Decorative Center of Houston v. Employers Cas. Co.

Decision Date28 May 1992
Docket NumberNo. 13-91-429-CV,13-91-429-CV
Citation833 S.W.2d 257
PartiesDECORATIVE CENTER OF HOUSTON and McDevitt & Street Co., Appellants, v. EMPLOYERS CASUALTY CO., Appellee.
CourtTexas Court of Appeals

Richard W. Mithoff, Scott Rothenberg, Mithoff & Jacks, Houston, for appellants.

Michael Phillips and Christopher L. Neal, Phillips & Akers, Houston, for appellee.

Before NYE, C.J., and BISSETT, 1 and SEERDEN, JJ.


BISSETT, Justice.

Decorative Center of Houston and McDevitt & Street Company ("appellants") appeal a summary judgment granted to Employers Casualty Company ("Employers Casualty") and the denial of their motion for summary judgment. We affirm.

In the mid-1980's, Decorative Center hired McDevitt & Street to build a commercial building at the corner of Woodway Drive and South Post Oak Lane in Houston, Texas. Decorative Center, the project's owner, and McDevitt & Street, its general contractor, purchased substantially identical liability insurance policies from Employers Casualty to protect themselves from liability to others that might arise out of the construction.

Joan P. Baker and Lovett Baker owned and occupied a home on land located directly adjacent to the site of the project. During construction, McDevitt & Street caused various forms of physical and mental harm to the Bakers' persons, property, and lifestyles, which continued despite the Bakers' oral and written protestations. The infractions included, but are not limited to, deliberately working later than the legally permitted hour, intentionally diverting water onto the Bakers' property, ruining the Bakers' landscaping, dropping heavy limbs on the Bakers' backyard, cursing the Bakers when they complained to the workmen on duty, and generally making the Bakers' lives miserable. The Bakers brought the underlying suit against appellants on the following grounds: 1) nuisance (resulting in lost value), 2) deliberate institution of the design and construction of the complex which has destroyed the Plaintiffs' property, 3) negligent invasion of the Plaintiffs' interests due to breach of the duty to reasonably develop the property, resulting in damages to the property, 4) negligent placement of the garage, 5) intentional trespass and negligent trespass, 6) wrongful encroachment, 7) fraudulent representations to Plaintiffs, 8) intentional infliction of emotional distress, 9) breach of the August 18, 1980, contract, and 10) negligent performance of the contract.

Employers Casualty defended the suit, but elected to have appellants, the insureds, sign separate "non-waiver agreements" in light of the coverage problems associated with the Bakers' claims of intentional conduct. In the underlying suit the jury then rendered an adverse verdict against appellants. The jury awarded $544,000 2, consisting of $144,000 actual damages and $400,000 exemplary damages.

Employers Casualty notified appellant that, under the terms of the policies, in light of the jury's finding of intentional injury in the underlying suit, it had no responsibility for the jury's verdict, and that it was confident the case should not be appealed. Appellants voluntarily settled with the Bakers for $536,000 3 and looked to Employers Casualty for indemnification of this amount. Employers Casualty refused on the grounds that the judgment was not covered by the policies and brought a declaratory judgment action to have its rights and liabilities judicially determined.

The trial court agreed with Employers Casualty and rendered summary judgment in its favor on all issues raised in its motion for summary judgment, except that the policies were found to cover a small part of the "negligence" damages under Part 1 of the policies, which amount has already been paid to Decorative Center and McDevitt & Street. In addition, the judgment disposed of all issues appellants raised in their motion for partial summary judgment, as well as all issues raised in their counterclaim.

Parts 1 and 3 of the policies are crucial to the disposition of this appeal. Part 1 provides in relevant part:

The company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of

Coverage A. bodily injury or

Coverage B. property damage

to which this insurance applies, caused by an occurrence....

The policies define "occurrence" as follows:

"occurrence" means an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured.

Part 3, which deals with "personal injury liability coverage, provides in relevant part:

The company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of injury (herein called "personal injury") sustained by any person or organization and arising out of one or more of the following offenses committed in the conduct of the named insured's business:


Group C--wrongful entry or eviction, or other invasion of the right of private occupancy.

