Pan Am Equities, Incorporated v. Lexington Insuran
959 F.3d 671
5th Cir.2020Background:
- Hurricane Harvey caused flood-only damage to two office buildings owned by Pan Am Equities; no wind damage occurred.
- Lexington Insurance covered the buildings under a policy with two relevant deductibles: a $100,000 Flood deductible and a larger Windstorm deductible equal to 5% of Total Insurable Value (TIV) for losses "arising out of a Named Storm."
- The Policy contains an Anti-Stacking clause: if multiple deductibles apply, the largest deductible governs.
- Lexington conceded coverage but applied the Windstorm (TIV-based) deductible for Harvey (a Named Storm), reducing Pan Am’s recovery to $0; Pan Am sued.
- The district court granted summary judgment for Lexington, finding the Policy unambiguous; the Fifth Circuit affirmed under Texas contract law.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Windstorm (Named Storm) deductible applies to flood-only damage caused by a hurricane | Pan Am: Windstorm deductible applies only if wind contributed; here loss was Flood-only so $100,000 Flood deductible controls | Lexington: "Named Storm" provision expressly brings Flood within "loss due to Windstorm," so the TIV-based Windstorm deductible applies; Anti-Stacking then selects the larger deductible | The court held the Policy unambiguous: Flood caused by a Named Storm falls within the Windstorm deductible; if both apply, the Anti-Stacking clause makes the larger (TIV) deductible control; judgment for Lexington affirmed |
Key Cases Cited
- SEACOR Holdings, Inc. v. Commonwealth Ins. Co., 635 F.3d 675 (5th Cir. 2011) (Named Windstorm deductible applied to hurricane-related water damage)
- Six Flags, Inc. v. Westchester Surplus Lines Ins. Co., 565 F.3d 948 (5th Cir. 2009) (both Flood and Named Storm deductibles applied to Katrina-induced flood damage)
- Kelley-Coppedge, Inc. v. Highlands Ins. Co., 980 S.W.2d 462 (Tex. 1998) (contracts must be construed to give effect to all provisions)
- First Bank v. Brumitt, 519 S.W.3d 95 (Tex. 2017) (extrinsic evidence cannot contradict an unambiguous contract)