Scottsdale Insurance Company v. Logansport Gaming , 556 F. App'x 356 ( 2014 )

Case: 13-30645 Document: 00512542259 Page: 1 Date Filed: 02/24/2014
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
No. 13-30645 FILED
Summary Calendar February 24, 2014
Lyle W. Cayce
Clerk
SCOTTSDALE INSURANCE COMPANY,
Plaintiff–Appellee
v.
LOGANSPORT GAMING, L.L.C.; LOGANSPORT TRUCKSTOP, L.L.C.;
SABINE RIVER RESTAURANT,
Defendants–Appellants
Appeal from the United States District Court
for the Western District of Louisiana
USDC No. 5:11-CV-01673
Before REAVLEY, JONES, and PRADO, Circuit Judges.
PER CURIAM:*
This case concerns the interpretation of an insurance policy issued by
Plaintiff–Appellee Scottsdale Insurance Company (“Scottsdale”) to
Defendants–Appellants Logansport Gaming, L.L.C., Logansport Truckstop,
L.L.C., and Sabine River Restaurant (together “Logansport”). The district
* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
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No. 13-30645
court granted summary judgment in favor of Scottsdale. For the reasons
below, we affirm.
I. BACKGROUND
Scottsdale issued Logansport an insurance policy for commercial general
liability and property insurance (“the Policy”), insuring a property in
Logansport, Louisiana. The property included a truck stop, a convenience
store, video poker machines, and a restaurant. The Policy contains a
Protective Safeguards Endorsement, which provides in pertinent part:
PROTECTIVE SAFEGUARDS
A. The following is added to the Commercial Property Conditions
PROTECTIVE SAFEGUARDS
1. As a condition of this insurance, you are required to maintain
the protective devices or services listed in the Schedule above
[Fire Extinguishers and Ansul System].
2. The protective safeguards to which this endorsement applies
are identified by the following symbols:
...
“P-9" The protective system described in the Schedule [Fire
Extinguishers and Ansul System].
B. The following is added to the EXCLUSIONS section of the
Causes of Loss- Special Form:
We will not pay for loss or damage caused by or resulting from fire
if, prior to the fire, you:
1. Knew of any suspension or impairment in any protective
safeguard listed in the Schedule above and failed to notify us of
that fact; or
2. Failed to maintain any protective safeguard listed in the
Schedule above, and over which you had control, in complete
working order.
Logansport purchased and installed a fire suppression system in the
vent hood above the stove in the restaurant kitchen. Logansport hired Ark-
La-Tex Fire Systems to service the fire suppression system and inspect it
semi-annually. Ark-La-Tex Fire Systems last inspected the Logansport fire
suppression system in August 2010. On January 31, 2011, a fire occurred in
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Logansport’s restaurant kitchen, causing damage to the property. Logansport
filed a claim on the Policy the same day. Scottsdale investigated the claim,
particularly whether the fire suppression system had been maintained “in such
a condition that it should have operated.” Its investigation concluded that the
system did not activate on the day of the fire and that, even if it had activated,
missing parts would have rendered the system ineffective in suppressing the
fire.
On September 15, 2011, Scottsdale brought this suit in federal court
seeking a declaratory judgment that the Policy did not provide coverage for the
damage. 1 Scottsdale moved for summary judgment, claiming that the policy
barred coverage because it required Logansport to maintain its fire
suppression system “in complete working order.” Logansport 2 contended that
it complied with the Policy by acting with due diligence and in a reasonably
prudent manner in maintaining the fire suppression system.
The district court granted summary judgment for Scottsdale. The
district court found that the Policy’s requirement that Logansport not only
“maintain” the system, but “maintain it in complete working order” meant that
the system had to be working at the time of the fire for Logansport to receive
coverage. Thus, because Logansport conceded that the system did not work on
the date of the fire and because Logansport did not provide any alternative
interpretation of the Policy’s language, summary judgment for Scottsdale was
appropriate. Logansport filed a timely notice of appeal.
Logansport made a counterclaim, which the district court dismissed. Logansport
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does not appeal this ruling.
Sabine River Restaurant did not oppose Scottsdale’s Motion for Summary Judgment
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below. Accordingly, it has waived its right to appeal.
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II. DISCUSSION
Logansport seeks review of a final judgment of the district court.
