 493, 498 (5th Cir.
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2001). Summary judgment is appropriate only “if 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.” FED. R. CIV. P. 56(a).
III. Discussion
This dispute centers on whether OPF provided sufficient notice to
trigger coverage under the 2016 Policy. To answer this question, we first
consider whether the policy required OPF to provide written notice to
Evanston as specified in Item 11 (OPF’s notice did not comport with Item
11). We then consider whether AmWINS was Evanston’s agent for purposes
of receiving notice. Because we conclude that OPF was not required to
provide notice in accordance with Item 11 and that AmWINS acted as
Evanston’s agent, we affirm that OPF’s notice was sufficient.
Under Texas law,2 insurance policies are interpreted “using the same
rules of interpretation and construction applicable to contracts generally.”
Tesoro Ref. & Mktg. Co. v. Nat’l Union Fire Ins. Co., 833 F.3d 470, 474 (5th
Cir. 2016). The first step of the policy interpretation is to analyze the policy’s
language. See RSUI Indem. Co. v. Lynd Co., 466 S.W.3d 113, 118 (Tex. 2015).
Texas law requires that language be given its plain meaning unless the
wording shows an intention to “impart a technical or different meaning.”
Am. Mfrs. Mut. Ins. Co. v. Schaefer, 124 S.W.3d 154, 158 (Tex. 2003). To
determine plain meaning, courts may look to dictionary definitions and a
term’s ordinary usage. See Anadarko Petrol. Corp. v. Hous. Cas. Co., 573
S.W.3d 187, 192 (Tex. 2019).
The 2016 Policy states that OPF “may provide written notice” in the
manner specified in Item 11. Common usage and dictionary entries
demonstrate that may usually suggests that an action is optional. See, e.g.,
2
In this diversity case, Texas substantive law applies. See RSR Corp. v. Int’l Ins.
Co., 612 F.3d 851, 857 (5th Cir. 2010).
4
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No. 20-20095
May, Merriam-Webster.com (last visited Aug. 13, 2020) (defining “may” as
“used to indicate possibility or probability” and “sometimes used
interchangeably with can”). Though may can be used in an “auxiliary
function expressing purpose or expectation,” this is an alternate (not
primary) definition, see id., and we decline to use an “auxiliary” definition as
the most widely understood meaning of a term.
Further, we do not “simply stop at the dictionary definitions” or
“isolate any word, phrase, sentence, or section from its setting and construe
it without considering its context.” Anadarko, 573 S.W.3d at 193. Context
here demonstrates that Evanston affirmatively chose to use the word may—
not an imperative like must or shall—in this provision. Indeed, in other
provisions, the policy did use the imperative shall: The next sentence
contained the phrase “shall be deemed.” If Evanston wanted to require that
written notice be sent to the email address, fax number, or physical mailing
address listed in Item 11, then it could have done so. But Evanston did not.
For these reasons, we affirm that a plain reading of the 2016 Policy’s
language shows that OPF had the option to provide written notice according
to Item 11, but OPF was not required to provide notice in that manner.
We next consider whether OPF’s notice to AmWINS through Porter
constituted sufficient notice. To determine whether notice to AmWINS
counted as notice to Evanston, we must determine whether AmWINS was
properly considered an agent who could receive notice. Evanston asserted in
the district court that AmWINS was OPF’s broker and thus agent. Even
assuming that were true, there are “some narrow sets of circumstances [in
which] an insurance agent may be deemed to have acted as the agent of both
the insured and the insurer.” Monumental Life Ins. Co. v. Hayes-Jenkins, 403
F.3d 304, 318 (5th Cir. 2005). One such circumstance is when an agent “has
authority to perform various functions on the insurer’s behalf.” Duzich v.
Marine Office of Am. Corp., 980 S.W.2d 857, 865 (Tex. App.—Corpus Christi
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1998, pet. denied). If notice falls under an agent’s responsibilities, then
notice to that agent qualifies as notice to the principal. Preston Farm & Ranch
Supply, Inc. v. Bio-Zyme Enters., 625 S.W.2d 295, 300 (Tex. 1981); cf. Berkley
Reg’l Ins. Co. v. Phila. Indem. Ins. Co., 600 F. App’x 230, 235 (5th Cir. 2015)
(per curiam).
Here, AmWINS was Evanston’s agent under a “Producer
Agreement” that contained express language requiring AmWINS to
“immediately notify [Evanston] of all claims, suits, and notices.” Under this
agreement, AmWINS was clearly responsible for providing notice of claims
to Evanston, so it served as Evanston’s agent for this purpose. Accordingly,
we conclude that the communication from OPF to AmWINS about the
contaminated proppant and corresponding potential claim constituted
sufficient notice to Evanston.
IV. Conclusion
Based on the foregoing reasons, the judgment of the district court is
AFFIRMED.
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