Liberty Mutual Fire Insurance Company v. Lexington Insurance Company as Subrogee of DCT Rittiman, LLC

Fourth Court of Appeals
San Antonio, Texas
OPINION
No. 04-13-00586-CV
LIBERTY MUTUAL FIRE INSURANCE COMPANY,
Appellant
v.
LEXINGTON INSURANCE COMPANY as Subrogee of DCT Rittiman, LLC,
Appellee
From the 288th Judicial District Court, Bexar County, Texas
Trial Court No. 2012-CI-13972
Honorable John D. Gabriel Jr., Judge Presiding
Opinion by: Patricia O. Alvarez, Justice
Sitting: Karen Angelini, Justice
Patricia O. Alvarez, Justice
Luz Elena D. Chapa, Justice
Delivered and Filed: September 30, 2014
REVERSED AND RENDERED
The sole issue in this appeal is whether an “own, rent, or occupy” exclusion in a commercial
general liability policy precludes coverage. Appellant Liberty Mutual Fire Insurance Company’s
policy holder damaged a building insured by Appellee Lexington Insurance Company. Lexington
covered the loss. As subrogee, Lexington sued Liberty Mutual. Liberty Mutual asserted its insured
occupied the premises and the exclusion applied. Both parties moved for summary judgment, the
trial court granted Lexington’s motion, and Liberty Mutual appeals. Because we conclude the
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exclusion precludes coverage as a matter of law, we reverse the trial court’s order and render
judgment that Lexington take nothing from Liberty Mutual on Lexington’s subrogation claim.
BACKGROUND
This appeal involves a dispute between two insurance companies. It arises out of an
incident causing damage to insured premises used by other parties and entities.
A. Parties and Entities
1. DCT
DCT Rittiman, LLC owns real property located at 5400 Rittiman Road, San Antonio, Bexar
County, Texas. A portion of DCT’s property was initially leased by Total Warehousing, Inc.
2. Total
Total Warehousing, Inc. provides management and logistics services to commercial
customers. In 2002, Total leased a portion of DCT’s property—the premises—from DCT’s
predecessor lessor. Total leased the premises for, and provided services to, CHEP USA.
3. CHEP
CHEP USA pools and leases to its customers equipment, wooden and plastic containers,
pallets, and crates to service its customers’ depot facilities. In late 2006, CHEP assumed Total’s
lease of the premises under an agreement signed by the lessor, CHEP, and Total. As part of their
business arrangement, CHEP retained Total to operate its pooling business and manage operations
on the premises. At the time of the incident that damaged the premises, Total was insured by
Liberty Mutual Fire Insurance Company.
4. Liberty Mutual
Liberty Mutual Fire Insurance Company issued a commercial general liability (CGL)
policy to Total for Total’s operations on the premises. Liberty Mutual is the appellant.
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5. Lexington
The appellee is Lexington Insurance Company. It insured DCT’s property, including the
premises.
B. Premises
The premises, as referenced in the lease, comprise “[a]pproximately 78,750 square feet of
office/warehouse space located at 5400 Rittiman Plaza in a 126,000 square foot facility.” The
office portion of the premises is less than 3,000 square feet; the remainder is warehouse space.
C. Incident
In August of 2008, a Total employee working on the premises struck a warehouse structural
support column with a forklift load. A large section of the building’s roof collapsed, and DCT
suffered approximately $2.9 million in damages. Lexington reimbursed DCT for its losses.
D. Lawsuit
Lexington, as DCT’s subrogee, sued Liberty Mutual—Total’s insurance carrier. In its
declaratory judgment action, Lexington sought a declaration that Liberty Mutual’s policy provided
coverage for the accident.
Liberty Mutual moved for summary judgment under traditional and no evidence rules; it
argued the incident was not a covered loss under Total’s policy because of an “own, rent, or
occupy” liability exclusion. It is undisputed that at the time of the incident Total did not own or
rent the premises; Liberty Mutual argued Total occupied the premises.
In Lexington’s response, it included a cross-motion for summary judgment under
traditional and no evidence rules. Lexington argued the exclusion is not applicable as a matter of
law and there is no evidence that Total occupied the property that was damaged.
The trial court granted Lexington’s cross-motion for summary judgment, and denied
Liberty Mutual’s motion. Liberty Mutual appeals.
