Pan Am Equities, Inc. v. Lexington Ins. Co.

• Decision Date: 26 May 2020
• Docket Number: No. 19-20363,19-20363
• Parties: PAN AM EQUITIES, INCORPORATED, Plaintiff-Appellant, v. LEXINGTON INSURANCE COMPANY, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

959 F.3d 671

PAN AM EQUITIES, INCORPORATED, Plaintiff-Appellant,

v.LEXINGTON INSURANCE COMPANY, Defendant-Appellee.

No. 19-20363

United States Court of Appeals, Fifth Circuit.

FILED May 26, 2020

Stephen Adam Weisbrod, Derek Y. Sugimura, Weisbrod, Matteis & Copley, P.L.L.C., Washington, DC, for Plaintiff-Appellant

James Michael Dennis, Wayne Glaubinger, Mound, Cotton, Wollan & Greengrass, L.L.P., New York, NY, for Defendant-Appellee

Before WIENER, STEWART, and WILLETT, Circuit Judges.

DON R. WILLETT, Circuit Judge:

Hurricane Harvey was the second-costliest natural disaster in U.S. history, ranking just behind Hurricane Katrina.¹ Harvey claimed 68 lives and inflicted $125 billion in damage, mostly from catastrophic flooding as the slow-moving storm, the wettest on record, stalled over southeast Texas, dumping up to 60? of rain over four days.² "So much rain has fallen," tweeted the National Weather Service, "we’ve had to update the color charts on our graphics in order to effectively map it."³

A litigation deluge naturally followed. This insurance-coverage case—a debate over deductibles—concerns Harvey-induced flood damage to two office buildings owned by Pan Am Equities and insured by Lexington Insurance. Unsurprisingly, the litigants are hardwired for certitude (as litigants tend to be), each adamant that the policy language "unambiguously" cuts their way. There are two competing deductibles: (1) the generic "Flood" deductible (favored by Pan Am), which covers "any ... loss due to Flood"; and (2) the pricier "Windstorm" deductible (favored by Lexington), which covers "Flood" damage "arising out of a Named Storm." Important here, the Policy also has an Anti-Stacking clause that says if multiple deductibles apply, then the largest one trumps.

The district court sided with Lexington that the unequivocal language of the "Windstorm" deductible controls, meaning zero recovery for Pan Am. We agree—the applicable deductible is not debatable—and affirm.

I

Two of Pan Am’s Houston buildings were damaged solely by flooding from Hurricane Harvey.⁴ Pan Am filed a claim with Lexington. Lexington agreed the claim was covered but instead of applying the Flood deductible it applied the Policy’s "Windstorm and Hail" deductible, relying on the subsidiary "Named Storm" provision.⁵ And under the "Windstorm" TIV-based deductible, Pan Am’s recovery was sharply less: $0.00.

Here are the two deductibles:

• For "Flood" losses, $100,000 "shall be deducted from any adjusted loss due to Flood";⁶ and "Flood" is contractually defined as:

"surface water; rising waters; waves; tide or tidal water [etc.] ... regardless of any other cause or event contributing concurrently or in any other sequence of loss."⁷

• For "Windstorm" losses, $100,000 "shall be deducted from any adjusted loss due Windstorm" ... "except as follows:"

"5% of the total insurable values (TIV) at the time of loss at each location involved in the loss or damage arising out of a Named Storm ... in Tier 1 Counties ... regardless of the number of coverages, locations or perils involved (including but not limited to all Flood....)"

Translation: The deductible is much higher for losses caused by a Named Storm such as Hurricane Harvey. And again, if two or more deductibles apply to a single loss, the Policy’s Anti-Stacking clause specifies that "the largest deductible applicable" will govern.

Lexington and Pan Am both moved for summary judgment, each arguing that the Policy unequivocally favored them. Applying Texas law, the district court agreed with Lexington that the "Windstorm" deductible, informed by the "Named Storm" provision’s explicit terms, covered "Flood" damage caused by a hurricane.⁸ And since the larger TIV-based "Windstorm" deductible applied and Pan Am’s claimed loss was less than 5% of the "total insurable values," Pan Am was owed nothing under the Policy.

