Southern Hospitality v. Zurich American
| Decision Date | 30 December 2004 |
| Docket Number | No. 03-6294.,03-6294. |
| Citation | 393 F.3d 1137 |
| Parties | SOUTHERN HOSPITALITY, INC.; Augusta Hotel Limited Partnership; BA Hotel Limited Partnership; Charlottesville Hotel Fund Limited Partnership; Cocoa Beach Hotel Fund Limited Partnership; Columbia Hotel Limited Partnership; Diamond Bar Hotel Fund Limited Partnership; Lubbock Hotel Fund Limited Partnership; Novi Hotel Fund Limited Partnership; Lake Buena Vista Village Hotel Fund Limited Partnership; Phoenix Metrocenter Hotel Limited Partnership; Union City Hotel Fund Limited Partnership, Plaintiffs-Appellants, v. ZURICH AMERICAN INSURANCE COMPANY, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Tenth Circuit |
Timothy D. DeGiusti and Bobbie T. Shell of Holladay, Chilton & DeGiusti, Oklahoma City, OK, for Plaintiffs-Appellants.
William D. Perrine and Jennifer L. Struble of Perrine, McGivern, Redemann, Reid, Berry & Taylor, PLLC, Tulsa, OK, for Defendant-Appellee.
Before SEYMOUR and ANDERSON, Circuit Judges, and KANE,* Senior District Judge.
This case arises from the denial of insurance claims after the events of September 11, 2001. The district court granted summary judgment in favor of defendant insurance company, Zurich American Insurance (Zurich), on plaintiffs' claims that their loss of business income was covered by their Zurich policy. The losses were sustained because customers canceled their visits to hotels plaintiffs operated when the Federal Aviation Administration (FAA) grounded all airplane flights in the United States. We exercise jurisdiction under 28 U.S.C. § 1291 and affirm.1
Plaintiffs, who will be referred to collectively as "Southern Hospitality," manage a number of hotels throughout the United States that are highly dependent on air travel. Southern Hospitality's fee is based on the hotels' gross room revenues. Those revenues, and therefore Southern Hospitality's profits, plummeted following the events of September 11 because the cancellation of flights meant that Southern Hospitality's customers could not travel by air to its hotels.
Southern Hospitality filed a claim with Zurich seeking coverage for its business income losses under two provisions of the policy. One provision covers losses "caused by action of civil authority that prohibits access to the described premises." Aplt.App., vol. II, at 243. The other provision covers losses caused by damages to "dependent property," as defined in the policy. Id. at 248-49. Zurich denied the claim, contending the losses were not covered by the policy.
Southern Hospitality filed the underlying lawsuit for breach of the insurance contract, including a request for damages based on Zurich's bad faith. The district court granted Zurich's motion for summary judgment, holding that the policy does not apply to the situation here and denying the bad-faith claim. Southern Hospitality appeals.
We review de novo the district court's grant of summary judgment, viewing the record in the light most favorable to the party opposing summary judgment. McKnight v. Kimberly Clark Corp., 149 F.3d 1125, 1128 (10th Cir.1998). Summary judgment is appropriate if there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Fed.R.Civ.P. 56(c). The underlying facts are undisputed in this case. Because Oklahoma law controls this diversity action, we endeavor to reach the same conclusion the state's highest court would reach. See Blanke v. Alexander, 152 F.3d 1224, 1228 (10th Cir.1998).
Under Oklahoma law, an insurance policy is a contract. First Bank of Turley v. Fid. & Deposit Ins. Co. of Md., 928 P.2d 298, 302 n. 6 (Okla.1996). "If language of a contract is clear and free of ambiguity the court is to interpret it as a matter of law, giving effect to the mutual intent of the parties at the time of contracting." Pitco Prod. Co. v. Chaparral Energy, Inc., 63 P.3d 541, 545 (Okla.2003) (footnote omitted). Whether the contract is ambiguous is for the court to decide, considering the contract as a whole. Id. at 545-46. "The test for ambiguity is whether the language is susceptible to two interpretations on its face ... from the standpoint of a reasonably prudent lay person, not from that of a lawyer." Spears v. Shelter Mut. Ins. Co., 73 P.3d 865, 869 (Okla.2003) (quotation omitted). "The mere fact the parties disagree or press for a different construction does not make an agreement ambiguous." Pitco Prod. Co., 63 P.3d at 545. In the absence of an ambiguity, the court must enforce an insurance contract according to its express terms, giving the policy's language its plain and ordinary meaning. Id. at 546 & n. 22. In making this determination, we do not search for unusual or tortured meanings. See Bituminous Cas. Corp. v. Cowen Constr., Inc., 55 P.3d 1030, 1035 (Okla.2002).
