Sharp v. State Farm Fire and Cas. Ins. Co., 96-50725
| Decision Date | 30 June 1997 |
| Docket Number | No. 96-50725,96-50725 |
| Parties | James B. SHARP; Brenda Sharp, Plaintiffs-Appellants, v. STATE FARM FIRE AND CASUALTY INSURANCE COMPANY, et al., Defendants, State Farm Fire and Casualty Insurance Company, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Stephen W. Boyd, Robert William Loree, San Antonio, TX, for Plaintiffs-Appellants.
J. Hampton Skelton, Jeffrey Charles Glass, Skelton & Woody, Austin, TX, for Defendant-Appellee.
Roderick Andrew Bordelon, Lanetta Marie Cooper, Office of Public Insurance Counsel, Austin, TX, for Office of Public Insurance Counsel of State of Texas, Amicus Curiae.
Appeal from the United States District Court for the Western District of Texas.
Before JOLLY, DUHE and EMILIO M. GARZA, Circuit Judges.
State Farm denied the Sharps' claim for structural and cosmetic damage to their house that resulted from a foundation shift, which was itself caused by a plumbing leak beneath the house. We are called upon to determine whether the standardized Texas homeowner's policy provides coverage. The district court determined that such damage was not covered by the policy, and granted State Farm's motion for summary judgment. We affirm.
James and Brenda Sharp are the holders of a homeowner's insurance policy issued by State Farm; the Sharps' policy is a standardized state contract: the Texas Standard Homeowners Policy--Form B. In September 1993, the Sharps discovered that foundation movement had caused extensive foundation, structural and cosmetic damage to their home. The Sharps believe that the foundation shift was caused by water leaking from deteriorated sub-surface plumbing beneath their home.
The Sharps notified their insurance agent of their claim for damages to their house. The Sharps did not file a claim for damage to personal property, nor have they alleged that they suffered any loss beyond the structural and cosmetic damage to the house itself. Apparently, State Farm initially paid the cost of accessing the plumbing system to correct the leak. However, State Farm ultimately determined that the claim was not covered, and denied payment.
The Sharps filed suit in Texas state court. State Farm removed the case to federal district court on the basis of diversity of citizenship. State Farm subsequently filed a motion for summary judgment on the ground that the policy did not cover the Sharps' claim for foundation damage. For purposes of the summary judgment motion only, the parties assumed that leaking plumbing caused the foundation shift and resulting damage to the Sharps' house. The district court granted the motion for summary judgment, and this appeal followed.
Texas law applies to our review of the district court's determination that the Sharps' policy did not afford coverage for their claim. We review the district court's application of Texas law concerning insurance contract interpretation de novo. Farm Credit Bank of Texas v. Guidry, 110 F.3d 1147, 1149 (5th Cir.1997).
Under Texas law, insurance policies are interpreted in accordance with the rules of construction that apply to all contracts generally. National Union Fire Ins. Co. of Pittsburgh, Pennsylvania v. CBI Industries, Inc., 907 S.W.2d 517, 520 (Tex.1995). It is well-established that ambiguities in insurance contracts are to be strictly construed against Whether the contract is ambiguous is a question of law for the court to decide. National Union Fire Ins. Co., 907 S.W.2d at 520 (citing Coker v. Coker, 650 S.W.2d 391, 393 (Tex.1983)). The fact that the parties disagree as to coverage does not create an ambiguity, nor may extrinsic evidence be admitted for the purpose of creating an ambiguity. Id. As in all contract cases, the court looks first to the language of the contract itself, and "[w]hen there is no ambiguity, it is the court's duty to give the words used their plain meaning." Puckett, 678 S.W.2d at 938. Accordingly, we now turn to the policy itself.
the insurer. Puckett v. U.S. Fire Insurance Co., 678 S.W.2d 936, 938 (Tex.1984). However, this rule of strict construction applies only if the contract is determined to be ambiguous.
