Corban v. United Services Auto. Ass'n

• Decision Date: 08 October 2009
• Docket Number: No. 2008-IA-00645-SCT.,2008-IA-00645-SCT.
• Parties: Margaret CORBAN and Magruder S. Corban v. UNITED SERVICES AUTOMOBILE ASSOCIATION a/k/a USAA Insurance Agency.
• Court: Mississippi Supreme Court

20 So.3d 601

Margaret CORBAN and Magruder S. Corban v. UNITED SERVICES AUTOMOBILE ASSOCIATION a/k/a USAA Insurance Agency.

No. 2008-IA-00645-SCT.

Supreme Court of Mississippi.

October 8, 2009.

Judy M. Guice, Clyde H. Gunn, III, Biloxi, Richard T. Phillips, Batesville, Christopher Collins Van Cleave, David Neil Harris, Jr., William Corban Gunn, Biloxi, for Appellants.

Charles G. Copeland, Robert P. Thompson, Robert L. Goza, Janet G. Arnold, Ridgeland, for Appellee.

EN BANC.

RANDOLPH, Justice, for the Court.

¶ 1. Dr. Magruder S. and Margaret Corban ("Corbans") incurred losses caused by physical damage to their Long Beach, Mississippi, residence during Hurricane Katrina on August 29, 2005. The Corbans had purchased a homeowner's policy and a flood policy from United Services Automobile Association Insurance Agency ("USAA"), both of which were in force at the time the losses were suffered.

¶ 2. The Corbans notified USAA of their claim for losses. USAA adjusters inspected the property and obtained an engineering report for an opinion as to whether the losses were caused by "wind damage ... versus flood damage." Subsequently, USAA informed the Corbans that the majority of the physical damage to their property was the result of flooding and that payment for losses caused by flood, an excluded peril in the homeowner's policy, would not be made under that policy.

¶ 3. Dissatisfied with USAA's decision, the Corbans filed suit. After answering the Complaint, USAA filed a "Motion for Partial Summary Judgment." Subsequently, the Corbans filed a "Motion for Partial Summary Judgment." The competing motions focused on the ambiguity, vel non, of the "water damage" exclusion and the "anticoncurrent cause" ("ACC") clause contained in the homeowner's policy, inter alia. The Corbans further asserted that if the policy language was determined to be unambiguous, then the provisions, when read together, were contrary to Mississippi public policy.

¶ 4. Following a hearing, the Circuit Court of Harrison County, Mississippi, First Judicial District, entered an "Order Granting Partial Summary Judgment to [USAA] and Denying Partial Summary Judgment to [the Corbans] Regarding Anticoncurrent Causation Clause and Storm Surge Issues (With Findings of Fact and Conclusions of Law)." The circuit judge found that "storm surge" is an "excluded peril" within the "water damage definition of the subject policy"; that the "water damage" exclusion and ACC clause are "unambiguous"; and that, although expressing a contrary interpretation of the policy language, "the anticoncurrent causation clause will be applied herein as interpreted by the United States Fifth Circuit Court of Appeals, thereby barring coverage under the homeowner's policy for any damage caused by water as defined in the policy or caused concurrently or sequentially by wind and water in combination." The Corbans sought an interlocutory appeal of these rulings, which this Court granted.¹ See Miss. R.App. P. 5.

FACTS

¶ 5. The Corbans had resided on East Beach Boulevard, Long Beach, Mississippi, several hundred feet from the Mississippi Gulf Coast,² since 1988. The subject property was insured by two policies, a homeowner's policy and a flood policy,³ each procured from USAA. The insured property included a two-story dwelling, multi-car garage, guest cottage, gazebo, and potting shed, among other structures. Significant damage was wrought upon the Corbans' real and personal property during Hurricane Katrina, causing significant losses. The Corbans filed a claim seeking indemnity for their losses, in the amount of $1,607,926.

¶ 6. USAA assigned Chris Sims and Joe Howell to adjust the Corbans' claim. According to Howell, Sims retained an engineer to inspect the property because "[w]e were using engineers on large, significant losses to help determine whether there was wind damage ... versus flood damage." Paul R. William, P.E., and Jim D. Wiethorn, P.E., of Haag Engineering Company ("Haag") inspected the property. Howell testified that no engineering report was necessary for a flood-policy claim as "it's obviously total flood damage in excess of the [flood] policy limit...."

¶ 7. In October 2005, the Corbans received $250,000, the limit of liability for loss to the dwelling under the flood policy. Thereafter, the Corbans received an additional $100,000, the limit of liability for loss to contents under the flood policy. The Corbans also received $4,000 under the homeowner's policy for loss of jewelry, watches, furs, and silverware, and $1,900 under the homeowner's policy for refrigerated food losses.

