Lexington Insurance Company v. St. Bernard Parish ( 2014 )

Case: 13-30300 Document: 00512462906 Page: 1 Date Filed: 12/06/2013
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
No. 13-30300 FILED
Summary Calendar December 6, 2013
Lyle W. Cayce
Clerk
LEXINGTON INSURANCE COMPANY,
Plaintiff - Appellant
v.
ST. BERNARD PARISH GOVERNMENT,
Defendant - Appellee
Appeal from the United States District Court
for the Eastern District of Louisiana
U.S.D.C. No. 2:11-CV-1865
Before WIENER, OWEN, and HAYNES, Circuit Judges.
PER CURIAM:*
Lexington Insurance Company (“Lexington”) brought a declaratory
judgment action against St. Bernard Parish Government (“St. Bernard”)
regarding the interpretation of an insurance policy. The district court entered
declaratory judgment in favor of St. Bernard, and Lexington timely appealed.
We AFFIRM the district court’s interpretation of the policies in question as it
applies to the duty to defend but REMAND for modifications to the judgment
* 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 R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH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.
Case: 13-30300 Document: 00512462906 Page: 2 Date Filed: 12/06/2013
No. 13-30300
consistent herewith.
I.
After Hurricane Katrina flooded virtually every structure in St. Bernard
parish, St. Bernard passed an ordinance condemning 5731 structures in
disrepair, thereafter demolishing many of them. In response, seventy property
owners sued St. Bernard in various Louisiana state court actions alleging that
St. Bernard had wrongfully demolished or damaged their properties.
St. Bernard sought defense and indemnity for the state court actions
under three consecutive Lexington Insurance Policies (the “Policies”) in effect
from February 2008 to February 2011. The Policies provided coverage for
“property damage” and “personal and advertising injury” arising out of an
“occurrence,” and contained a $10,000,000 per occurrence and aggregate limit,
subject to a $250,000 retained limit. Lexington did not assume the defense of
St. Bernard in the underlying actions. Instead, it brought the instant action,
requesting a declaratory judgment that the Policies’ $250,000 retained limit
applied separately to each alleged demolition or property damage asserted in
the underlying actions. Under that theory, no defense would be owed as no
property had a value exceeding $250,000.
The case proceeded to a bench trial on stipulated facts with two disputed
issues of law presented for the district court’s resolution: (1) “Whether the
intentional demolition of the subject properties constitutes an ‘occurrence’
under the Lexington Policies”; and (2) “To the extent there has been an
‘occurrence,’ whether the demolition or destruction of each separate property,
which took place at individual times and locations, constitutes a separate
‘occurrence’ under the Lexington Policies such that the $250,000 per
occurrence retained limit must be exhausted for each separate property.” The
district court resolved both issues in favor of St. Bernard.
2
Case: 13-30300 Document: 00512462906 Page: 3 Date Filed: 12/06/2013
No. 13-30300
II.
“A district court’s interpretation of an insurance contract or provision is
a question of law that we review de novo.” French v. Allstate Indem. Co., 637
F.3d 571, 577 (5th Cir.), cert. denied, 132 S. Ct. 420 (2011). Since this is a
diversity action, we apply Louisiana substantive law. Martco Ltd. P’ship v.
Wellons, Inc., 588 F.3d 864, 871 (5th Cir. 2009). In construing an insurance
policy under Louisiana law, the following general rules of interpretation apply:
Words and phrases used in a policy are to be construed using their
plain, ordinary and generally prevailing meaning, unless the
words have acquired a technical meaning. . . . Where the language
in the policy is clear, unambiguous, and expressive of the intent of
the parties, the agreement must be enforced as written. However,
if after applying the other rules of construction an ambiguity
remains, the ambiguous provision is to be construed against the
drafter and in favor of the insured.
The purpose of liability insurance is to afford the insured
protection from damage claims. Policies therefore should be
construed to effect, and not to deny, coverage.
