642 F. App'x 359
5th Cir.2016Background
- Lexington issued a property insurance policy to Saratoga covering May 18, 2012–May 18, 2013 for multiple oil/gas properties with different insured values.
- Hurricane Isaac (Aug. 28, 2012) damaged several insured properties; Saratoga claimed $3,085,047.39 in damages.
- Lexington paid $2,001,191.28, calculating a Named Windstorm deductible of $912,500 (5% of the aggregate insured values), while Saratoga contended the deductible should be $400,000 (5% applied per property with a $250,000 minimum and then capped by the policy’s multi-deductible clause).
- Parties filed cross-motions for summary judgment limited to whether the policy language was unambiguous; the district court granted Lexington’s motion and denied Saratoga’s.
- On appeal, the Fifth Circuit reviewed contract interpretation de novo and affirmed, adopting Lexington’s interpretation of “5% of Total Insurable Values” as 5% of the aggregate insured values of the damaged properties.
Issues
| Issue | Plaintiff's Argument (Saratoga) | Defendant's Argument (Lexington) | Held |
|---|---|---|---|
| Meaning of “5% of Total Insurable Values” | "Total Insurable Values" means plural term applied to each property (5% per property), producing "mini-deductibles" | Phrase means 5% of the aggregate (sum) of insured values of the damaged properties | Court held phrase means 5% of the aggregate insured values (Lexington) |
| Effect of $250,000 minimum and multi-deductible clause | After per-property 5% (with $250k minimum), multiple deductibles exist and total deductible capped at highest mini-deductible ($400k) | If aggregate 5% produces single deductible, multi-deductible cap clause is not triggered; aggregate yields $912,500 | Court held only Lexington’s reading is reasonable; multi-deductible clause can apply in other multi-event scenarios but not here |
| Can policy be rewritten to adopt Saratoga’s interpretation based on endorsements | Saratoga points to endorsement headings ("Total Insured Value Per Interest") to argue a different technical meaning of "Total Insurable Values" | Lexington: the deductible language uses plain terms; court cannot insert "Per Interest" qualifier not present in deductible clause | Court refused to rewrite policy; ordinary meaning controls |
| Application of contra proferentem (favoring insured) | Saratoga relies on maxims favoring the insured to resolve ambiguity | Lexington argues language is unambiguous in its favor; court agreed there is only one reasonable interpretation | Court did not apply the insured-favoring rule because only one reasonable interpretation existed |
Key Cases Cited
- Admiral Ins. Co. v. Ford, 607 F.3d 420 (5th Cir. 2010) (ordinary-meaning rule for insurance terms)
- Markel Ins. Co. v. Muzyka, 293 S.W.3d 380 (Tex. Ct. App. 2009) (use of ordinary meaning for insurance terms)
- Cicciarella v. Amica Mut. Ins. Co., 66 F.3d 764 (5th Cir. 1995) (courts will not rewrite insurance contracts)
- U.S. Fire Ins. Co. v. Scottsdale Ins. Co., 264 S.W.3d 160 (Tex. Ct. App. 2008) (contract construction principles)
- Balandran v. Safeco Ins. Co. of Am., 972 S.W.2d 738 (Tex. 1998) (avoid rendering any policy provision inoperative)
- Certain Underwriters at Lloyds, London v. Law, 570 F.3d 574 (5th Cir. 2009) (when only one reasonable interpretation exists, courts construe policy as a matter of law)
- Martin Res. Mgmt. Corp. v. Axis Ins. Co., 803 F.3d 766 (5th Cir. 2015) (same principle on construing unambiguous policies as a matter of law)
- Matador Petroleum Corp. v. St. Paul Surplus Lines Ins. Co., 174 F.3d 653 (5th Cir. 1999) (harmless-error review of evidentiary rulings)