Lead Opinion
Thiеves stole copper tubing out of seventeen free-standing commercial air-conditioning units permanently installed on the roof of a vacant office building owned by Defendants-Appellees Wan E. Law and Sie L. Tsu (the “Laws”). The Laws’ commercial property insurer, Certain Underwriters at Lloyd’s, London (“Underwriters”), denied coverage based on the insurance policy’s theft exclusion, and this declaratory action by Underwriters ensued. The district court held that coverage was available, apparently (but not completely clearly) basing its holding on either (1) the policy’s coverage of vandalism damage or (2) the policy’s burglary exception to its theft exclusion; and both parties appealed. We reverse the holding of the district court in favor of the Laws and render a take-nothing judgment against them.
I. FACTS AND PROCEEDINGS
The facts of the underlying theft are not in dispute. In April 2005, thieves climbed onto the roof of the Laws’ building in Houston, tore off portions of the exterior panels that formed the housings of each of seventeen air-conditioning units, then broke into the units themselves to steal their copper condenser coils. The salvage value of the stolen copper was less than $2,000, but the total damage to the air-conditioning units caused by the thieves in the course of stealing the copper was closer to $200,000. The Laws reported the theft to Houston police and filed a claim with Underwriters for the costs of repair and replacement.
Underwriters denied coverage based on the policy’s theft exclusion and sought a declaratory judgment in district court that it had no duty to indemnify the Laws. The Laws counter-sued seeking a declaratory judgment that their claim was covered.
The district court granted the Laws’ motion for summary judgment and awarded them $177,150, the gross cost of repair minus the salvage value of the stolen copper, plus attorneys’ fees. The awаrd was based on the parties’ stipulation of the repair costs incurred by the Laws and the salvage value of the stolen copper tubing. Both parties filed timely notices of appeal.
II. ANALYSIS
We review a district court’s grant of summary judgment and its interpretation of an insurance policy de novo.
Underwriters makes two claims of error: The district court (1) misinterpreted the insurance policy; and, (2) in any event, the court miscalculated the damages.
A. The Insurance Policy
The vandalism provision at issue, which also contains both the theft exclusion and the exception to that exclusion for damage from breaking and entering, reads, in relevant part:
A. Covered Causes of Loss ...
Covered Causes- of Loss means the following:
8. Vandalism, meaning willful аnd malicious damage to, or destruction of, the described property.
We will not pay for loss or damage caused by or resulting from theft, except for building damage caused by the breaking in or exiting of burglars.
The instant dispute turns on whether the damage to the Laws’ air conditioners is (1) vandalism (the “vandalism coverage”), (2) damage caused by or resulting from theft (the “theft exclusion”), or (3) building damage caused by the breaking in or exiting of burglars (the “ingress/egress exception”).
Underwriters asserts that the damage done to the roof-mounted air conditioners resulted from theft and is therefore excluded from coverage by the theft exclusion, insisting that the district court misconstrued the policy by finding coverage under the ingress/egress exception to that exclusion. The Laws counter thаt the district court correctly found coverage under the vandalism provision, but that, alternatively, coverage would also have been
The parties thus disagree about the basis of the district court’s ruling, and the reasons for the court’s decision are less than pellucid to us. There can be no question, however, that because the district court found coverage for damage to the air conditioners, its judgment must rest on one of two different findings: The damage resulted either from vandalism or from the actions of burglars breaking into or exiting from the Laws’ building.
1. Texas Law
We look first to background principles of Texas law that govern the interpretation of contracts in general and insurance policies in particular.
The dissent concludes that the controlling provisions of the policy are ambiguous then relies on the pro-insured penumbra in Texas law to find coverage. But, even recognizing that reasonable minds can disagree, we are compelled to repeat for emphasis that this Texas maxim favoring the insured applies only after the court determines that there is ambiguity in a policy’s wording—and we find none here. Therefore, like the courts of Texas, we conduct our analysis pursuant to ordinary principles of contract interpretation. Indeed, this is where, with the utmost respect, we part company with the dissent: It finds ambiguity then finds coverage by crediting the insured’s interpretation of the putatively ambiguous language over that of the
Consideration of the pertinent policy provisions at issue in this case appears to be one of first impression in Texas and in this Circuit.
2. Vandalism
Although the district court never еxpressly labeled the damage as resulting from vandalism per se, the Laws insist that the district court nevertheless based its holding on a determination that the damage was caused by acts of vandalism.