Elliot v. Cont’l Cas. Co., 949 So. 2d 1247, 1254 (La. 2007) (emphasis omitted)
(quoting Reynolds v. Select Props., 634 So. 2d 1180, 1183 (La. 1994)).
Lexington first argues that the district court incorrectly determined that
the injuries alleged by the state court plaintiffs were “personal and advertising
injury” occurrences as defined in the Policies. The Policies define a personal
and advertising injury as arising out of, inter alia, “[t]he wrongful eviction
from, wrongful entry into, or invasion of the right of private occupancy of a
room, dwelling or premises that a person occupies by or on behalf of its owner,
landlord or lessor.” The sole contention between the parties on this issue is the
function of the phrase, “by or on behalf of its owner, landlord or lessor.”
Lexington argues that the phrase modifies the wrongful acts, such that the
eviction or invasion of right of occupancy must occur “by or on behalf of” the
“owner, landlord or lessor” of the property. Conversely, St. Bernard contends
3
Case: 13-30300 Document: 00512462906 Page: 4 Date Filed: 12/06/2013
No. 13-30300
that the phrase modifies “that a person occupies,” such that the injured party
must rightfully occupy the property “by or on behalf of its owner, landlord or
lessor.” The district court found the phrase ambiguous and construed it in
favor of coverage. 1
We agree with the district court’s construction. The Louisiana Supreme
Court has not expressly interpreted this language, and other courts have
applied both parties’ constructions, with many interpreting the language in
favor of the insured because it is ambiguous. 2 Indeed, when construing this
same language under Mississippi law, we previously held that “the phrase
reasonably may be interpreted to mean that, in order for there to be coverage,
the victim must be occupying the [property] . . . in the interest of’ the owner of
the [property].” Am. Guar. & Liab. Ins. Co. v. 1906 Co., 273 F.3d 605, 620–21
(5th Cir. 2001). We concluded that Mississippi courts would likely apply this
meaning “in favor of coverage, either as their own interpretation or in
accordance with Mississippi law governing the construction of ambiguous
insurance contracts.” Id. at 621. Applying Louisiana’s general rules of
insurance policy interpretation to the Policies here compels no different result:
1The underlying lawsuits against St. Bernard were brought by owners of the affected
properties for actions taken by St. Bernard; it is undisputed that St. Bernard was not the
owner, landlord, or lessor of the properties, or acting on behalf of such persons. Therefore,
under Lexington’s proposed construction, the Policies would not be triggered because the acts
of condemnation and demolition would not be “personal and advertising” injuries.
2Compare Chimera Inv. Co. v. State Farm Fire & Cas. Co., 268 F. App’x 793, 797 (10th
Cir. 2008) (unpublished) (applying Utah law to reach the interpretation argued by
Lexington), and Whittier Props., Inc. v. Alaska Nat’l Ins. Co., 185 P.3d 84, 94 (Alaska 2008)
(applying Alaska law to reach the interpretation argued by Lexington), with Royal Ins. Co.
of Am. v. Kirksville Coll. of Osteopathic Med., 191 F.3d 959, 963 (8th Cir. 1999) (applying
Missouri law to find the language ambiguous and construing in favor of the insured), New
Castle Cnty. v. Nat’l Union Fire Ins. Co., 174 F.3d 338, 347–51 (3d Cir. 1999) (applying
Delaware law to find the language ambiguous and construing in favor of the insured), and
United States v. Sec. Mgmt. Co., 96 F.3d 260, 265 (7th Cir. 1996) (noting, in dicta, that the
language at issue “refine[s] the nature of the prerequisite ‘right’ of private occupancy”).
4
Case: 13-30300 Document: 00512462906 Page: 5 Date Filed: 12/06/2013
No. 13-30300
the language is, at best, ambiguous, with at least one reasonable interpretation
being that occupancy must occur by or on behalf of the property’s owner,
landlord, or lessor. Accordingly, the definition of a personal and advertising
injury occurrence is properly construed in favor of St. Bernard. See Elliot, 949
So. 2d at 1254 (ambiguity is to be construed in favor of coverage).