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STANDARDS OF REVIEW
We address the applicable standards of review for competing summary judgment motions
in a liability insurance coverage context.
A. Traditional Motions
In a traditional motion seeking summary judgment on a subrogation claim, the subrogee
has the burden to establish the existence of a valid policy and coverage for the loss under its terms.
See Gilbert Tex. Constr., L.P. v. Underwriters at Lloyd’s London, 327 S.W.3d 118, 124 (Tex.
2010) (citing Ulico Cas. Co. v. Allied Pilots Ass’n, 262 S.W.3d 773, 782 (Tex. 2008)). See
generally TEX. R. CIV. P. 166a(c); accord Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 548
(Tex. 1985). “If the [subrogee] proves coverage, then to avoid liability the insurer must prove the
loss is within an exclusion.” Gilbert Tex. Constr., 327 S.W.3d at 124; Ulico Cas. Co., 262 S.W.3d
at 782. If the insurer meets its burden to conclusively prove the policy excludes coverage for the
loss, “the burden shifts back to the [subrogee] to show that an exception to the exclusion brings
the claim back within coverage.” Gilbert Tex. Constr., 327 S.W.3d at 124; accord Oleksy v.
Farmers Ins. Exch., 410 S.W.3d 378, 383 (Tex. App.—Houston [1st Dist.] 2013, pet. denied). If
the subrogee fails to raise a genuine issue of material fact on whether an exception to the exclusion
applies, the insurer is entitled to judgment. See TEX. R. CIV. P. 166a(c); Gilbert Tex. Constr., 327
S.W.3d at 124.
B. No-Evidence Motions
Under the no-evidence rule, “[a]fter adequate time for discovery, [either the subrogee or
the insurer] . . . may move for summary judgment on the ground that there is no evidence of one
or more essential elements of a claim or defense on which [the other] would have the burden of
proof at trial.” TEX. R. CIV. P. 166a(i); accord W. Invs., Inc. v. Urena, 162 S.W.3d 547, 550 (Tex.
2005). Neither the subrogee nor the insurer may properly move for summary judgment on the
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ground that there is no evidence of a claim or defense on which the movant has the burden of proof
at trial. See Foreman v. Whitty, 392 S.W.3d 265, 279 (Tex. App.—San Antonio 2012, no pet.);
see also Urena, 162 S.W.3d at 550. For example, a subrogee may not obtain no-evidence summary
judgment on the ground that the loss is covered under the policy. See Gilbert Tex. Constr., 327
S.W.3d at 124 (subrogee’s burden); Urena, 162 S.W.3d at 550 (no-evidence motion); Foreman,
392 S.W.3d at 279. Conversely, an insurer may not obtain no-evidence summary judgment on the
ground that the exclusion precludes coverage. See Gilbert Tex. Constr., 327 S.W.3d at 124
(subrogee’s burden); Urena, 162 S.W.3d at 550 (no-evidence motion); Foreman, 392 S.W.3d at
279.
C. Competing Summary Judgment Motions
“When both sides move for summary judgment . . . and the trial court grants one motion
and denies the other, reviewing courts consider both sides’ summary-judgment evidence,
determine all questions presented, and render the judgment the trial court should have rendered.”
Gilbert Tex. Constr., 327 S.W.3d at 124 (citing Embrey v. Royal Ins. Co. of Am., 22 S.W.3d 414,
415–16 (Tex. 2000)).
D. Ambiguity Review
Determining whether an insurance policy is ambiguous and construing an unambiguous
policy are questions of law which we review de novo. Am. Mfrs. Mut. Ins. Co. v. Schaefer, 124
S.W.3d 154, 157 (Tex. 2003); Nat’l Union Fire Ins. Co. of Pittsburgh, Pa. v. CBI Indus., Inc., 907
S.W.2d 517, 520 (Tex. 1995); see Coker v. Coker, 650 S.W.2d 391, 393–34 (Tex. 1983) (contract
construction).
INSURANCE POLICY AMBIGUITY, CONSTRUCTION
In this appeal, the parties dispute the definition of occupy in an “own, rent, or occupy”
exclusion; each moved for summary judgment on their respective definition. Lexington argues in
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the alternative that the term occupy as applied is ambiguous. Before we review the summary
judgment evidence, we first determine whether occupy is ambiguous as we construe the policy.
