Nassar v. Liberty Mut. Fire Ins. Co.

• Citation: 508 S.W.3d 254
• Decision Date: 27 January 2017
• Docket Number: NO. 15–0978,15–0978
• Parties: Elie NASSAR and Rhonda Nassar, Petitioners, v. LIBERTY MUTUAL FIRE INSURANCE COMPANY, Liberty Mutual Group, Dave Baker, Mary Hamilton, and Marcus Smith, Respondents
• Court: Texas Supreme Court

508 S.W.3d 254

Elie NASSAR and Rhonda Nassar, Petitioners,

v.LIBERTY MUTUAL FIRE INSURANCE COMPANY, Liberty Mutual Group, Dave Baker, Mary Hamilton, and Marcus Smith, Respondents

NO. 15–0978

Supreme Court of Texas.

OPINION DELIVERED: January 27, 2017

Jonathan Findley, Kurt Brynilde Arnold, Micajah Daniel Boatright, Arnold & Itkin LLP, Houston, TX, for Elie Nassar and Rhonda Nassar.

Catherine L. Hanna, Eric Scott Peabody, Hanna & Plaut, L.L.P., Austin, TX, for Liberty Mutual Fire Insurance Company, Liberty Mutual Group, Dave Baker, Mary Hamilton, and Marcus Smith.

Per Curiam

In this case, we must determine whether Elie and Rhonda Nassar's homeowners insurance policy affords coverage for fencing attached to their home under the policy's "dwelling" provision or under the "other structures" provision. Because the Nassars' interpretation of the policy language is reasonable and the policy is unambiguous, we hold that the Nassars' fencing is covered under the "dwelling" provision as a matter of law. Accordingly, we reverse the judgment of the court of appeals and remand the case to the trial court for further proceedings consistent with this opinion.

Elie and Rhonda Nassar own six acres of property in Richmond, Texas. On September 13, 2008, Hurricane Ike caused significant damage to the Nassars' property. The Nassars filed a claim with Liberty Mutual Insurance Company under their Texas Standard Homeowners Policy— Form A. Liberty Mutual conducted an investigation and paid several claims under the policy. Disputes arose over the value of various items of damaged property, however, and this appeal concerns which part of the Liberty Mutual insurance policy covers the Nassars' damaged fencing.

In addition to their residence, the Nassars' property contains barns, outbuildings, and a system of fencing. The system of fencing, spanning over 4,000 linear feet,

include[s] a white picket fence at the northeast corner of the dwelling, an ornamental iron fence ... in front of the dwelling, numerous cross fences, garden fences and pens, and a larger perimeter fence constructed of 2' x 6' lumber with wooden posts at eight foot intervals, on which a welded wire mesh is attached.

To insure their property,¹ the Nassars elected $247,200 in coverage under the policy's "dwelling" provision and $24,720 in coverage under the "other structures" provision. Liberty Mutual valued the damage to the dwelling at $20,090.61 and the damage to other structures at $70,449.02. The undisputed value of the damage to the fencing alone totaled $58,665.² Because Liberty Mutual considered the fencing an "other structure" under the policy, Liberty Mutual issued a payment to the Nassars for $20,090.61 under the "dwelling" coverage and a separate payment equal to the policy limit for "other structures" coverage to settle the Nassars' outstanding claims.

The core dispute between the Nassars and Liberty Mutual arises out of different interpretations of the two policy provisions that separate coverage for the "dwelling" and "other structures." The relevant policy provisions under "Coverage A (Dwelling)" provide as follows:

We cover:

1. the dwelling on the residence premises shown on the declarations page including structures attached to the dwelling.

2. other structures on the residence premises set apart from the dwelling by clear space. This includes structures connected to the dwelling by only a fence, utility line or similar connection. The total limit of liability for other structures is the limit of liability shown on the declaration page or 10% of Coverage A (Dwelling) limit of liability, whichever is greater. This is additional insurance and does not reduce the Coverage A (Dwelling) limit of liability.

The definition section provides:

"Residence premises " means the residence premises shown on the declarations page. This includes the one or two family dwelling, including other structures, and grounds where an insured resides or intends to reside within 60 days after the effective date of this policy.

Importantly, "structure" is not defined in the policy. The Nassars argue that, under the plain language of these provisions, their fencing, which is attached to their house at four separate points,³ is a "structure [ ] attached to the dwelling." Liberty Mutual argues that simply connecting 4,000 feet of fencing to the dwelling by four bolts does not attach the fencing to the dwelling. Liberty Mutual contends that the only logical reading of the policy provisions together leads to the conclusion that a fence cannot operate to connect the dwelling to other structures; therefore, the Nassars' fencing must be an "other structure."

In February 2009, the Nassars filed suit against Liberty Mutual, their agent,⁴ and several adjusters who handled aspects of the hurricane claim. The Nassars alleged, among other things, that they were assured by the agent who initially inspected the property that the system of fencing would be fully covered in the event of a loss. Consequently, the Nassars asserted numerous claims, including breach of contract, violations of the Deceptive Trade Practices Act, violations of the Insurance Code, breach of the duty of good faith and fair dealing, breach of fiduciary duty, unfair insurance practices, fraud, and misrepresentation.

