Dick Bennett | Property Insurance Law Observer | July 7, 2015
Last Thursday in King v. Burwell, 2015 WL 2473448, 2015 U.S. LEXIS 4248 (U.S., Jun. 25, 2015), Chief Justice Roberts explained that “[a] provision that may seem ambiguous in isolation is often clarified by the remainder of the statutory scheme” when construing a law. In the same fashion, it is inappropriate to find ambiguity residing in a single phrase in a contract of insurance when the meaning can be clarified by referring to the policy as a whole. That was the teaching of a recent opinion by a unanimous panel of Texas’ intermediate level appellate court in 3109 Props. L.L.C. v. Truck Ins. Exch., 2015 WL 3827580, 2015 Tex. App. LEXIS 6146 (Tex.Ct.App., Jun. 18, 2015).
The insured was filmmaker Richard Linklater, the director of over a dozen films including Matthew McConaughey’s debut, the 1993 coming of age comedy Dazed and Confused. Linklater had a $500,000 archive of his various film projects in a building in Paige, Texas. In September of 2011, that was destroyed by the Bastrop County Complex Fire, a 32,000-acre inferno that did $325 million in insured property damage in southeast Texas; it is still the state’s most destructive blaze.
Linklater made claim for business personal property loss under a commercial property policy issued by Truck Insurance Exchange. The contract of insurance contained a declarations page that listed the coverage types afforded (liability, auto, and property), and the line for “Location of Premises” on that form was blank. It also contained:
- a renewal certificate whose “Description of Premises” was an Austin, Texas location on 51st Street; and
- a supplement declarations form whose “Description of Premises” was another Austin location on Interstate 35.
The insured denied liability because the archive was not at a “Described Location,” and a lawsuit followed. The trial court granted summary judgment to the insurer, and Linklater then took an appeal, arguing: (1) that the policy had no geographic limitation and therefore covered all of his business personal property regardless of its location because the declarations page did not specify a particular location; and, in the alternative, (2) that the contract of insurance was ambiguous and should be construed in favor of coverage.
Last month, the Court of Appeals rejected both contentions and affirmed. As Justice David Puryear’s decision explained, Linklater’s contentions were unavailing because they required that the court “look only at one page of the policy and ignore the other parts[.]” According to the opinion, the declarations page
is the cover page for the entire policy, which includes not only commercial property coverage, but also commercial general liability and automobile coverage, whereas the “Supplemental Declarations” page and the . . . “Renewal Certificate” are specific to the policy’s commercial property coverage, which is what would cover business personal property. It is nonsensical to ignore the declarations specific to the policy being construed when attempting to discern what property that policy covers[.] . . . . [T]he omission of a property description in the . . . Declarations page does not render the commercial property policy ambiguous.
The court also shot down the insured’s attempts to invoke coverage for the archive under the contract of insurance’s “Newly Acquired or Constructed Property” provision. That extended coverage to “Business Personal Property at any location you acquire within the Coverage Territory.” In the words of the court, the policyholder’s argument
ignores the active nature of the dynamic verb “acquire.” “Acquire” means “to gain possession or control of something; to get or to obtain.” . . . By contrast, “own” is a stative verb that means “to rightfully have or possess as property; to have a legal right to.” . . . The verb “acquire” represents an action — that of obtaining — whereas the verb “own” represents a state – that of possession. Section 5(a)(2)(a)(i) extends coverage to business personal property at locations Linklater acquires — i.e., gets or obtains — during the policy period. It does not extend coverage to business personal property at all locations Linklater already owned when the policy period commenced.
According to Justice Puryear, any contrary reading of the language at issue “would render the policy’s geographic limitations on covered business personal property meaningless.”