A. Policy Ambiguity
If the parties disagree about the meaning of certain terms in an insurance policy, the policy
is not ambiguous “simply because the parties offer conflicting interpretations” of the policy.
Schaefer, 124 S.W.3d at 157 (citing Kelley–Coppedge, Inc. v. Highlands Ins. Co., 980 S.W.2d
462, 464 (Tex. 1998)). “If policy language is worded so that it can be given a definite or certain
legal meaning, it is not ambiguous and we construe it as a matter of law.” Id.; accord Nat’l Union
Fire Ins., 907 S.W.2d at 520. “An ambiguity exists only if the [policy] language is susceptible to
two or more reasonable interpretations.” Schaefer, 124 S.W.3d at 157 (citing Kelley–Coppedge,
980 S.W.2d at 465).
B. Policy Construction
“[Reviewing courts] interpret insurance policies in Texas according to the rules of contract
construction.” Id.; accord Gilbert Tex. Constr., 327 S.W.3d at 126; Kelley-Coppedge, 980 S.W.2d
at 464. We give “[t]he policy’s terms . . . their ordinary and generally-accepted meaning unless
the policy shows the words were meant in a technical or different sense.” Gilbert Tex. Constr.,
327 S.W.3d at 126. We read all the policy’s provisions together searching for a reasonable
construction that gives every provision meaning and renders no provision meaningless. Id.;
Schaefer, 124 S.W.3d at 157.
With these principles in mind, we turn to the language of the CGL policy and the exclusion
at issue.
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POLICY LANGUAGE
Liberty Mutual issued a CGL policy to Total with a per occurrence limit of $1 million for
bodily injury and property damage. The coverage provision and the exclusion at issue here read
as follows:
1. Insuring Agreement
a. We will pay those sums that [Total] becomes legally obligated to pay as
damages because of “bodily injury” or “property damage” to which this
insurance applies. . . .
...
2. Exclusions
This Insurance does not apply to:
...
(j) Damage [t]o Property
“Property damage” to:
(1) Property you own, rent, or occupy, including any costs or expenses
incurred by you, or any other person, organization or entity, for repair,
replacement, enhancement, restoration or maintenance of such property
for any reason, including prevention of injury to a person or damage to
another’s property;
...
(5) That particular part of real property on which you or any contractors or
subcontractors working directly or indirectly on your behalf are
performing operations, if the “property damage” arises out of those
operations; . . . .
ANALYSIS
Before we can determine whether summary judgment was proper, we must construe the
policy’s terms regarding coverage and any applicable exclusions.
A. Coverage
The parties agree on the core facts regarding coverage. They agree Liberty Mutual issued
a CGL policy to Total, the policy was in effect when the incident occurred, and Total’s employee
was responsible for the damage to the structural support column. Thus, under the policy, Liberty
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Mutual was obligated to pay for the damage caused by Total’s employee unless an exclusion
applied to preclude coverage.
B. Exclusions
Policy paragraph 2(j)(1) excludes from coverage property damage to “property you own,
rent, or occupy.” The parties also agree on the following facts regarding the exclusions:
• Total did not own or rent the premises,
• Total was authorized to be on the premises, and
• Total was conducting operations on the premises under its agreement with CHEP and
within the scope of the lease’s permitted uses of the premises.
The parties disagree on whether Total’s presence and operations on the premises met the
exclusion’s definition of occupy and whether Total occupied the property that was damaged. To
support its judgment, the trial court necessarily concluded Total did not occupy the premises, Total
did not occupy the roof, or both. We first review de novo the trial court’s construction of occupy.
C. Parties’ Constructions of Exclusion
The policy does not define the term “occupy,” and the parties offer conflicting
constructions of the term.
Liberty Mutual asserts Kelley-Coppedge defined occupy as “to hold or keep for use.” See
Kelley-Coppedge, 980 S.W.2d at 467. It argues Total met both of what Liberty Mutual asserts are
occupy’s elements: a continued physical presence and control of the property for the insured’s own
benefit.