The Sharps' policy is divided into two separate sections: "Coverage A," which covers damage to the dwelling itself, and "Coverage B," which covers damage to personal property. Coverage A covers "all risks" to the dwelling unless specifically excluded in the Exclusions section. Coverage B covers only personal property losses caused by certain enumerated "perils," again unless those losses are specifically excluded in the Exclusions section. The list of covered perils under Coverage B, the personal property coverage section (listed in full in the Appendix to this opinion), specifically includes plumbing leaks:
Accidental Discharge, Leakage, or Overflow of Water or Steam from within a plumbing, heating or air conditioning system or household appliance.
A loss resulting from this peril includes the cost of tearing out and replacing any part of the building necessary to repair or replace the system or appliance. But this does not include loss to the system or appliance from which the water or steam escaped.
Exclusions 1.a. through 1.h. under Section I Exclusions do not apply to loss caused by this peril.
The separate Exclusions section, which generally applies to both the dwelling coverage and the personal property coverage, enumerates eleven specific types of losses that are not covered.
Exclusion "h," which State Farm argues completely precludes the Sharps' claim, states:
We do not cover loss under Coverage A (Dwelling) caused by settling, cracking, bulging, shrinkage, or expansion of foundations, walls, floors, ceilings, roof structures, walks, drives, curbs, fences, retaining walls or swimming pools.
We do cover ensuing loss caused by collapse of building or any part of the building, water damage or breakage of glass which is part of the building if the loss would otherwise be covered under this policy.
The Sharps seek compensation for structural and cosmetic damage to their house, which is indisputably covered under "Coverage A (Dwelling)." The Sharps have not filed a claim for damage to personal property, nor alleged that they suffered any such damage. On its face, Exclusion "h" bars coverage of the Sharps' claim. The only substantial issue in this appeal, therefore, is whether any interplay between Exclusion "h" and the "accidental discharge" peril could permit coverage of this claim solely for damage to the Sharps' house. 1
The Sharps' principal argument to the district court and on appeal is that the We are sympathetic to the Sharps' situation, but we cannot agree that text specifically included in Coverage B, which applies only to personal property, may be imported into Coverage A, which applies to the dwelling or house, in order to create coverage for a loss that does not involve personal property damage. The Sharps' policy clearly and unambiguously divides dwelling losses and personal property losses into two separate "coverages." It therefore would appear to be nonsensical, and a rejection of the obvious structure of the policy, to reach into text that applies solely to Coverage B (Personal Property) to determine the extent of coverage provided under Coverage A (Dwelling).
text describing the "accidental discharge" peril under Coverage B (Personal Property) somehow overrides the specific exclusion of losses to the dwelling "caused by settling, cracking, bulging, shrinkage or expansion of foundations ..."
Nevertheless, the Sharps insist that the final sentence of the "accidental discharge peril," which reads "Exclusions 1.a. through 1.h. under Section I Exclusions do not apply to this peril," applies to both Coverage A (Dwelling) and Coverage B (Personal Property), even though it is found only in Coverage B. The Sharps argue that this sentence overrides Exclusion "h" in all cases where any loss may be attributable to a plumbing leak.
As support for this assertion, the Sharps argue that the history of the "accidental discharge" peril indicates that it is supposed to permit coverage in cases like theirs, and that it clearly did so before a 1990 revision to the standardized policy. The Sharps insist that the committee charged with revising the forms was not authorized to restrict coverage in any significant way, and therefore the current policy must not be read to restrict coverage that existed under the prior policy.
Yet even if we assume, as the Sharps assert, that the prior version of the Texas Homeowner's Policy--Form B provided coverage for their claim, that fact cannot alter our view of the current policy that constitutes the contract between State Farm and the Sharps. As a form of extrinsic evidence, the prior version of the standardized policy is not relevant unless the current policy is found to be ambiguous; the Sharps may not point to the revision process to create an ambiguity. See National Union Fire Ins. Co., 907 S.W.2d at 520 (). Because there is no such predicate ambiguity in this contract, the Sharps gain nothing from this argument.
We also must reject the Sharps' argument that we are bound by a statement by the Texas Department of Insurance (the "Department") that the "current policy language in these forms is ambiguous and unclear as to coverage for the tear out and replacement of building or land in the event of accidental discharge or leakage of water ..." 20 Tex. Reg. 10398, 10399 (Dec. 8, 1995). First, we note that the statement describes an ambiguity in the extent of "tear out and replace" coverage, not an ambiguity concerning the effect of the sentence...
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