Lexington next argues that the district court improperly held that “the
condemnation and demolition activities . . . constitute a series of related
occurrences for which a single retained limit applies” under the Policies. With
regard to personal and advertising injuries, the Policies provide that “[a]ll
damages that arise from the same, related or repeated injurious material or
act will be deemed to arise out of one occurrence, regardless of the frequency
or repetition thereof, the number and kind of media used and the number of
claimants.” The Policies also specify that “[t]he retained limit . . . [a]pplies
separately to each and every occurrence . . . or series of continuous, repeated,
or related occurrences.” Accordingly, if the acts of condemnation and
demolition alleged in the underlying complaints against St. Bernard arose
from related or repeated acts, they are deemed to arise out of a single
occurrence to which the Policies’ retained limit would apply only once.
Alternatively, to the extent that the alleged acts of condemnation and
demolition were instead multiple occurrences, the Policies’ retained limit
would still apply only once if they constituted a “series of continuous, repeated,
or related occurrences.” Lexington argues that neither avenue applies because
the acts alleged in the complaint are not related. 3 We disagree.
3 Lexington also devotes much of its briefing to asserting that this case is governed by
Lombard v. Sewerage & Water Bd., 284 So. 2d 905 (La. 1973), and cases applying it. As
thoroughly explained by the district court, Lombard is inapposite because the Lexington
Policies differ materially from the policy construed in Lombard. See Lexington Ins. Co. v. St.
Bernard Parish Gov’t, No. 2:11-CV-1865, 2013 WL 55908, at *7–9 (E.D. La. Jan. 23, 2013).
5
Case: 13-30300 Document: 00512462906 Page: 6 Date Filed: 12/06/2013
No. 13-30300
“Related” is not defined in the Policies and has not been defined in this
context by Louisiana courts. However, we are guided by the rule that “[w]ords
and phrases used in a policy are to be construed using their plain, ordinary and
generally prevailing meaning.” Elliot, 949 So. 2d at 1254. “Related” has a
plain meaning of “connected by reason of an established or discoverable
relation.” MERRIAM-WEBSTER’S COLLEGIATE DICTIONARY 1050 (11th ed. 2007).
In the insurance policy context, courts have recognized the broad meaning of
“related” and have held that it covers logical or causal connections between
acts or occurrences. See, e.g., Gregory v. Home Ins. Co., 876 F.2d 602, 604–06
(7th Cir. 1989) (“[T]he common understanding of the word ‘related’ covers a
very broad range of connections, both causal and logical.”); Ariz. Prop. & Cas.
Ins. Guar. Fund v. Helme, 735 P.2d 451, 456–58 (Ariz. 1987) (noting that
related can mean either a logical or a causal connection, but ultimately
concluding, “series of related incidents” meant that the incidents were
“causally related”); Bay Cities Paving & Grading v. Lawyers’ Mut. Ins. Co.,
855 P.2d 1263, 1271–75 (Cal. 1993) (interpreting “series of related acts,” and
holding that “the term ‘related’ as it is commonly understood and used
encompasses both logical and causal connections”).
We likewise recognize the broad meaning of the term and hold that the
acts alleged in the underlying actions are related because they all resulted
from St. Bernard’s ordinance condemning those properties that remained in
disrepair following Hurricane Katrina. The fact that the properties in the
underlying action were demolished at different times, in varying degrees, and
at different locations, does not mean that these acts are not related. The
Policies explicitly recognize that acts can be related “regardless of the
frequency or repetition thereof, the number and kind of media used and the
number of claimants.” Furthermore, the Policies contemplate that occurrences
in a series, i.e., at different times, can be related. Because the multiple acts of
6
Case: 13-30300 Document: 00512462906 Page: 7 Date Filed: 12/06/2013
No. 13-30300
condemnation and demolition alleged in the underlying complaints are related
such that they arose either from a single occurrence or a series of related
occurrences, the Policies’ $250,000 retained limit applies once to the alleged
acts. 4
Lastly, Lexington urges that the district court’s order and judgment are
premature and overbroad because they extend to the duty to indemnify in
declaring that “St. Bernard Parish Government is entitled to coverage by the
Lexington insurance policies for damages caused by St. Bernard.” We agree.
