The LYND COMPANY, Appellant v. RSUI INDEMNITY COMPANY, Appellee.
No. 04-11-00193-CV.
Court of Appeals of Texas, San Antonio.
March 28, 2012.
197
a complaint that the arbitrator exceeded his powers.”). We may not substitute our own judgment just because we would have reached a different conclusion. See Centex/Vestal, 314 S.W.3d at 686. Therefore, vacating an arbitrator’s award is rare.
The Fifth Circuit Court of Appeals’s case law is instructive. The Fifth Circuit has stated an award is legitimate so long as it “draws its essence from the collective bargaining agreement.” Folger Coffee Co. v. Int’l Union, United Auto., Aerospace & Agric. Implement Workers of Am.-UAW, Local Union No. 1805, 905 F.2d 108, 110 (5th Cir.1990) (quoting Enter. Wheel & Car Corp., 363 U.S. at 597, 80 S.Ct. 1358). The Fifth Circuit further explained that “[a]n award draws its essence from the agreement so long as it is ‘rationally inferable’ in ‘some logical way’ from the agreement.” Id. (quoting Int’l Chem. Workers Union v. Day & Zimmermann, Inc., 791 F.2d 366, 369 (5th Cir.1986)).
Here, the CBA did not expressly state that the City’s past practice of buying back sick leave or whether the City acted in good faith could be considered. But, even if the arbitrator made a mistake of fact or misapplied the substantive law when he considered the City’s past practices, we find his consideration of the City’s past practice drew its essence from the CBA. See Folger Coffee Co., 905 F.2d at 110; Pheng Invs. Inc., 196 S.W.3d at 329. Therefore, we hold the trial court did not err by affirming the arbitrator’s award.
Conclusion
Although we recognize the significant hardships the arbitrator’s decision has placed on the City, our review is very limited, and we must affirm the arbitrator’s findings because there are no valid reasons to vacate the arbitrator’s award. See Pheng Invs. Inc., 196 S.W.3d at 329. We also hold the issue of past practices, as submitted by Mojica, was an arbitrable issue as it drew its essence from the CBA. Accordingly, the trial court’s judgment is affirmed.
Jay W. Brown, Bruce Ramsey Wilkin, Stephen R. Wedemeyer, Winstead PC, Houston, TX, for Appellee.
Sitting: CATHERINE STONE, Chief Justice, SANDEE BRYAN MARION, Justice, STEVEN C. HILBIG, Justice.
OPINION
SANDEE BRYAN MARION, Justice.
This is an appeal from a take-nothing summary judgment rendered in favor of appellee. The issues on appeal center on the interpretation of an excess coverage insurance policy issued by appellee, RSUI Indemnity Company (“RSUI”), to appellant, The Lynd Company (“Lynd”). We reverse the trial court’s judgment and render judgment in favor of Lynd.
BACKGROUND
Lynd manages apartment complexes across the country. During the period of March 31, 2005 through March 31, 2006, Westchester Fire Insurance Company (“Westchester”) provided the primary property insurance coverage for the complexes under a single policy, with a total policy limit of $20 million per occurrence. In addition to the coverage for the buildings, personal contents, and loss of business income, the Westchester policy provided separate coverage for code compliance and debris removal costs. RSUI provided excess property coverage for damage over Westchester’s $20 million limit, up to $480 million per year per occurrence. There is no dispute that both policies provided coverage for hurricane damage.
On September 23, 2005, Hurricane Rita damaged fifteen Lynd apartment complexes, all covered by both policies, causing damage in excess of $24 million. Westchester and RSUI retained Bill Franz, an
STANDARD OF REVIEW
We review an order granting a traditional motion for summary judgment de novo. Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex.2005). A traditional motion for summary judgment should be granted only when the movant establishes there are no genuine issues of material fact and the movant is entitled to judgment as a matter of law on the grounds expressly set forth in the motion.
Insurance policies are interpreted according to the same principles that govern contract interpretation. See Utica Nat’l Ins. Co. v. Am. Indem. Co., 141 S.W.3d 198, 202 (Tex.2004); see also MCI Telecomm. Corp. v. Tex. Utils. Elec. Co., 995 S.W.2d 647, 650-51 (Tex.1999) (interpretation of an unambiguous contract is a question of law, which is reviewed de novo). Our primary goal is to give effect to the written expression of the parties’ intent. Balandran v. Safeco Ins. Co. of Am., 972 S.W.2d 738, 741 (Tex.1998). We must read all parts of the contract together, striving to give meaning to every sentence, clause, and word to avoid rendering any portion inoperative. Id.