In a recent case, our Supreme Court, speaking through Justice Gonzales, in National Union Fire Ins. Co. v. Hudson Energy Co., 811 S.W.2d 552 (Tex.1991), said:

Generally, a contact of insurance is subject to the same rules of construction as other contracts. Barnett v. Aetna Life Ins. Co., 723 S.W.2d 663, 665 (Tex.1987). If the written instrument is worded so that it can be given only one reasonable construction, it will be enforced as written. Puckett v. U.S. Fire Ins. Co., 678 S.W.2d 936, 938 (Tex.1984). However, if a contract of insurance is susceptive of more that one reasonable interpretation, we must resolve the uncertainty by adopting the construction that most favors the insured. Barnett, 723 S.W.2d at 667; Ramsay v. Maryland Am. Gen. Ins. Co., 533 S.W.2d 344, 349 (Tex.1976); Brown v. Palatine, 89 Tex. 590, 35 S.W. 1060, 1061 (1896).

Id. at 555.

The provision at issue, "Group C, Part 3", which provides coverage for "other invasion of the right of private occupancy." Appellants argue that the provision, if not actually in their favor, is at least ambiguous, and therefore should be construed in their favor and against Employers Casualty because it drafted the policy and such construction is the only reasonable construction of the provision. Employers Casualty argues that the provision is not ambiguous and should be enforced as written. It further argues that coverage does not exist under any provision in the policies because Part 1 of the policies, pertaining to bodily injury and property damage, precluded coverage for intentional acts of trespass and nuisance, and because the acts complained of do not fall within the list of offenses covered under the policies' Personal Injury (Part 3) coverage. We hold that the provisions in the policies above-quoted are not ambiguous.

Public policy prohibits permitting an insured to benefit from his own wrongdoing. "It is axiomatic in the insurance industry that one should not be able to insure against one's own intentional misconduct." Ranger Insurance Company v. Bal Harbour Club, Inc., 549 So.2d 1005, 1007 (Fla.1989), citing 12 J. Appleman, Insurance Law and Practice § 7031 (1981); 9 G. Couch, Couch Cyclopedia of Insurance Law § 39.15 (1980). The rationale behind the public policy is that the insured is more likely to engage in behavior which is harmful to society if he believes that he will not have to bear the financial costs of his intentional indiscretions. Ranger, 549 So.2d at 1007.

Further, the policies should not be read piecemeal. When construing a particular provision in an insurance policy, all of the policy's provisions should be given effect, and the whole of the contract considered, with each clause being used to help interpret the other. In analyzing the provision in question, we consider that Coverage Part 1 specifically excludes intentional behavior of the type engaged in by appellant. The policies' drafters surely would not permit actions excluded under one portion of the policy to be covered under a subsequent part.

Appellants further contend that the facts in this case constituted "other invasion of the rights of private occupancy." The phrase in question is not a legal term or phrase of art. Beltway Management Co. v. Lexington Landmark Ins. Co., 746 F.Supp. 1145, 1156 (D.D.C.1990). Absent evidence to the contrary, words and phrases in a written contract are accorded their ordinary, popular, and commonly-accepted meanings. TM Productions, Inc. v. Nichols, 542 S.W.2d 704, 708 (Tex.Civ.App.--Dallas 1976, no writ), citing Pan American Ins. Co. v. Cooper Butane Co., 157 Tex. 102, 300 S.W.2d 651, 654-55 (1957) and Magnolia Warehouse & Storage Co. v. Davis & Blackwell, 108 Tex. 422, 195 S.W. 184, 186 (1917).

Webster's Ninth New Collegiate Dictionary defines "occupancy" as "the fact or condition of holding, possessing, or residing in or on something," and defines "private" as "intended for or restricted to the use of a particular person, group or class." Restatement of the Law of Property, § 1 defines "right" as a "legally enforceable claim of one person against another, that the other shall do a given act, or shall not do a given act."

Decorative Center and McDevitt & Street's primary argument is that, because the Bakers' ability to use their property was interfered with, that the interference necessarily constitutes an "other invasion of the right of private occupancy," thus triggering coverage. We do not agree. "Occupancy" normally refers to the state of being inhabited. The right of "private occupancy" can only refer to those rights associated with an individual's act of inhabiting the premises, and not to rights associated with the individual's right to use and enjoy the inhabited premises. The Group C Offenses are meant to cover only landlord-tenant situations, or, if extended, only similar...

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