Certain Underwriters At Lloyd's of London v. Lowen Valley View, L. L.C.

• Decision Date: 06 June 2018
• Docket Number: No. 17-10914,17-10914
• Citation: 892 F.3d 167
• Parties: CERTAIN UNDERWRITERS AT LLOYD'S OF LONDON, Syndicate Nos. 2003, 1414, 0510, 4472, 1183, 1200, and 4444, Subscribing to Policy Number NJL440003612, Plaintiff–Appellee v. LOWEN VALLEY VIEW, L.L.C.; Panade II, Limited, doing business as Hilton Garden Inn, Defendants–Appellants
• Court: U.S. Court of Appeals — Fifth Circuit

892 F.3d 167

CERTAIN UNDERWRITERS AT LLOYD'S OF LONDON, Syndicate Nos. 2003, 1414, 0510, 4472, 1183, 1200, and 4444, Subscribing to Policy Number NJL440003612, Plaintiff–Appellee

v.LOWEN VALLEY VIEW, L.L.C.; Panade II, Limited, doing business as Hilton Garden Inn, Defendants–Appellants

No. 17-10914

United States Court of Appeals, Fifth Circuit.

June 6, 2018

Gerard Joseph Kimmitt, II, Legge, Farrow, Kimmitt, McGrath & Brown, L.L.P., Houston, TX, Karen A. Conticello, Sheshe Taylor Evans, Holman, Fenwick & Willan, Houston, TX, for Plaintiff–Appellee.

Brendan K. McBride, McBride Law Firm, San Antonio, TX, Matthew Raymond Pearson, Esq., Gravely & Pearson, L.L.P., San Antonio, TX, for Defendants–Appellants.

Before CLEMENT, HIGGINSON, and HO, Circuit Judges.

STEPHEN A. HIGGINSON, Circuit Judge:

An insurance underwriter brought this suit seeking a declaratory judgment that it owed no coverage under a commercial property insurance policy. The insured counterclaimed for declaratory judgment, breach of the insurance contract, and violations of the Texas Insurance Code. The district court granted summary judgment in favor of the insurer on all claims, and we affirm.

I.

Defendants Lowen Valley View, LLC and Panade II Limited (collectively, Lowen Valley) own and operate a Hilton Garden Inn in Irving, Texas. Plaintiff Certain Underwriters at Lloyd’s of London, Syndicate Nos. 2003, 1414, 0510, 4472, 1183, 1200, and 4444, Subscribing to Policy Number NJL440003612 (Lloyd’s) issued Lowen Valley a commercial property insurance policy for the period from June 2, 2012 to June 2, 2013. In November 2014, a Lowen Valley employee "noticed that the shingles on the top of the hotel looked bad" and called a roofing contractor to investigate. The contractor found evidence of significant hail damage.

On December 29, 2014, Lowen Valley notified the company’s insurance agent that the hotel roof had suffered hail damage. The agent filed a "Property Loss Notice" with Lloyd’s the same day. The notice listed Lowen Valley’s "Date of Loss" as June 13, 2012. The agent apparently based the June 2012 date of loss on a weather history report obtained by Lowen Valley’s roofing contractor. The report listed nine hail events of varying severity occurring "[a]t location" between January 2006 and December 2014.

After receiving the claim, Lloyd’s sent an adjuster, Derek Phipps, to inspect the property. Phipps concluded that the roof would need to be replaced, and estimated a total repair cost of $429,225.41. On March 2, 2015, Lloyd’s, through another adjuster, sent Lowen Valley a "reservation of rights" letter, which stated that "potential coverage issues may exist."

After sending the reservation of rights letter, Lloyd’s commissioned Haag Engineering to prepare a report—what would become the first of three—analyzing Lowen Valley’s claim. In this first report, Haag confirmed that the hotel had suffered hail damage and concluded that "the most recent hailstorm with hailstones large enough to cause the damage [Haag] observed was on June 13, 2012." (emphasis added). At Lloyd’s request, Haag also completed a second report. This time, Haag stated that its previous report had "concluded that the observed damage most likely occurred on June 13, 2012." (emphasis added).

On February 18, 2016, Lloyd’s denied Lowen Valley’s claim. The same day, Lloyd’s filed this suit seeking a declaratory judgment that it owed no coverage for Lowen Valley’s hail damage claim. Lowen Valley counterclaimed for declaratory judgment, breach of the insurance contract, and violations of the Texas Insurance Code.