Lexington argues that even a substantial physical presence on, or use of, the property is not
occupancy. It insists occupancy requires the actor to have the exclusive right of possession to the
premises. It contends Kelley-Coppedge as applied in this case provides two conflicting
interpretations of the term occupy, and thus an ambiguity exists. Consequently, Lexington urges
this court to adopt Lexington’s definition of occupy in light of the contra-insurer rule. See State
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Farm Fire & Cas. Co. v. Vaughan, 968 S.W.2d 931, 933 (Tex. 1998); Charida v. Allstate Indem.
Co., 259 S.W.3d 870, 873 (Tex. App.—Houston [1st Dist.] 2008, no pet.).
We turn to Kelley-Coppedge.
D. Kelley-Coppedge, Inc. v. Highlands Insurance Co.
In Kelley-Coppedge, Inc. v. Highlands Insurance Co., the court held the word occupy was
unambiguous in the context of a pollution exclusion in a CGL policy. 980 S.W.2d at 467. Kelley-
Coppedge dealt with a pollution exclusion in paragraph f.(1). The exclusion precluded coverage
for the following:
“Bodily injury” and “property damage” arising out of the actual, alleged or
threatened discharge, dispersal, seepage, migration, release or escape of pollutants;
(a) At or from any premises, site or location which is or was at any time owned
or occupied by, or rented or loaned to, any insured;
...
(d) At or from any premises, site or location on which any insured or any
contractors or subcontractors working directly or indirectly on any insured’s
behalf are performing operations:
(i) If the pollutants are brought on or to the premises, site or location in
connection with such operations by such insured, contractor or
subcontractor;
Id. (emphasis added). Subparagraph f.(2) excluded coverage for the following:
Any loss, cost or expense arising out of any
(a) Request, demand or order that any insured or others test for, monitor, clean
up, remove, contain, treat, detoxify or neutralize, or in any way respond to, or
assess the effects of pollutants . . . .
Id.
The dispute in Kelley-Coppedge turned on whether the term “occupied by [the insured]”
contained in f.(1)(a) of the policy excluded cleanup costs sustained by the insured when the
insured’s activities of lying pipe along an easement resulted in a spillage. In formulating the
definition of occupy, the court examined two cases to illustrate the difference between a transient
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use and occupancy. Id. The first case dealt with a pollution exclusion similar to that in Kelley-
Coppedge.
1. United States Fidelity & Guaranty Co. v. B & B Oil Well Service, Inc.
In B & B Oil Well Service, a contractor was reworking oil wells and performing only
occasional, limited work on the owners’ sites. See U.S. Fid. & Guar. Co. v. B & B Oil Well Serv.,
Inc., 910 F. Supp. 1172, 1178 (S.D. Miss. 1995). The court stated that occasional and limited work
performed by a subcontractor at well sites operated and controlled by others does not amount to
occupancy. Id. The court opined that “if any sort of occupancy, ‘no matter how transitory or for
whatever purpose,’ were deemed sufficient to invoke subsection (a) of this pollution exclusion,
‘the remaining subsections, (b) through (d), would be meaninglessly superfluous.’” Id. (quoting
Schumann v. New York, 610 N.Y.S.2d 987, 991 (N.Y. Ct. Cl. 1994)). It added that “each aspect
of the ‘occupancy’ definition suggests something other than a transient, nonpossessory relation to
the property.” Id.
Kelley-Coppedge then contrasted B&B Oil Well Service with Gregory v. Tennessee Gas
Pipeline Co., 948 F.2d 203 (5th Cir. 1991).
2. Gregory v. Tennessee Gas Pipeline Co.
In Gregory, riparian rights owners sued the City of Natchitoches, Louisiana for the effects
of “pollutants at or from the lake.” Id. at 205, 207. The City claimed that while it owned the lake
bed, it did not own “the waters, fish, flora, or fauna of the lake.” Id. at 205. The Fifth Circuit
reasoned that because the City “created the lake, owns at least a large portion of the bed, and
maintains and uses the lake and its waters for a drinking water supply,” the City occupied the lake.
Id. at 207. The Fifth Circuit then defined occupy as “to hold or keep for use.” Id.