CALCULATION OF LOSS
The dispositive issue in this appeal concerns how RSUI may limit its liability when multiple properties are damaged in a single occurrence. Resolution of this issue involves the interpretation of RSUI’s policy, which contains a “Scheduled Limit of Liability” endorsement that reads, in pertinent part, as follows:
SCHEDULED LIMIT OF LIABILITY
This endorsement modifies insurance provided under the following:
ALL COVERAGE PARTS
It is understood and agreed that the following special terms and conditions apply to this policy:
1. In the event of loss hereunder, liability of the Company shall be limited to the least of the following in any one “occurrence”:
a. The actual adjusted amount of the loss, less applicable deductibles and primary and underlying excess limits; b. 115% of the individually stated value for each scheduled item of property insured at the location which had the loss as shown on the latest Statement of Values on file with this Company, less applicable deductibles and primary and underlying excess limits. If no value is shown for a scheduled item then there is no coverage for that item; or
c. The Limit of Liability as shown on the Declarations page of this policy or as endorsed to this policy.
. . .
The term “occurrence”, where used in this policy, shall mean any one loss, disaster, casualty or series of losses, disasters, or casualties arising from one event.
When the term “occurrence” applies to a loss or series of losses from the perils of tornado, cyclone, hurricane, windstorm, hail, flood, earthquake, volcanic eruption, riot, riot attending a strike, civil commotion and vandalism and malicious mischief, one event shall be construed to be all losses arising during a continuous period of 72 hours. When filing a proof of loss the insured may elect the moment at which the 72 hour period shall be deemed to have commenced, which shall not be earlier than the first loss to occur at any covered location.
Lynd argues the above language requires RSUI to apply the same method of limiting its liability (a, b, or c) to all of the insured properties when damage to the properties arises from the same “occurrence.” Lynd contends RSUI may not “mix and match” the options. On appeal, RSUI first argues there is no summary judgment evidence that it “mixed and matched” the options. We disagree. It is undisputed that fifteen of Lynd’s properties sustained damage from the same “occurrence.” The worksheet prepared by Franz pursuant to RSUI’s instructions contains a list of the properties and various columns. The four columns relevant to this discussion show the building replacement value,1 the amount equal to 115% of the replacement value, the building loss claimed by Lynd, and the claim amount associated with the loss that RSUI agreed to pay. For twelve of the buildings, the loss amount claimed by Lynd was less than both the replacement value and the 115% limitation amount. For these twelve buildings, RSUI agreed to pay the loss amount claimed by Lynd, in other words, “the actual adjusted amount of the loss”—option (a). Two of the properties, however, sustained losses that exceeded both their replacement value and the 115% limitation amount. For these two buildings, RSUI agreed to pay only the 115% limitation amount—option (b). We conclude this is sufficient evidence to establish that RSUI did not select one limitation option and apply it uniformly to all properties damaged as a result of the single hurricane “occurrence.”
RSUI next asserts its liability is limited under the endorsement for each separately scheduled item of property. Thus, RSUI would decide which option to use for each separate property, as opposed to selecting one option and applying it to the aggregate loss sustained by all the properties arising from one “occurrence.” We believe both option (a) and option (b) require that the losses be aggregated
A scheduled policy is a policy in which “each separately treated item of property is in effect covered by a separate contract of insurance and the amount recoverable with respect to a loss affecting such property is determined independently of the other items of property.” 12 Couch on Ins. § 175.90. A blanket policy is a policy that “attaches to, and covers to its full amount, every item of property described in it.” Id. at § 177.72. The RSUI policy here includes a limitation option in subparagraph (b) that limits RSUI’s liability to “115% of the individually stated value for each scheduled item of property insured at the location which had the loss as shown on the latest Statement of Values on file with this Company. . . .” Limitation option (b) provides “scheduled” coverage.2 However, this option is not the only possible limitation on RSUI’s liability. As stated above, the “Scheduled Limit of Liability” includes two other possible limitations on RSUI’s liability—subsection (a) and subsection (c)—and the stated value for each scheduled property does not factor into either of these limitations. Which of the three limitation options applies is determined by which option yields “the least” loss “in any one occurrence.” For this reason, to decide the dispositive issue before us, we need not decide whether the RSUI policy provides for scheduled coverage or blanket coverage because our task is to read all parts of the contract together, striving to give meaning to every sentence, clause, and word to avoid rendering any portion inoperative. Balandran, 972 S.W.2d at 741. We do this without regard to how the policy or the coverage it provides is labeled.3 Therefore, we turn to the issue of whether RSUI may apply
In ARM Properties, ARM (the insured) had purchased more than one layer of insurance to cover several properties. RSUI provided the third excess layer of insurance. After nine properties were damaged by Hurricane Katrina, and after the first and second layer insurers paid their policy limits, ARM filed a claim with RSUI. RSUI denied the claim for several reasons. ARM sued, alleging, among other arguments, that RSUI had significantly undervalued its claimed losses by improperly applying the policy’s “limit of liability provisions.” Similar to the policy at issue in the appeal before this panel, the policy in ARM Properties contained the following “limit of liability provisions”:
In the event of loss hereunder, liability of the Company shall be limited to the least of the following in any one “occurrence”:
a. The actual adjusted amount of the loss, less applicable deductibles and primary and underlying excess limits;
b. 115% of the individually stated value for each scheduled item of property insured at the location which had the loss as shown on the latest Statement of Values on file with this Company, less applicable deductibles and primary and underlying excess limits. If no value is shown for a scheduled item then there is no coverage for that item; or
c. The Limit of Liability as shown on the Declarations page of this policy or as endorsed to this policy.