Haag prepared two more documents after Lloyd’s sued. Haag’s third report "conclude[d] that it is unlikely that hail only fell at this location one time." The report identified four dates for which both National Weather Service hail reports and third-party radar data suggested that hail greater than one inch in diameter fell in the vicinity of the hotel. Finally Haag produced a "letter to clarify statements made in [its] past reports regarding dates of hailfall and potential damage." The letter explained that "a single sentence in the June report inadvertently referred to June 13, 2012, as the ‘most likely’ date that damage occurred instead of the ‘most recent.’ " Haag averred that it never intended "to suggest that June 13, 2012, was the known date or the only date that dents/damage occurred at this property," and, to the contrary, "[m]eteorological study ... identifies additional dates in which conditions were conducive to hail at the site prior to June 2012."

Lloyd’s moved for summary judgment on all claims before the district court. The court granted Lloyd’s motion in full, and this appeal followed.

II.

The district court granted summary judgment on Lloyd’s declaratory judgment claim for two, independent reasons: (1) Lowen Valley failed to meet its burden to offer evidence that would allow a trier of fact to segregate covered losses from non-covered losses, and (2) Lowen Valley failed to provide prompt notice of its loss, and this delay prejudiced Lloyd’s as a matter of law. We affirm on the first ground, and do not reach the second.¹

In this diversity case, we review the district court’s grant of summary judgment de novo, applying Texas law. Erie R.R. Co. v. Tompkins , 304 U.S. 64, 78, 58 S.Ct. 817, 82 L.Ed. 1188 (1938) ; Burciaga v. Deutsche Bank Nat’l Tr. Co. , 871 F.3d 380, 388 (5th Cir. 2017). Summary judgment is proper only "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). Although "the evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor," summary judgment remains appropriate if the non-movant’s evidence is "merely colorable" or "not significantly probative." Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 249, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

In Texas, insurance policies are contracts subject to the rules of contract construction. Mid–Continent Cas. Co. v. Swift Energy Co. , 206 F.3d 487, 491 (5th Cir. 2000). "[W]hen an insurance policy is ambiguous or inconsistent, the construction that would afford coverage to the insured must govern." Id. The elements of a breach of contract action under Texas law are: "(1) the existence of a valid contract; (2) performance or tendered performance by the plaintiff; (3) breach of the contract by the defendant; and (4) damages sustained by the plaintiff as a result of the breach." Smith Int’l., Inc. v. Egle Grp., LLC , 490 F.3d 380, 387 (5th Cir. 2007) (quoting Valero Mktg. & Supply Co. v. Kalama Int’l, L.L.C. , 51 S.W.3d 345, 351 (Tex. App.—Houston [1st Dist.] 2001, no pet.) ). The insured bears the burden of establishing that its claim is covered by the policy. Wells v. Minn. Life Ins. Co. , 885 F.3d 885, 890 (5th Cir. 2018).

An insurer is liable only for losses covered by the policy. Accordingly, "[w]hen covered and excluded perils combine to cause an injury, the insured must present some evidence affording the jury a reasonable basis on which to allocate the damage." Lyons v. Millers Cas. Ins. Co. of Tex. , 866 S.W.2d 597, 601 (Tex. 1993) ; accord Fiess v. State Farm Lloyds , 392 F.3d 802, 807–08 (5th Cir. 2004). If the insured falls short of meeting this burden, the insurer is entitled to summary judgment. See Hamilton Props. v. Am. Ins. Co. , 643 Fed.Appx. 437, 442 (5th Cir. 2016) (affirming grant of summary judgment for insurer where insured’s evidence showed that damage could be "linked " to a particular hail storm, but did "nothing to enable a jury to segregate damages for only that property damage caused by covered perils that occurred within the policy period"); Wallis v. United Servs. Auto Ass’n , 2 S.W.3d 300, 304 (Tex. App.—San Antonio 1999, pet. denied) ("[T]he jury could believe that plumbing leaks caused part of the complained-of damage. However, the engineers could not indicate the extent to which this peril damaged the Wallises’ home. This is fatal to their claim.").

Here, as noted, the policy coverage period was June 2, 2012, to June 2, 2013. The summary judgment evidence reveals that several hail storms struck the vicinity of the hotel in the several years preceding Lowen Valley’s claim. Only one of these storms fell within the coverage period. The district court held that Lloyd’s was entitled to summary judgment because the record lacked reliable evidence permitting a jury to determine which of these storms—alone or in combination—damaged the hotel. We agree.

To resist this...