400 F. App'x 938
5th Cir.2010Background
- ARM properties group purchased property insurance for hundreds of apartment complexes; Katrina damaged nine ARM properties.
- Three-layer policy structure: Primary Policy by Westchester ($20M, with $7.5M flood sub-limit), First-Layer Policy by Essex ($10M), RSUI second-layer excess ($470M) over combined $30M.
- RSUI argues wind-water damage falls within exclusions; ARM seeks $5,500,587.03 under RSUI.
- District court found ACC Clause and Water Exclusion incorporated, RSUI liability attached, flood deductible not incorporated, aggregate sub-limit, anti-assignment waived insurable interest issues; awarded ARM full claim.
- Court of appeals addresses whether ACC Clause and Water Exclusion are incorporated; Texas law governs interpretation; relies on policy-integration analysis.
- Threshold issue: if ACC Clause and Water Exclusion are incorporated, wind-water damages exceed policy limits and ARM cannot recover under RSUI; opinion reverses and remands.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether ACC Clause and Water Exclusion are incorporated into RSUI | ARM/PLaintiff: incorporated by RSUI via policy clauses. | RSUI/Defendant: not incorporated; exclusions do not apply to excess policy. | ACC Clause and Water Exclusion incorporated |
| Whether RSUI’s liability attaches under the RSUI Policy | ARM: RSUI liable for wind-water losses. | RSUI: excluded because primary policy exclusions apply. | Liability not reached under RSUI due to incorporation finding |
| Whether flood deductible from Primary Policy is incorporated | Flood deductible should reduce RSUI exposure if incorporated. | Deductible not incorporated into RSUI. | Not reached due to threshold on wind-water incorporation |
| Whether scheduled limit of liability applies on an aggregate basis | Aggregate damages must be tallied across layers. | Aggregate interpretation favors RSUI. | Not reached due to threshold issue |
| Whether RSUI waived anti-assignment clause/insurable interest | Waiver permitted ARM assignments and insurable interest. | RSUI did not waive or extinguish those protections. | Not reached due to threshold issue |
Key Cases Cited
- Leonard v. Nationwide Mut. Ins. Co., 499 F.3d 419 (5th Cir. 2007) (ACC clause excludes water damage even if wind contributed)
- Bilbe v. Belsom, 530 F.3d 314 (5th Cir. 2008) (wind-water synergistic damage excluded under ACC/Water exclusions)
- Wentwood Woodside I, LP v. GMAC Commercial Mortgage Corp., 419 F.3d 310 (5th Cir. 2005) (ambiguous maintenance-of-primary-insurance provisions affect incorporation)
- Bank of La. v. Aetna U.S. Health Care, Inc., 571 F.Supp.2d 728 (E.D. La. 2008) (district court summary judgment approach in insurance contract disputes)
- State Farm Life Ins. Co. v. Beaston, 907 S.W.2d 430 (Tex. 1995) (ambiguous terms construed against insurer in coverage disputes)