The Laws nevertheless contend that the purpose for which damage is done is irrelevant to determining whether the cause of the damage is vandalism. But their position ignores the distinction that the policy makes and would render the theft exclusion meaningless, in contravention of the rule that each element of a contract or insurance policy must be given effect. We reject the Laws’ contention. The policy provisions at issue, viz., the vandalism coverage, the theft exclusion, and the ingress/egress exception, indisputedly turn on the purpose for which the damage at issue is done: (1) Damage done for no purpose other than to destroy property for destruction’s sake is “vandalism;”
We also reject the Laws’ contention that any damage which is excessive and unnecessary to accomplish a theft, even if in furtherance of it, is vandalism. That one thief chooses to pick a lock to gain entry while another takes an axe to the door cannot be the basis for different coverage outcomes under the same insurance policy. The Laws would have us deny recovery to the first hypothetical policyholder because the damage was minimal or non-existent and, therefore, entirely necessary to accomplish the theft, but grant recovery to the latter one because the damage was significant or excessive and, therefore, vandalism.
Here, the damage was solely in furtherance of stealing the copper. Just enough of the air-conditioning units’ exterior metal paneling was torn away to allow access to the machinery inside. Likewise, the actual cooling mechanisms inside the paneling were damaged by the thieves for the sole purpose of gaining access to the copper. There is no evidence of “malicious” damage in any of this, yet the policy defines vandalism conjunctively as willful and malicious damage to the property. Even though the damage done might have exceeded the minimum required to gain access to the copper tubing, it was done entirely to gain such access. As such, the damage was done solely to further the theft and was not vandalism as that term is used in the policy.
The plain language of the instant insurance policy lеaves little room for debate that this was damage “caused by or resulting from” theft and is thus excluded from coverage by virtue of the theft exclusion to the coverage of vandalism. Thieves caused the damage in the course of gaining access to the object of their theft, i.e., the copper tubing components of the air-conditioning units. But for the thieves’ desire to steal the copper tubing, the damage would not have occurred. The damage therefore falls squarely within the theft exclusion—unless, that is, it is covered by virtue of the theft exclusion’s ingress/egress exception.
3. The Ingress/Egress Exception
In the vandalism/theft/burglary inquiry, the most narrow and complex question asks whether the incidental damage to the housings and machinery of the roof-mounted air-conditioning units can be shoe-horned into the ingress/egress exception to the theft exclusion from vandalism coverage. Again, we first turn to the text: “... except for building damage caused by the breaking in or exiting of burglars.” The district court determined that the air conditioners were part of the insured building because they are fixtures, and the
The Laws insist that because of that definition, the thieves’ entry into the rooftop fixtures is equivalent to “breaking in or exiting” the building. Following the Laws’ argument, the air conditioners as fixtures are essentially surrogates for the building itself. The dissent agrees, finding the policy ambiguous and the Laws’ contention a reasonable interpretation of it. Relying on the pro-insured treatment of insurance policy ambiguity, the dissent asserts that we must adopt the Laws’ view.
Again, however, we perceive no ambiguity. The policy employs a common phrase in a familiar context: “breaking in,” as in a burglary. Texas courts have stated that the phrase “to break in” in the context of burglary is commonly understood.
The protection is to the interior or enclosed part of the described object, be it a house, a building or a vehicle.... Taking items attached to the outside of the vehicle, house, or building that does not reflect an entry into an interiоr or enclosed part of the described object in order to steal does not constitute the offense of burglary.19
We certainly do not doubt that the large, self-contained air-conditioning units installed atop the exterior roof of the Laws’ building can be considered fixtures.
Texas’s definition of “burglar” offers further, support. A “burglar” is one who, without the owner’s consent, “(1) enters a habitation, or a building (or any portion of á building) not then open to the public with intent to commit a felony, theft, or an assault; ... (3) enters a building or habitation and commits or attempts to commit a felony, theft, or an assault.”
As we observed earlier, the dissent’s entire reasoning is founded on its view of the policy’s wording as ambiguous. In contrast, we find no ambiguity in the words of the insurance policy or in the policy as a whole. As we thus follow the dictates of Texas law and rely on the plain meaning of the policy’s language, we never reach the competing interpretations proffered by the parties as we would if we were first to conclude that the governing provisions of the policy were ambiguous.
We are guided in our analysis by the charge under Texas law to construe the contract consistently with the parties’ original intent.