"Civil Authority" Clause
Southern Hospitality first contends its losses were covered by the following policy provision:
Civil Authority. We will pay for the actual loss of Business Income you sustain and necessary Extra Expense caused by action of civil authority that prohibits access to the described premises due to direct physical loss of or damage to property, other than at the described premises, caused by or resulting from any Covered Cause of Loss. This coverage will apply for a period of up to two consecutive weeks from the date of that action.
Aplt.App., vol. II, at 243 (emphasis added). There is no dispute that the FAA's order prohibiting the flying of airplanes qualified as an "action of civil authority." Rather, Southern Hospitality argues that the words "prohibits access" apply because its customers were prevented by the FAA order from coming to its hotels by air. It does not dispute, however, that its hotels remained open for business at all relevant times. Zurich counters that the flying restrictions did not prohibit access to Southern Hospitality's hotels because the hotels themselves were accessible, and therefore the policy does not apply.
Southern Hospitality contends the term "prohibits access" should be interpreted to provide coverage because it is ambiguous and the acceptable definitions include meanings that result in coverage. We are not persuaded. The plain and ordinary meaning of "prohibit" is to "formally forbid, esp. by authority" or "prevent." Oxford American Dictionary and Language Guide 795 (1999). "Access" means "a way of approaching or reaching or entering." Id. at 6. The FAA order prohibited access to airplane flights; it did not prohibit access to hotel operations. As the district court noted:
Substitution of "prohibit" with any of the words suggested by Plaintiffs does not change the result as it does not alter the meaning of the policy. For example, if "hinder" is used, the order must still hinder access to Plaintiffs' property. Under the facts of this case, that requirement was not met.
Aplt.App., vol. II, at 442-43.
Cases applying the "prohibits access" language in similar policies have reached the same conclusion. In Abner, Herrman & Brock, Inc. v. Great Northern Ins. Co., 308 F.Supp.2d 331, 333 (S.D.N.Y.2004), access to the plaintiff's business premises in New York City was prohibited by civil authority following the September 11, 2001 attacks. The court held the "civil authority" provision was unambiguous and was applicable only to the four days access to the premises was completely prohibited by the order. Id. at 336-37. After the no-access order was lifted, pedestrian access to the premises was permitted and public transit was available. Id. at 333. The court held coverage was not available for the time after the civil authority lifted the no-access order, even though vehicular traffic was restricted in the area and "put a crimp in the ability of [the plaintiff's] Chairman to use his car and driver, and walking and public transportation were not palatable alternatives." Id. at 333-34, 336.
In a case much like the present one, the plaintiffs sought coverage for business losses resulting from the FAA's September 11 order and the subsequent cancellation of flights. 730 Bienville Partners, Ltd. v. Assurance Co. of Am., 2002 WL 31996014, at *1 (E.D.La. Sept.30, 2002) (unpublished). There, as here, the plaintiff lost business when its intended guests could not travel to its hotels. Id. at *2. Finding the policy language unambiguous, the court denied coverage because the FAA's action did not prohibit access to the hotels. Id."While the FAA's closure of the airports and cancellation of flights may have prevented many guests from getting to New Orleans and ultimately to plaintiff's hotels, the FAA hardly `prohibited' access to the hotels." Id.
Coverage under a "civil authority" provision was similarly denied in the following cases where the civil authority order had only the indirect effect of restricting or hampering access to the business premises. 54th St. Ltd. Partners, L.P. v. Fid. & Guar. Ins. Co., 306 A.D.2d 67, 763 N.Y.S.2d 243, 244 (N.Y.App.Div.2003) (); St. Paul Mercury Ins. Co. v. Magnolia Lady, Inc., 1999 WL 33537191, at *3 (N.D.Miss. Nov.4, 1999) (unpublished) (); Syufy Enters. v. Home Ins. Co. of Ind., 1995 WL 129229, at *2-3 (N.D.Cal. Mar.21, 1995) (unpublished) ().
On the other hand, courts have found that access was prohibited where the order of a civil...
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