After reviewing these cases, Kelley-Coppedge also defined occupy as “to hold or keep for
use,” Kelley-Coppedge, 980 S.W.2d at 467, and approvingly recited the following:
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Construed in its ordinary sense and given its intended meaning, the word “occupy”
suggests . . . continued physical presence [on the premises]. This exclusion is
intended to deprive an insured from the benefit of coverage for damages it causes
while “occupying” the [premises]. Plaintiff’s occasional trips to the [premises] to
make minor improvements do not suggest that it “occupied” the damaged property
within the intent of the exclusion and at the time of the loss.
Id. at 466 n.1 (alterations in original) (quoting C.O. Falter, Inc. v. Crum & Forster Ins. Cos., 361
N.Y.S.2d 968, 974 (Sup. Ct. 1974)). After it established that physical presence was necessary,
Kelley-Coppedge addressed the insured’s argument that if any presence, no matter how transitory,
constituted occupancy under section f.(1)(a), then subsection f.(1)(d) would be meaningless. Id.
at 467. The court agreed and concluded as follows:
Subparagraph (a) applies to releases at or from premises owned or controlled by
the contractor. Subparagraph (d) broadens the scope of the exclusion to include
releases at or from premises owned by a third party at which the contractor is
performing operations, but only if the contractor brings the pollutants onto the site.
...
A reading that does give meaning to both provisions is that section f.(1)(a)
refers to operations on premises owned or controlled by the contractor, while
section f.(1)(d) refers to operations taking place on a third-party’s premises. This
reading is consistent with the plain, ordinary, and generally accepted meaning of
“occupied” when read in context with the other terms in the clause, “owned,”
“rented,” and “loaned.”
Id. (first and third emphases added). Thus, in addition to a requirement for a continued physical
presence on the premises, the court construed f.(1)(a) to require the insured to have some
ownership or control over the premises. The court concluded: “We hold that the term ‘occupied
by’ in this insurance policy’s pollution exclusion clause does not encompass [the insured’s]
operations on a third-party’s premises. The provision unambiguously excludes costs for pollution
spillage from or on the insured’s own premises.” Id. (emphases added).
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E. Ambiguity of Occupy under Kelley-Coppedge
Lexington argues Kelly-Coppedge’s holding created two competing definitions of the term
occupy, and under the contra-insurer rule, we must adopt its interpretation. See Kelley-Coppedge,
980 S.W.2d at 467. We disagree.
Kelley-Coppedge is clear: an insured using the property for its own benefit—rather than
merely conducting operations on the property for the benefit of the owner—distinguishes the
occupancy exclusion (exclusion f.(1)(a)) from the operations exclusion (exclusion f.(1)(d)). Id.
(“By negating coverage for a contractor’s entire operations at a job site, the court of appeals’
interpretation leaves section f.(1)(d) nothing to exclude.”). Kelley-Coppedge was dealing with the
entire f.(1)(a) exclusion. In the exclusion at issue there, occupy was accompanied by the words
“owned,” “rented,” and “loaned.” Id. Considering the words together, the court determined the
exclusion was applicable to “premises owned or controlled by the contractor.” Id. (emphasis
added).
Applying Kelley-Coppedge, we conclude Lexington’s proposed definition for “occupy”
that requires both legal ownership and exclusive control over the premises would impermissibly
render the words own and rent in exclusion (j)(1) meaningless. See id. Kelley-Coppedge only
requires control over the premises for the insured’s own benefit. Like Kelley-Coppedge, we
conclude our interpretation “is consistent with the plain, ordinary, and generally accepted meaning
of ‘occup[y]’ when read in context with” the words “own” and “rent.” Id.; accord Mid-Continent
Cas. Co. v. JHP Dev., Inc., No. Civ.A.SA04CA-192-XR, 2005 WL 1123759, at *6 (W.D. Tex.
Apr. 21, 2005), aff’d, 557 F.3d 207 (5th Cir. 2009) (quoting Kelley-Coppedge, 980 S.W.2d at 467).
F. Occupy in Policy is Unambiguous
Having reviewed the policy and the applicable law, we conclude the term occupy as used
in the CGL policy at issue is unambiguous. See Kelley-Coppedge, 980 S.W.2d at 467. Following
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Kelley-Coppedge, we hold that occupy comprises (1) a continued physical presence on the
premises, and (2) control of the premises for the insured’s own benefit. See id.; Gregory, 948 F.2d
at 207; Mid-Continent Cas. Co., 2005 WL 1123759, at *6.