As a result, we reject the Laws’ assertion that the thieves’ physical intrusion into the seventeеn free-standing, self-contained air conditioners themselves was sufficient to qualify the thieves as “burglars” or their actions as “breaking in or exiting” the building. Such a determination would turn almost entirely on the fact that the air conditioners were outside the building proper. Had the same units been inside the building, they could not be damaged by burglars gaining entry into the building, but rather by burglars already inside.
We likewise reject the Laws’ contention that, at the very least, the metal housings that contained the air-conditioning units are tantamount to outbuildings that the thieves had to break into and enter to gain access to the air conditioners inside and strip their copper. The housings in question are essentially large, custom-made metal boxes, the size of a small shed or shipping container, that contain the actual cooling machinery. They are integral parts of the air-conditioning units; the air conditioners are defined with the housings as integral components and each is mounted onto the roof as a single contraption. The metal housings are merely the most exterior components of the free-standing air-conditioning units. The fact that they come from their manufacturer with permanent protective housings made specifically for these machines and are integral components of them precludes the transformation of the thieves into burglars or their actions in gaining access to the machinery
In sum, we decline to credit any of the Laws’ tortured interpretations of the uncomplicated language of the policy’s ingress/egress exception. The phrase “building damage caused by the breaking in or exiting of burglars” is straightforward and unambiguous, ineluctably requiring breaking through (or attempting to break through) a building’s exterior to gain access to its interior for the purpose of committing a theft crime. There is no room in the ordinary understanding of the phrase for extending its ambit to include damage caused to a roof-mounted air conditioner during the course of stealing its copper tubing. We cannot imagine that the parties could have intended this meaning when they entered into this contract of insurancе. Simply put, damage caused to an exterior fixture to gain access to its own internal components is not building damage caused in gaining access to the building itself, even if that fixture is determined to be part of the building for some other policy purpose. We hold that the damage done to the casings and machinery of the Laws’ roof-mounted air conditioners resulted from theft, which falls within the theft exclusion to the policy’s coverage of vandalism, and did not result from the breaking into the insured building by burglars. The ingress/egress exception to the theft exclusion is inapplicable to the facts of this case.
III. CONCLUSION
The damage suffered by the Laws resulted from neither vandalism nor the breaking into or exiting of the insured building by burglars. Rather, the damage to the Laws’ air conditioners was caused by or resulted from acts of theft. As such, the policy expressly excludes coverage of the costs of repair or replacement of the Laws’ air-conditioning units. We therefore reverse the judgment of the district court, vacate its award of damages and attorneys’ fees to the Laws, and render judgment that the Laws take nothing. As the Laws thus recover no damages, we need not, and therefore do not, address Underwriters’ claim of error in the district court’s calculation of damages.
REVERSED; VACATED; and RENDERED.
Notes
. The Laws never filed a brief in support of their appeal; they only responded to Underwriters’ brief and, in so doing, made no claim of error.
. See, e.g., Gore Design Completions, Ltd. v. Hartford Fire Ins. Co.,
. See, e.g., Foradori v. Harris,
. Don’s Bldg. Supply, Inc. v. OneBeacon Ins. Co.,
. R & P Enters, v. LaGuarta, Gavrel & Kirk, Inc.,
. Gray & Co. Realtors, Inc. v. Atl. Hous. Found., Inc., 228 S.W.3d 431, 434 (Tex.App.Dallas 2007, no pet.).
. See, e.g., DeWitt County Elec. Co-op., Inc. v. Parks,
. Columbia Gas Transmission Corp. v. New Ulm Gas, Ltd.,
. Barnett v. Aetna Life Ins. Co.,
. U.S. Fid. & Guar. Co. v. Bimco Iron & Metal Corp.,
. In Bimco, the Texas Supreme Court considered the theft-vandalism issue in the context of an insurance policy the wording of which is so different that it is of little assistance here. Id. at 354-55.
. We reject Underwriters' contention that the Laws waived this argument by failing to raise it to the district court. The Laws' assertions of vandalism to the district court were perhaps not robust, but they were sufficient to eschew waiver. In their response to Underwriters' motion for summary judgment, the Laws repeatedly referred to the possibility that the damage was vandalism. Furthermore, the parties' arguments are based entirely on the policy's vandalism provision, in which (1) coverage of vandalism, (2) the theft exclusion, and (3) the ingress/egress exception are found.
. Webster’s defines "vandalism” as "1. deliberately mischievous or malicious destruction or damage of proрerty.” Webster's Encyclopedic Unabridged Dictionary, 1579 (1989).
. Smith v. Shelby Ins. Co. of Shelby Ins. Group,
. See id.