¶ 8. In early 2006, Howell received the Haag report, which attributed all damage to "the first story living area to flooding and wave wash." After receiving the report, Howell inspected the property. Howell "determined what was to be paid on the wind loss[,]" relying on the Haag report and "[m]y observations of the loss and looking at the house and the damage that presented itself." Howell attributed none of the first-floor damage to wind, concluding that payment to the Corbans was limited to "replac[ing] the cottage roof and ... replac[ing] the roof and some fascia repair and paint around the main house[,]" as well as for power washing and a "repair allowance" on the gazebo and the potting shed.⁴

¶ 9. In January 2006, the Corbans received $39,971.91 under "Coverage A— Dwelling" and "Coverage B—Other Structures" of the homeowner's policy for losses USAA attributed to wind damage. The Corbans also received $16,955.38 under the homeowner's policy for additional living expenses incurred. In February 2006, USAA issued a letter to the Corbans, stating that, based upon the Haag report, "[i]t was determined that the majority of the damage to your home was the result of flooding. Unfortunately, flood is an excluded peril in your HO-3 Homeowners Policy[⁵] and payment cannot be made for these damages." The Corbans finally received a payment of $21,077 under the homeowner's policy for personal property insured under a "personal articles floater." Thus, the Corbans received a total of $433,903.77 ($350,000 under the flood policy and $83,903.77 under the homeowner's policy), leaving $1,174,022.23 in claimed losses unsatisfied.

¶ 10. The Corbans filed suit based on a variety of contract and tort theories.⁶ According to the Complaint, "USAA marketed, packaged, presented, and sold the subject [homeowner's] policy to the Corbans in such a manner as to cause them to believe they had coverage under the subject policy for all damages that could be caused by a hurricane." The Corbans contended, inter alia, that the "water damage" exclusion and accompanying ACC clause, when considered "with the policy's intent to provide coverage for hurricane losses, are ambiguous as a matter of law." USAA answered and affirmatively pleaded "that certain of the damages ... were the result of water damages as defined in the policy. Such damages are excluded under `Section I—Exclusions, 1.c.(1).'"

¶ 11. USAA later filed a "Motion for Partial Summary Judgment," asserting, inter alia, that:

(1) Storm surge is flood and is an excluded peril under the water damage exclusion.

(2) The [Corbans] are judicially estopped from denying that the insured structures and contents were damaged by flood at least to the extent of the amount paid under the flood insurance policy.

(3) The wind and hail deductible (incorrectly referred to by [the Corbans] as "a hurricane deductible endorsement") does not affect the policy provisions.

(4) The [Corbans'] claims for misrepresentation by USAA or its agents is without merit because the policy is not ambiguous and the provisions pertaining to covered and excluded perils are plainly stated.

The Corbans then filed a "Motion for Partial Summary Judgment," maintaining that the ACC clause in the policy should be invalidated as ambiguous and contrary to Mississippi public policy, such that "Plaintiffs are entitled to judgment as a matter of law...." USAA responded that "the ACC clause contained in [the] policy is unambiguous and should be enforced as written."

¶ 12. Following a hearing, the circuit court conducted a conference with counsel to discuss its rulings prior to entry. During that conference, the Corbans stated their intention to seek an interlocutory appeal. USAA agreed that such was appropriate. The circuit court then entered an "Order of Continuance and Stay" providing that "trial of this cause is hereby continued and the case is stayed pending entry of orders of the Court ... and interlocutory appeal thereof."

¶ 13. Relevant to the disposition of this appeal, the circuit court entered an "Order Granting Partial Summary Judgment to Defendant and Denying Partial Summary Judgment to Plaintiffs Regarding Anticoncurrent Causation Clause and Storm Surge Issues (With Findings of Fact and Conclusions of Law)." The circuit judge found "storm surge" to be within the "water damage definition ... and ..., therefore, an excluded peril." The circuit judge further found that the "water damage" exclusion and ACC clause were "unambiguous." Finally, the circuit judge concluded that "the anticoncurrent causation clause will be applied herein as interpreted by the United States Fifth Circuit Court of Appeals, thereby barring coverage under the homeowner's policy for any damage caused by water as defined in the policy or caused concurrently or sequentially by wind and water in combination."

¶ 14. The Corbans' "Petition for Interlocutory Appeal" followed entry of the aforementioned order, and was granted by this Court.

ISSUES

¶ 15. On interlocutory appeal, the Corbans identified the following issues:

1. Is the water damage exclusion purporting to exclude concurrent or sequential contributing causes ambiguous and therefore void as to hurricane losses where multiple courts and parties have struggled for years and are unable to determine what the language means and how it affects Hurricane Katrina...