Both parties filed summary judgment motions regarding whether the fencing should be classified under the policy's subsection (1), relating to "dwelling" coverage, or subsection (2), relating to coverage for "other structures." The trial court granted Liberty Mutual's motion and denied the Nassars' motion, deciding coverage as an "other structure" under subsection (2). The trial court then compelled an appraisal of the disputed damages, granted Liberty Mutual's second motion for summary judgment in light of the appraisal award, and entered final judgment in favor of Liberty Mutual.

In a split opinion, the court of appeals affirmed the trial court's summary judgment orders. 478 S.W.3d 65, 67. The court of appeals held that the insurance policy unambiguously foreclosed application of subsection (1), "dwelling," and that the Nassars' interpretation of the disputed policy language failed as a matter of law because it would render a portion of the policy meaningless. Id . at 70–71. The dissent concluded that the policy language does not unambiguously favor Liberty Mutual, and that, at the very least, the policy is ambiguous, which requires adopting the interpretation that favors the Nassars as insureds under the policy. Id . at 82 (Frost, C.J., dissenting).

We review grants of summary judgment de novo. Provident Life & Accident Ins. Co. v. Knott , 128 S.W.3d 211, 215 (Tex. 2003). "[W]e take as true all evidence favorable to the nonmovant, and we indulge every reasonable inference and resolve any doubts in the nonmovant's favor." Id . Additionally, "the party moving for summary judgment bears the burden to show that no genuine issue of material fact exists and that it is entitled to judgment as a matter of law." Id . at 215–16 (citing TEX. R. CIV. P. 166a(c) ).

The Nassars contend that the court of appeals improperly applied settled rules of contract interpretation when adopting Liberty Mutual's interpretation of subsections (1) and (2) of the Texas Standard Homeowners Policy—Form A. We agree. We have consistently instructed that Texas courts are to construe insurance policies "using ordinary rules of contract interpretation." E.g. , Tanner v. Nationwide Mut. Fire Ins. Co ., 289 S.W.3d 828, 831 (Tex. 2009). When doing so, courts must "determin[e] the parties' intent as reflected in the terms of the policy itself." Id . Courts must "examine the entire agreement and seek to harmonize and give effect to all provisions so that none will be meaningless." Gilbert Tex. Constr., L.P. v. Underwriters at Lloyd's London , 327 S.W.3d 118, 126 (Tex. 2010). "[N]o one phrase, sentence, or section [of a contract] should be isolated from its setting and considered apart from the other provisions." Forbau v. Aetna Life Ins. Co ., 876 S.W.2d 132, 134 (Tex. 1994) (quoting Guardian Trust Co. v. Bauereisen , 132 Tex. 396, 121 S.W.2d 579, 583 (1938) ). "Unless the policy dictates otherwise, [courts] give words and phrases their ordinary and generally accepted meaning, reading them in context and in light of the rules of grammar and common usage." RSUI Indem. Co. v. The Lynd Co ., 466 S.W.3d 113, 118 (Tex. 2015) (citing Gilbert , 327 S.W.3d at 126 ). If we determine that only one party's interpretation of the insurance policy is reasonable, then the policy is unambiguous and the reasonable interpretation should be adopted. Id. (citing Grain Dealers Mut. Ins. Co. v. McKee , 943 S.W.2d 455, 459 (Tex. 1997) ). Alternatively, if we determine that both interpretations are reasonable, then the policy is ambiguous. Id .

In that event, "we must resolve the uncertainty by adopting the construction that most favors the insured," and because we are construing a limitation on coverage, we must do so "even if the construction urged by the insurer appears to be more reasonable or a more accurate reflection of the parties' intent."

Id . (quoting Nat'l Union Fire Ins. Co. of Pittsburgh, Pa. v. Hudson Energy Co ., 811 S.W.2d 552, 555 (Tex. 1991) ).

In contract law, the term "ambiguous" means more than simply "denoting a lack of clarity in language." Id . at 119 (citing Universal C.I.T. Credit Corp. v. Daniel , 150 Tex. 513, 243 S.W.2d 154, 157 (1951) ). A contract is not ambiguous simply because the parties to a lawsuit offer conflicting interpretations of the contract's provisions. Id . (citing Am. Mfrs. Mut. Ins. Co. v. Schaefer , 124 S.W.3d 154, 157 (Tex. 2003) ). A policy is ambiguous if it is genuinely subject to more than one meaning after applying the pertinent rules of contract interpretation. Id . (citing Daniel , 243 S.W.2d at 157 ; Balandran v. Safeco Ins. Co. of Am ., 972 S.W.2d 738, 741 (Tex. 1998) ). Thus, we must determine whether the Nassars' interpretation is...