SUMMARY JUDGMENT MOTIONS
Both Liberty Mutual and Lexington filed traditional and no-evidence motions for summary
judgment. The trial court denied Liberty Mutual’s motions and granted Lexington’s. We begin
by reviewing Liberty Mutual’s no-evidence motion.
A. Liberty Mutual’s No-Evidence Motion
In its motion, Liberty Mutual stated it relied on both the traditional and no-evidence
standards. However, Liberty Mutual was only entitled to a no-evidence summary judgment if it
identified elements of Lexington’s cause of action on which there was no evidence and for which
Lexington had the burden of proof at trial. See TEX. R. CIV. P. 166a(i); Urena, 162 S.W.3d at 550.
Although Lexington had the burden to prove a policy existed, the policy covered the loss,
and if an exclusion applied, an exception to the exclusion, see Gilbert Tex. Constr., 327 S.W.3d at
124, it was Liberty Mutual who offered the policy—which shows coverage—as part of its
summary judgment evidence. Further, Liberty Mutual did not assert there was no evidence of any
exception to the exclusion. Thus, Liberty Mutual was not entitled to summary judgment on the
grounds that there was no evidence of coverage or an exception to the exclusion—issues for which
Lexington would have the burden of proof at trial. See TEX. R. CIV. P. 166a(i); Urena, 162 S.W.3d
at 550. Thus, the trial court did not err in denying Liberty Mutual’s no-evidence motion for
summary judgment.
B. Lexington’s Cross-Motion for Summary Judgment
In Lexington’s cross-motion, it sought summary judgment under the no-evidence and
traditional rules.
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As grounds for its no-evidence motion, Lexington asserted three key points: Liberty Mutual
had the burden to prove the own, rent, or occupy exclusion applied; the parties agreed Total did
not own or rent the premises; and, there was no evidence that Total occupied the damaged property.
Specifically, Lexington contended there was no evidence that Total’s operations on the premises
constituted occupancy, and there was no evidence that Total occupied the damaged property—the
roof.
In its traditional motion, Lexington argued the evidence shows as a matter of law that Total
did not occupy the damaged property; it did not assert any exception to the exclusion. We address
each of the grounds for summary judgment set forth in Lexington’s combined and Liberty
Mutual’s traditional motions.
1. Lexington’s Grounds, Liberty Mutual’s Traditional Ground
Lexington’s grounds and Liberty Mutual’s traditional ground involve the same facts and
law; we discuss the facts and grounds together but separately apply the applicable summary
judgment standards. See TEX. R. CIV. P. 166a(c) (traditional); id. R. 166a(i) (no evidence).
Lexington does not dispute the existence or validity of the lease agreement or the
assignment, or the fact of Total’s operations on the premises. Instead, Lexington contends (1)
there is no evidence that Total’s operations on the premises constitute occupancy of the damaged
property, see TEX. R. CIV. P. 166a(i), and (2) the evidence shows as a matter of law that Total did
not occupy the damaged property, id. R. 166a(c).
Liberty Mutual argues there are no genuine issues of material fact, it conclusively proved
it occupied the premises, including the roof, and it is entitled to judgment as a matter of law. See
id.
We review the summary judgment evidence and apply the applicable law concerning
Total’s operations on the premises.
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2. Total Held or Kept the Premises for Its Use
As part of its summary judgment evidence, Liberty Mutual provided the 2002 lease
between Total and DCT’s predecessor lessor. The lease provides that Total “shall use the Premises
primarily for the purpose of operating a third-party logistics facility, including a pallet and
returnable plastic container refurbishment center which includes the shipping, receiving, painting,
and storage of such pallets and containers, and secondarily for such uses as are permitted in
Landlord’s commercially reasonable judgment.” The lease also provides that it is assignable by
Total to CHEP at any time.