Id. *2.
The policy defined “occurrence” as “any one loss, disaster, casualty, or series of losses, disasters, or casualties arising from one event.” Specifically, in the case of a hurricane, “one event shall be construed to be all losses arising during a continuous period of 72 hours.” Neither party disputed that each of the nine properties insured under this policy was a “scheduled item of property.” Id.
Similar to the argument it makes in this appeal, RSUI argued the above language
The district court decided it was not necessary to decide whether the policy at issue was a scheduled or blanket policy because whether blanket or scheduled, “by its plain terms the extent of RSUI’s liability is the lesser of (a) the actual adjusted amount of all losses arising out of one occurrence; (b) 115% of the value of each scheduled item of property insured; or (c) the policy limit.” Id. at *9. “The policy definitions of ‘loss’ and ‘occurrence’ both contemplate a series of losses subject to the Limit of Liability clause. Therefore, the valuation method should be applied uniformly to all the losses in a series.” Id.
In this appeal, RSUI contends the Fifth Circuit has since directly addressed and rejected “the blanket approach applied in ARM Properties . . . instead, affirming a scheduled approach.” We disagree with RSUI’s interpretation of the two cited cases upon which it relies. In Gulfport-Brittany, LLC v. RSUI Indemnity Co., 339 Fed.Appx. 413 (5th Cir.2009), a single apartment complex was insured under a policy that contained clauses similar to those here:
In the event of loss hereunder, liability of the Company shall be limited to the least of the following in any one “occurrence”:
a. The actual adjusted amount of the loss, less applicable deductibles and primary and underlying excess limits;
b. 100% of the individually stated value for each scheduled item of property insured at the location which had the loss as shown on the latest Statement of Values on file with this Company, less applicable deductibles and primary and underlying excess limits. If no value is shown for a scheduled item then there is no coverage for that item; or
c. The Limit of Liability as shown on the Declarations page of this policy or as endorsed to this policy.
Id. at *2.
Gulfport-Brittany argued the policy was ambiguous because it was unclear whether the per occurrence limit for damage to the apartments was $140 million (the policy limit) or $2,458,014 (as stated in the latest Statement of Values). The Fifth Circuit concluded the policy was not ambiguous and the policy provided “overall occurrence limits of $140,000,000.00, and limit[ed] coverage for each individual property to the sub-limits listed on the Statement of Values on file with the company.” Id. at *5. The Fifth Circuit therefore concluded RSUI’s liability with respect to the apartment complex was limited to the $2,458,014.00 individually stated amount identified on the last Statement of Values. Id.
The other case cited by RSUI is RSUI Indemnity Co. v. Benderson Development Co., No. 2:09-cv-88-FtM-29DNF, 2011 WL 32318, at *1 (M.D.Fla. Jan. 5, 2011). That case involved damage to four different properties all insured under an excess coverage policy that contained liability-limitation options similar to those in Gulfport-Brittany. Id. at *4. The parties disputed whether the policy was a scheduled policy or a blanket policy. Without any discussion of the three possible limitations on the insurer’s liability, the court concluded the policy was a scheduled policy, rather than a blanket policy. Id. Again, however, the Benderson Development court did not address the same issue as in the case before this court.
The precise issue with which we are faced is one of first impression for a Texas state court, and we believe Judge Sparks’s opinion in ARM Properties provides persuasive guidance. Applying well-established rules of contract interpretation, we begin with the general “Insuring Clause” of the RSUI policy and then look to any limitations or modifications of that clause. The “Insuring Clause” provides as follows:
Subject to the limitations, terms and conditions contained in this Policy or added hereto, [RSUI] agrees to indemnify [Lynd] in respect of direct physical loss or damage to the property described in the schedule while located or contained as described in the schedule, occurring during the period stated in the schedule and caused by any of such perils as are set forth in item 3 of the schedule, and which are also covered by and defined in the policy(ies) specified in the schedule and issued by the “Primary Insurer(s)” [here, Westchester] stated therein. [Emphasis added.]