. At least one court has expressly considered and rejected this sort of relational distinction. Gen. Star Indent. Co. v. Zelonker,
. The "Building and Personal Property Coverage Form" (the "Coverage Form”) states that "Covered Property, as used in this Coverage Part, means the type of property described in this section .... a. Building, meaning the building or structure described in the Declarations, including ... (2) Fixtures, including outdoor fixtures.” (emphasis added).
. Landry v. State,
. Griffin v. State,
. A "fixture” is "1. something securely, and usually permanently, attached or appended, as to a house, apartment, building, etc.” Webster's Encyclopedic Unabridged Dictionary, 538 (1989). Black's defines the term as “[p]ersonal property that is attached to land or a building and that is regarded as an irremovable part of the real property.” Black's Law Dictionary, 669 (8th ed.2004).
. We do note, though, that immediately following the description on which the Laws (and the dissent) rely is an entirely separate "definition” of "Your Business Personal Property” which also includes the term "fixtures” without distinction. The Laws offer no explanation for how the description of "building” can be the sole applicable understanding of "fixtures” when it is immediately followed by a description of an entirely different term that also includes "fixtures.” Given the two competing provisions, we hardly think the "definition” on which the Laws rely can bear the weight they place on it.
. In the more common case, entry into the building will be a prerequisite to entry into a fixture, mooting the issue. In the more extreme case, it is possible that a fixture may be a means of entry into the building itself. Underwriters concedes that coverage would apply to damage caused during a Mission: Impossible-style entry through an air-condi
. Gen. Star Indem. Co. v. Zelonker,
In the second case that considered the language here at issue, the plaintiff did not claim that any of the loss would fall within the ingress/egress exception. Smith v. Shelby Ins. Co. of Shelby Ins. Group,
. Tex Penal Code Ann. § 30.02 (Vernon 2008).
. Id.
. Webster’s Encyclopedic Unabridged Dictionary, 500 (1989).
. Coker v. Coker,
. The dissent would have us find multiple entries with each intrusion by burglars further into the interior of the building—into the interior courtyard, into the fixture itself, and so on. Such an interpretation strays into the absurd and would eviscerate the theft exclusion.
. Under the Laws' interpretation, if the thieves had removed the air conditioners intact to some secure place and had then broken into them, the act would still constitute breaking into the building. The Laws' argument offers no explanation for how the air conditioners could continue to be part of the building (which they would have to be following the Laws' logic) after they had been moved far away from the insured building, long before their integrity was ever violated.
Dissenting Opinion
dissenting:
I agree with the majority’s conclusion that the damage at issue is not covered “vandalism” under the policy. See ante, Part 11(A)(2). I reach a different conclusion as to the construction of the building damage exception to the theft exclusion, what the majority terms “the most narrow and complex question” before the court. Id. at 579. For this reason, I would affirm the judgment of the District Court.
As the majority recognizes, when a court interprets an insurance policy under Texas law, “[ajmbiguity is ‘liberally’ construed in favor of the insured.” Id. at 577 (quoting Barnett v. Aetna Life Ins. Co.,
Adhering to these interpretive mandates, I reach two conclusions as to the proper construction of the ambiguous provision before the court: First, the air conditioners must be understood to be part of the building. Second, the damage at issue is properly characterized as damage caused when burglars broke into those units. This understanding of the policy is reasonable and “avoid[s] exclusion of coverage.”