II

The federal summary-judgment standard is familiar: "We review grants of summary judgment de novo, using the same standard as that employed initially by the district court under Rule 56."⁹ Summary judgment is proper if "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law."¹⁰

Texas contract-interpretation standards are also familiar.¹¹ The rules in the Lone Star State for interpreting insurance policies have been around a long time.¹² The paramount rule is that courts enforce unambiguous policies as written.¹³ We must honor plain language, reviewing policies as drafted, not revising them as desired. If an insurance contract, just like any other contract, uses unambiguous language, that’s that. Our first task, then, is purely legal: deciding whether the Policy is ambiguous.¹⁴ And under Texas contract law, "ambiguity" means more than "lack of clarity."¹⁵ A policy is not ambiguous merely because different parties—or different judges—offer conflicting interpretations.¹⁶ If its wording "can be given a definite ... meaning, then it is not ambiguous...."¹⁷ A policy is only ambiguous if, giving effect to all provisions, its language is "subject to two or more reasonable interpretations."¹⁸ Also, ambiguity must be evident from the policy itself; it cannot be fashioned via parol evidence.¹⁹ Finally, because we presume that contracting parties intended all that they enacted, we examine the entire contract in order "to harmonize and give effect to all provisions so that none will be meaningless."²⁰

III

The dispute is simply stated: Which deductible applies to flood damage caused by a hurricane, the $100,000 "Flood" deductible or the steeper TIV-based "Windstorm" deductible?²¹ The answer turns on the interplay of five provisions:

1. § A(10)(C)—"Flood" deductible;

2. § A(10)(D)—"Windstorm" deductible;

3. § A(10)(D)(1)—"Named Storm" provision;

4. § B(3)(L)(b)—"Flood" definition; and

5. § A(10)(b)—Anti-Stacking clause.

Pan Am insists the "Windstorm" deductible and its "Named Storm" provision are inapt. Since that provision is found under the "Windstorm" heading, it thus applies only to those losses caused at least in part by "Windstorm"—not to "Flood"-only losses. Lexington counters that a hurricane is a "Windstorm," and the "Named Storm" provision applies by its terms to "Flood" losses that are caused by a "Named Storm."

We side with Lexington. The "Windstorm" deductible applies to all "loss due to Windstorm." And the accompanying "Named Storm" provision enlarges what qualifies as a "loss due to Windstorm" to plainly encompass Harvey’s flood damage to Pan Am’s buildings. Holding otherwise would not "give effect to all [Policy] provisions."²² Our on-point decision in SEACOR Holdings, Inc. v. Commonwealth Insurance Co. is instructive.²³ In that case, involving wind and water damage inflicted by Hurricanes Katrina and Rita, the threshold dispute was whether SEACOR had to pay two deductibles: one for Flood and another for Named Windstorm. The policy contained no specific provision allowing multiple deductibles. We concluded that the Named Windstorm deductible applied since "Katrina’s winds were the proximate cause of SEACOR’s water-related damages."²⁴

Here, the answer is even more inescapable. First, and most telling, this Policy’s "loss due to Windstorm" is informed by a "Named Storm" provision that specifically includes "Flood" damage . In SEACOR , the Named Windstorm provision merely spoke to "loss caused directly by the peril of a Named Windstorm." There was no specific mention of flood damage. Even so, we concluded that the flood damage was "caused directly" by Katrina and thus covered under the Named Windstorm deductible. Second, even if both deductibles applied here—the TIV-based "Windstorm" deductible and the generic $100,000 "Flood" deductible—the former deductible controls. Indeed, the Policy expressly anticipates that multiple deductibles will sometimes apply to a single occurrence. And when this happens, the Anti-Stacking provision imposes the "largest deductible applicable"—here, the 5% TIV-based "Windstorm" deductible, which means no recovery for Pan Am.²⁵

Pan Am repeats that the Policy provides discrete deductibles for discrete types of losses and, when, as here, "Flood" loss is unaccompanied by "Windstorm" loss, we should apply only the "Flood" deductible. In other words, no wind damage = no "Windstorm" deductible. For support, Pan Am points to the "lead-in language" for each deductible: "[t]he following sum(s) shall be deducted from any adjusted loss due to" "Flood" or "Windstorm." Pan Am takes this to mean that for a specific peril’s deductible to apply, that peril must have contributed to the loss. In other words, there must have been wind damage for the "Windstorm" deductible to apply. And, since the "Named Storm" provision is found under the "Windstorm" deductible, it may only apply when the "Windstorm" deductible itself applies. Under Pan Am’s reading, no wind damage means the "Windstorm" deductible can’t apply, meaning the "Named Storm" provision can’t apply. Pan Am bolsters its interpretation by pointing to the anti-concurrent causation clause in "Flood[’s]" definition—the Flood deductible applies to Flood damage regardless of any contributing cause.

We understand Pan Am’s argument. But we cannot accept it. Pan Am places undue interpretive weight on the fact that the Policy’s "Named Storm" provision is found within the "Windstorm" deductible. When we interpret a contract, insurance or otherwise, location (where the provision is) matters far less than locution (what the provision says).²⁶ This Policy’s "Named Storm" provision sweeps in a slew of associated perils explicitly untethered from wind, specifically "Flood." By defining what a "loss due to Windstorm" means, the provision makes clear when the "Windstorm" deductible applies. Put differently, the express inclusion of "Flood" damage within the "Named Storm" provision compels us to read "loss due to Windstorm" broadly to include all loss or damage—"including ... Flood"—"arising out of a Named Storm."

Texas law...