The first italicized language requires us to look to any other limitations or terms of the RSUI policy that modify the general language of the policy. One such modification is contained in the Scheduled Limit of Liability endorsement. The second italicized language obligates RSUI to indemnify Lynd only for those losses caused by perils set forth in the RSUI policy and specified in the Westchester policy (hereinafter, the “covered loss provisions”). This language is consistent with another clause contained in the RSUI policy, the “follow-ing form” clause, which states that the RSUI policy is “subject to the same warranties, terms and conditions . . . as are contained in or as may be added to” the Westchester policy.
The applicable covered loss provisions in the Westchester policy taken together with the applicable provisions in the RSUI policy determine the amount of loss Lynd may claim. RSUI’s liability for the balance of any claim, after its liability is triggered, is
The parties agree that the third of the three limitation options (the policy limit) does not apply here; therefore, in this case, RSUI was entitled to limit its liability “to the least of the following in any one ‘occurrence’”: (a) “the actual adjusted amount of the loss, less applicable deductibles and primary and underlying excess limits”; “or” (b) “115% of the individually stated value for each scheduled item of property insured at the location which had the loss as shown on the latest Statement of Values on file with this Company, less applicable deductibles and primary and underlying excess limits.” Subsection (a)—the actual adjusted loss limitation—is not linked to the stated value of the covered property.5 Only subsection (b)—the 115% limitation—is specifically linked to the individually stated value for each scheduled property as shown on the Statement of Values. And only subsection (b) calculates RSUI’s limitation on its liability as a percentage (115%) of value. We also note that the Statement of Values serves to identify the locations for which coverage is provided6 and provides for the calculation of the premium.7 Therefore, the mere presence of a Statement of Values does not transform an entire policy into a scheduled coverage policy. Instead, in addition to identification of coverage location and premium calculation, the Schedule of Values provides the method by which RSUI may—if it elects option (b)—calculate the limitation on its liability as a percentage of the value of the property, as opposed to the “actual adjusted loss” incurred by the property. Finally, the use of the disjunctive “or” indicates the parties’ intent to provide RSUI with a choice of one of the available limitation options when determining its liability for losses arising from one “occurrence.” See Neighborhood Comm. on Lead Pollution v. Bd. of Adjustment of the City of Dallas, 728 S.W.2d 64, 68 (Tex.App.-Dallas 1987, writ ref’d n.r.e.) (noting that “[o]ne of the recognized usages of ‘and’ is to refer to ‘either or both’ of two alternatives, when ‘or’ might be interpreted as referring to only one or the other”). An “occurrence” is defined as “any one loss, disaster, casualty or series of losses, disasters, or casualties arising from one event.” “When the term ‘occurrence’ applies to a loss or series of losses from the perils of . . . [a] hurricane . . . , one event shall be construed to be all losses arising during a continuous period of 72 hours.” It is undisputed that the losses Lynd’s properties sustained all arose from one “occurrence.”
rence.” See ARM Prop., 2008 WL 5973220, *9. Therefore, RSUI may limit its liability for damages to all properties arising from this one hurricane occurrence by applying either option (a) or option (b), but it may not apply both when the damage arises from the same “occurrence.” Accordingly, the trial court erred in rendering summary judgment in favor of RSUI.
CONCLUSION
We sustain Lynd’s first issue and reverse the trial court’s summary judgment in favor of RSUI.8 The parties have stipulated to the “least” amount in the event this court agrees with Lynd that RSUI must apply the same limitation option uniformly to all losses arising from the same “occurrence”; therefore, remand is not necessary. Accordingly, we render judgment in favor of Lynd in the amount stipulated to by the parties as follows:
| Amount owed under the policy | $4,190,400.65 |
| Texas Insurance Code Chapter 542 Interest | $2,486,837.49 |
| Pre-Judgment Interest | $ 651,307.13 |
| Attorney’s Fees through trial | $ 139,745.00 |
| Attorney’s Fees for an appeal to the Court of Appeals | $ 50,000.00 |
| TOTAL | $7,518,290.27 |
| Attorney’s Fees if appealed to the Texas Supreme Court | $ 25,000.00 |
UNITED STATES FIRE INSURANCE COMPANY, Appellant/Cross-Appellee v. The LYND COMPANY, Appellee/Cross-Appellant v. RSUI Indemnity Company, Cross-Appellee.
No. 04-11-00347-CV.
Court of Appeals of Texas, San Antonio.
Aug. 15, 2012.