Under the terms of the policy, the air conditioning units are part of the “building.” The policies “Building and Personal Property Coverage Form” defines the term “building” to “includ[e] ... [fixtures, including outdoor fixtures.” Ante at 580, n. 17. Construed in the insured’s favor, this definition no doubt extends to the roof-mounted air conditioning units. Even if the coverage form could not reasonably be construed to extend to all of the policy’s provisions, we would be obliged to adopt a definition of the term “building” that included fixtures, as this would be a reasonable definition that favored the insured. There is nothing in the policy to prevent construing “building” to include fixtures. Understanding a building to cоmprise in part its fixtures is perfectly reasonable. Indeed, it is the most natural understanding of the term. Specifically, “[i]t is common knowledge that a furna[c]e, or air conditioner, or light ‘fixture’ ... is generally regarded by us all as part of the building to which the item is attached.” Alphonse M. Squillante, The Law of Fixtures: Common Law and the UCC, 89 Com. L.J. 501, 501 (1984) (emphasis added). We are thus obliged to consider the-air conditioning units to be part of the building. Parkans Int’l v. Zurich Ins. Co.,
In terms of ordinary usage, it is natural to describe the damage at issue as the result of “breaking in ... of burglars.” Cf, e.g., Allstate Ins. Co. v. Smith,
Contrary to the majority, I conclude that Texas’ burglary statute further supports this construction of the policy. The majority recognizes that the Texas law definition of “burglar” includes a criminal who “‘enters a habitation, or a building (or any portion of a building) ... with intent to commit a ... theft.’ ” Ante at 581 (quoting Tex. Penal Code Ann. § 30.02 (Vernon 2008)) (emphasis added). The statute also “defines ‘enter’ as ‘to intrude ... any part of the body; or ... any physical object connected with the body.’ ” Id. (quoting Tex. Penal Code Ann. § 30.02 (Vernon 2008)). There can be no question that the thieves who destroyed the air
At its core, the court’s opinion reflects the majority’s conclusory assertion that the thieves “never became ‘burglars’ vis a vis the building qua building.” Id. In turn, this assertion rests on the majority’s insistence that “ ‘breaking in’ to a building unambiguously contemplates nothing more expansive than an attempt to enter bodily into the interior space of the building as bounded by the walls, floors and ceilings.” Id. at 580. But nothing in the policy demands such a cramped understanding of intrusion to apply only to a building’s “interior space.” That should be the end of the matter, because the majority’s narrowing construction works to exclude coverage. Nevertheless, Texas law offers additional support. It endorses a substantially more expansive view of entry. Texas cases involving the burglary of vehicles aptly illustrate the point. And it is wise to look to these eases “because ‘enter’ is defined exactly the same for burglary of a building or habitation as it is for burglary of a vehicle!;] the element of intrusion into a building or habitation under § 30.02 should be оf the same nature as intrusion into a vehicle under § 30.04.” Griffin v. Texas,
Lastly, the majority construes the policy to exclude coverage in order to avoid what it perceives to be two “varied and illogical outcomes.” Ante at 582.. First, the majority assumes that “[h]ad the same units been inside the building,” the plaintiffs claim necessarily would have failed because it would have been causеd by “burglars already inside” the building. Id. at 582. Based on this assumption, the major: ity faults the insured’s construction of the policy because it “turns artificially on the location of the fixtures, either inside or outside the building proper.” Id. Second, the majority is unwilling to “permit coverage to turn on the discrete burglary methodology employed by the thieves,” stressing that “[h]ad the thieves' taken a crane, and lifted the units intact off the building’s roof, there obviously would have been no ‘entry.’ ” Id. I disagree with the assump
I find nothing in the policy to support the majority’s assumption that coverage extends only to damage caused in the very first penetration into the building’s outermost perimeter. And I think this assumption would yield “varied and illogical outcomes.” Id. at 582. For examрle, imagine that an insured property contains an outer entryway into an interior courtyard or hall and that a locked door leads from the courtyard or hall farther into the building. The majority finds it obvious that the policy would cover only damage to the outer entryway, not the interior door. It asserts that each hypothetical must be understood to describe “multiple entries with each intrusion by burglars further into the interi- or of the building,” id. at 582, n. 28, presumably into the “interior space of the building as bounded by the walls, floors and ceilings,” id. at 580. I am not convinced. And how substantial must a courtyard’s “eeilin[g]” be in order to exclude coverage for damage caused to its interior doorway? What if it lacks a ceiling altogether? Similarly, imagine that valuable devices or appliancеs are sealed within a building’s interior walls. Under the majority’s view, damage caused by tearing into these walls could not be covered. I am not certain this assumption holds true. And what if the walls were exterior walls? Would tearing out an appliance amount to entry into the “interior space of the building as bounded by the walls, floors and ceilings?” These are issues we need not reach today, as “[njeither scenario applies here.” Id. at 580-81, n. 22. Nevertheless, these scenarios illustrate that the majority’s reasoning rests on assumptions that are in my view unwarranted.
At a more fundamental level, the majority’s requirement that coverage vary neither with the location of a fixture nor the method of its theft betrays our obligation to “strictly constru[e]” the policy “in favor of the insured in order to avoid exclusion of coverage.” Puckett,
The air conditioning units at issue were destroyed when thieves “broke into the units .... to steal their copper condenser coils.” Ante at 575 (emphasis added). Liberally construing the policy in the insured’s favor, these units were part of the building, and they consequently fall within the policy’s building damage exception to its theft exclusion. I would thus affirm the judgment of the District Court.