Trammell Crow Residential Co. v. American Protection Insurance
574 F. App'x 513
5th Cir.2014Background
- Trammell Crow owned and operated Colorado apartment complexes and was insured by APIC, Virginia Surety, and Old Republic across 2001–2004 with APIC having a $1,000,000 per occurrence limit and $250,000 deductible.
- Trammell Crow tendered defense in a mold-related Colorado Litigation to Virginia Surety; Virginia Surety later sought contribution from APIC in an Insurance Litigation.
- APIC was found not to owe a duty to defend/indemnify in the Colorado Litigation; Virginia Surety’s contribution claim was resolved against Surety.
- APIC billed an expense account controlled by Trammell Crow for its defense costs incurred in the Insurance Litigation; Trammell Crow sought return of those funds while APIC counterclaimed for reimbursement.
- The district court granted summary judgment for APIC, holding defense costs were “claim expenses” and that Trammell Crow owed them up to the deductible; collateral estoppel barred some arguments about the deductible.
- On appeal, the Fifth Circuit affirmed in part and reversed in part, remanding for further proceedings consistent with its opinion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether APIC’s defense costs in the Insurance Litigation are ‘claim expenses’ under the policy. | Trammell Crow contends “claim expense” requires costs incurred by the insured only. | APIC argues “claim expense” includes costs incurred by either party (disjunctive reading of ‘and’). | Ambiguous; costs incurred by either party qualify, so APIC may recover up to the deductible. |
| How to read the policy’s use of ‘and’ in ‘incurred by the insured and by us.’ | Trammell Crow reads ‘and’ as conjunctive, limiting to costs incurred by the insured. | APIC reads ‘and’ as disjunctive, allowing costs incurred by either party. | Disjunctive reading adopted; costs incurred by either party qualify as claim expenses. |
| Whether collateral estoppel bars Trammell Crow from arguing it has met the deductible. | The deductible issue in the Insurance Litigation did not address APIC’s defense costs. | District court held deductible not met; estoppel should apply. | Collateral estoppel does not bar the deductible argument; remand to consider deductible including APIC costs. |
| Whether the district court erred in not considering APIC’s defense costs in applying collateral estoppel. | The prior order did not address the added claim expense of APIC’s defense costs. | Estoppel applies based on the prior ruling that deductibles were not met. | Error; remand to consider new deductible amount with APIC costs. |
Key Cases Cited
- Velazquez, 660 F.3d 895 (5th Cir. 2011) (construes ‘and’ as disjunctive in certain contexts to reflect intent of the contract)
- Lanier v. Spring Cypress Inv., 1995 WL 489427 (Tex. App.—Houston (unpublished)) (context supports disjunctive reading of ‘and’ to effectuate contract intent)
- Aerospatiale Helicopter Corp. v. Universal Health Servs., 778 S.W.2d 492 (Tex. App.—Dallas 1989) (indemnity clause read to cover two alternative circumstances; ‘and’ can mean ‘or’ in context)
- Board of Insurance Commissioners of Texas v. Guardian Life Ins. Co. of Texas, 180 S.W.2d 906 (Tex. 1944) (interpreting ‘and’ versus ‘or’ in insurance context to effectuate parties’ intent)
- American National Ins. Co. v. Wilson State Bank, 480 S.W.2d 296 (Tex. Civ. App.—Amarillo 1972) (illustrates ordinary meaning of contract language and avoid over-narrow reading of terms)