Accordingly, this Court has jurisdiction pursuant to 28 U.S.C. § 1291.
This Court reviews a district court’s ruling on summary judgment de
novo, applying the same standard as the district court in the first instance.
Turner v. Baylor Richardson Med. Ctr., 476 F.3d 337, 343 (5th Cir. 2007)
(citation omitted). Summary judgment should be granted only when there is
“no genuine dispute as to any material fact and . . . the movant is entitled to a
judgment as a matter of law.” Fed. R. Civ. P. 56(a). An interpretation of an
insurance policy provision is likewise an issue of law reviewed de novo.
Travelers Lloyds Ins. Co. v. Pac. Emp’rs Ins. Co., 602 F.3d 677, 681 (5th Cir.
2010).
Having diversity jurisdiction over this action, we apply the substantive
law of the forum state. See Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938).
In the underlying action, Louisiana is the forum state, and thus, Louisiana law
governs this dispute. Louisiana courts construe insurance policies using
ordinary contract principles. Smith v. Matthews, 611 So. 2d 1377, 1379 (La.
1993). An insurance contract’s clear and unambiguous language will be
enforced as written, but any ambiguous provisions must be construed in favor
of coverage to the insured and against the insurer who issued the policy. Id.(citing Cent. La. Elec. Co. v. Westinghouse, 579 So. 2d 981 (La. 1991); Breland
v. Schilling, 550 So. 2d 609 (La. 1989)); see also La. Civ. Code Ann. art. 2046.
Still, “[w]hen a literal interpretation will produce absurd consequences, the
court may consider all pertinent facts and circumstances, including the parties’
own conclusion of the instrument’s meaning, rather than adhere to a forced
meaning of the terms used.” Halphen v. Borja, 2006-1465, p. 4 (La. App. 1 Cir.
5/4/07); 961 So. 2d 1201, 1205, writ denied, 2007-1198 (La. 9/21/07); 964 So. 2d
338.
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On appeal, Logansport challenges the district court’s interpretation of
the Policy. Specifically, Logansport argues that (1) the Policy’s language—to
“maintain . . . in complete working order”—is ambiguous; (2) the district court’s
interpretation of the Policy leads to absurd results; and (3) due diligence is the
proper standard for determining compliance with the Policy’s requirements.
Scottsdale argues that Logansport’s ambiguity and absurdity arguments
about the interpretation of the Policy were not raised before the district court
and should therefore be deemed waived. We agree that Logansport failed to
raise its ambiguity and absurdity arguments before the district court. As the
district court emphasized, Logansport did not frame its arguments as offering
an interpretation of the language of the Policy itself. Accordingly, we deem
Logansport’s ambiguity and absurdity arguments waived on appeal. See
LeMaire v. La. Dep’t of Transp. & Dev., 480 F.3d 383, 387 (5th Cir. 2007).
Logansport’s lone remaining argument is that we should consider
evidence of its due diligence in determining whether the Policy’s exclusion for
“fail[ing] to maintain any protective safeguard . . . in complete working order”
applies. We disagree. Nothing in the plain language of the Policy suggests
that to maintain the protective safeguards in complete working order means
only to exercise due diligence in maintaining the safeguards listed. As the
district court emphasized, the phrase “in complete working order” is crucial.
There might be a genuine issue of material fact as to what actions are
necessary to “maintain” protective safeguards. See Charles Stores, Inc. v.
Aetna Ins. Co. 428 F.2d 989 (5th Cir. 1970) (holding that determination of
whether insured maintained sprinkler and alarm systems was a “classic issue
for jury”). Yet the Policy’s use of the phrase “in complete working order” to
modify “maintain” leaves no doubt that diligence alone is not enough to satisfy
the plain terms of the Policy. In conceding that the fire suppression system
did not work on the day of the fire, Logansport necessarily admits that its
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system was not “in complete working order,” and thus did not comply with the
plain language of the Policy.
Scottsdale also filed a motion to dismiss the appeal pursuant to Federal
Rule of Appellate Procedure 27 for failure to “address the actual Judgment of
the District Court.” Logansport has adequately addressed the district court’s
judgment and we accordingly deny its motion.
III. CONCLUSION
Therefore, we DENY Scottsdale’s motion to dismiss the appeal and
AFFIRM the district court’s grant of summary judgment for Scottsdale.
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