“An insurer’s duty to defend suits on behalf on an insured presents a separate
and distinct inquiry from that of the insurer’s duty to indemnify a covered
claim after judgment against the insured in the underlying liability case.”
Martco, 588 F.3d at 872 (applying Louisiana law) (citing Elliot, 949 So. 2d at
1250). The former is governed by the “Eight Corners Rule,” in which the
allegations of the underlying complaint are applied to the policy, without resort
to extrinsic evidence, to determine whether the pleadings against the insured
disclose a possibility of liability under the policy. Martco, 588 F.3d at 872–73.
Conversely, whether the insurer has a duty to indemnify a claim turns on facts
beyond those alleged in the complaint against the insured. Id. To make this
latter determination, a court applies the policy “to the actual evidence adduced
at the underlying liability trial together with any evidence introduced in the
coverage case.” Id. at 877. Accordingly, Louisiana law generally provides that
the issue of indemnity is premature and non-justiciable until the underlying
Lexington also argues that “[r]egardless of how many retained limits apply in any
4
given policy period, St. Bernard must pay at least one for each policy from which it seeks
coverage.” This issue was neither raised in Lexington’s complaint for declaratory judgment,
submitted to the district court for resolution at trial, nor ruled on by the district court.
Because the issue was not raised in the trial court, we will not consider it for the first time
on appeal. See Priester v. Lowndes Cnty., 354 F.3d 414, 424–25 (5th Cir. 2004).
7
Case: 13-30300 Document: 00512462906 Page: 8 Date Filed: 12/06/2013
No. 13-30300
issue of liability is resolved and the defendant is cast in judgment. See Meloy
v. Conoco, Inc., 504 So. 2d 833, 839 (La. 1987); Mossy Motors, Inc. v. Cameras
Am., 898 So. 2d 602, 607 (La. Ct. App. 4th Cir. 2005).
In this case, the arguments presented dealt only with the pleadings in
the underlying actions; evidence regarding St. Bernard’s liability was not
before the court nor was it argued that the indemnity issue was somehow
justiciable despite the fact that the issue of St. Bernard’s liability had yet to be
resolved. St. Bernard did not file a counter-claim seeking its own declaration.
In short, the indemnity issue is non-justiciable under the pleadings before the
district court. 5 The judgment therefore should be modified to reflect only a
declaration that Lexington owes a duty to defend St. Bernard under the
current pleadings (as of the time of the original trial) in the “Underlying
Lawsuits” as defined in the complaint.
AFFIRMED as MODIFIED and REMANDED for entry of judgment
consistent herewith.
5 Undoubtedly, Lexington’s somewhat confusing complaint and piecemeal approach
to the issues fostered confusion as to what it was seeking. However, whether a case is
justiciable at all implicates Article III jurisdiction questions and, thus, cannot be waived.
See Stolt-Nielsen S.A. v. Animal Feeds Int’l Corp., 130 S. Ct. 1758, 1767 n.2 (2010); Rosedale
Missionary Baptist Church v. New Orleans City, 641 F.3d 86, 88 (5th Cir. 2011). This point
is not merely academic – if St. Bernard is never held liable to the plaintiffs in the “Underlying
Lawsuits,” it will never suffer any harm requiring redress with respect to Lexington’s
indemnity obligation. Thus, the indemnity claim is not yet ripe.
8