Liberty Mutual also submitted the 2006 lease assignment from Total to CHEP which was
signed by Total, CHEP, and DCT’s predecessor lessor. These documents are not only some
evidence, but also conclusively prove Total had a contractual right be on the premises to conduct
its business operations as the tenant’s (CHEP’s) agent. As CHEP’s agent, Total exercised CHEP’s
possessory rights to the premises. Cf. Travis Cent. Appraisal Dist. v. Signature Flight Support
Corp., 140 S.W.3d 833, 841 (Tex. App.—Austin 2004, no pet.) (“‘An ownership interest in a
leasehold is the legal right to possess that property for a set period of time . . . [and] to possess the
property under the terms of the lease.” (first alteration in original) (quoting Panola Cnty. Appraisal
Dist. v. Panola Cnty. Fresh Water Supply Dist. No. One, 69 S.W.3d 278, 284 (Tex. App.—
Texarkana 2002, no pet.)).
The lessor, under the assigned lease, and CHEP, under the operating agreement, retained
some rights to enter onto the premises under certain conditions, e.g., tenant default, inspections,
hazardous waste remediation, facility maintenance, etc. Otherwise, Total generally controlled
access to the premises. It could grant its employees and third parties permission to enter the
premises. Cf. id. It could keep others out of the premises. Cf. id.
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We conclude Liberty Mutual not only met its burden to provide some evidence that it
occupied the premises, its evidence conclusively proved Total held or kept the premises for its use.
See Gilbert Tex. Constr., 327 S.W.3d at 124 (burden); Kelley-Coppedge, 980 S.W.2d at 467
(occupancy). Thus, as a matter of law, Total occupied the premises. See Kelley-Coppedge, 980
S.W.2d at 467. We turn to the second aspect of Lexington’s grounds—that Total did not occupy
the property that was damaged.
3. Use of Premises Includes Use of Roof
Lexington argues that even if we accept Liberty Mutual’s construction of the term occupy,
Total did not occupy the roof because the roof was not part of the premises and neither CHEP nor
Total was “delegated control or use of the roof.” Lexington’s argument necessarily fails because
the lease expressly anticipates and authorizes Total’s use of the ceiling and roof.
a. Lease section 7.1
Lease section 7.1 states “Landlord shall not be responsible for the following: (i) any roof
penetrations caused by or installed for Tenant’s operation[s or any] damage to the roof, exterior
walls, and/or foundation resulting from the negligent act or acts, or omissions of Tenant.”
b. Lease section 9.1
Lease section 9.1 addresses prior consent for alterations and fixtures. It reads in pertinent
part as follows: “Tenant shall have the right to make non-structural alterations, additions or
improvements to the Premises without the necessity of obtaining Landlord’s consent [for such
changes costing $25,000 or less].” These changes expressly include “[a]ny alteration,
improvement, modification or fixture which is installed by . . . Tenant on the Premises and which
is in any manner attached to the floors, walls or ceilings.”
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c. Lease section 9.2
Lease section 9.2 provides that “all normal trade fixtures, equipment, shelves, machinery
and fixtures installed in the Premises at the cost of Tenant . . . may be removed by Tenant.”
Reading the lease and the assignment as a whole, we conclude all three signatories—the
lessor, CHEP, and Total—understood Total’s permitted use of the premises might cause it to install
fixtures, equipment, machinery, or the like to support its operations on the premises. Each
understood these anticipated alterations included attaching items to the ceiling, penetrating the
roof, and mounting equipment to the roof and ceiling. Although the lessor retained overall control
of the roof and was responsible for its maintenance, the lease expressly allowed Total to use the
ceiling and roof as needed for Total’s operations, and that right of use continued for the entire
period of the lease. Thus, Total had a right to a continued physical presence for its equipment on,
under, or otherwise attached to the roof.
CONCLUSION
Under Kelley-Coppedge, the term “occupy”—in an “own, rent, or occupy” exclusion in a
commercial general liability policy that does not otherwise define occupy—means “to hold or keep
for use.” We hold that “occupy” comprises (1) a continued physical presence and (2) control of
the premises for the insured’s own benefit.
Having reviewed the summary judgment evidence de novo, we conclude Liberty Mutual
proved as a matter of law that Total occupied the premises, including the roof, at the time of the
incident, and the exclusion precludes coverage. Therefore, the trial court erred when it granted
Lexington’s cross-motion for summary judgment.
We reverse the trial court’s order and render judgment that Lexington take nothing from
Liberty Mutual on Lexington’s subrogation claim.
Patricia O. Alvarez, Justice
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