Opinion
Civil Action No. 01-2380
December 27, 2002
ORDER AND REASONS
Before the Court is a Motion for Summary Judgment (Rec. Doc. 37) filed by plaintiff Certain Underwriters at Lloyd's London. Defendant, The Warehouse, Inc., opposes the motion. The motion, set for hearing on December 18, 2002, is before the Court on the briefs without oral argument. For the reasons that follow the motion is GRANTED.
Background
Certain Underwriters at Lloyd's London ("Lloyd's") filed the instant declaratory judgment suit against its insured The Warehouse, Inc. ("Warehouse"). Lloyd's issued a policy of commercial property insurance to Warehouse to cover certain risks at its New Orleans premises. In its complaint Lloyd's seeks a declaration that its policy does not cover Warehouse for losses incurred during a November 13, 2000, burglary. Lloyd's alleges that Warehouse did not maintain its burglary and robbery protective systems as required by the policy. (Rec. Doc. 1).Lloyd's now moves for summary judgment pursuant to Rule 56(c) of the Federal Rules of Civil Procedure.
The Parties' Contentions
Lloyd's argues that the "Burglary and Robbery Protective Systems Endorsement" of its policy excludes coverage for losses incurred in the November 13, 2000, burglary. Lloyd's Exhibit A. Lloyd's points out that the evidence shows that the alarm was not armed on the night in question and had not been for some time prior to the burglary, and under those circumstances coverage is excluded. Lloyd's asserts that the evidence demonstrates that on other occasions the alarm system was wholly inoperable although it had been fixed prior to the burglary.
In opposition Warehouse argues that the Lloyd's exclusion was not clearly communicated to Warehouse and that it was Lloyd's responsibility to make sure that Warehouse was properly using the alarm system before agreeing to issue a policy of insurance. Warehouse also argues that Lloyd's should be estopped from enforcing the policy exclusion because Warehouse was materially misled into believing that it was sufficiently maintaining the alarm.
Discussion
1. Summary Judgment Standards
In determining whether a party is entitled to summary judgment, the court views the evidence in the light most favorable to the non-moving party. Littlefield v. Forney Indep. School Dist., 268 F.3d 275, 282 (5th Cir. 2001) (citing Smith v. Brenoettsy, 158 F.3d 908, 911 (5th Cir. 1998); Tolson v. Avondale Indus., Inc., 141 F.3d 604, 608 (5th Cir. 1998)) Summary judgment is appropriate if the pleadings, depositions, answers to interrogatories, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Id. (citingCelotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)). The moving party bears the burden, as an initial matter, of showing the district court that there is an absence of evidence to support the nonmoving party's case. Id. (citing Celotex, 477 U.S. at 325, 106 S.Ct. at 2548). If the moving party fails to meet this initial burden, the motion must be denied regardless of the nonmoving party's response. Id.
2. Lloyd's Motion
a. The evidence of record
At the outset, the evidence of record leaves no conclusion other than the alarm was unarmed when the burglary occurred.
According to the deposition testimony of Amaniel Tewelde (Warehouse Exhibit B) and Glenn Charles (Lloyd's Exhibit B), Warehouse's owners, the Warehouse premises has a club and restaurant on site but they are operated as two separate businesses. Tewelde and Charles run the club (where the burglary occurred) and Tewelde's Uncle Sammy subleases and runs the restaurant. The club and restaurant maintain different hours of operation which results in the restaurant being open while the club is closed. When the restaurant is open for business the burglar alarm cannot be set so the club is often left unprotected while closed and unoccupied.
When asked whether the alarm was set on the night of the burglary, Tewelde answered "no." Exhibit B, at 145. Tewelde said that Uncle Sammy had the alarm code but was unable to say why Uncle Sammy didn't set the alarm on the night in question. Id. at 86-87, 146.
Charles testified that only he and Tewelde had the alarm code and that it had never been given to Uncle Sammy. Exhibit C, at 60-61. He also stated that the alarm was not set on the night of the burglary. Id. at 61. He explained that the club closed around 5:00 or 6:00 a.m. on Sunday morning and that no one had set the alarm because Sammy would be arriving later that morning around 10:00 a.m. to open the restaurant. Id. at 63. According to Charles, having Sammy and the restaurant sharing the premises often precluded use of the alarm system for the club. Id.
The conclusion that the alarm was not set when the burglary occurred is further supported by the alarm system activity logs, Lloyd's Exhibits E F, which APS's corporate representative discussed in his deposition. APS's representative explained that the Warehouse had not armed the alarm since June 9, 2000, over five months before the burglary occurred. Lloyd's Exhibit C, at 54-55. Further, during the time period August 11, 2000, through October 27, 2000, the alarm system was wholly inoperable due to an electrical problem. Id. at 144. These assertions, which were based upon the activity logs, are consistent with the nonchalant and haphazard manner in which the alarm system was operated according to Tewelde's and Charles's own testimony.
The foregoing evidence establishes that the alarm was not set on the morning of the burglary. Interestingly, Warehouse seems to have abandoned its prior disagreement with this conclusion. It does, however, allude to the fact that the burglary could have occurred during the restaurant's operational hours when Warehouse's alarm system could not be armed. Even if this were true, it would not change the fact that the burglary occurred while the club was unoccupied and at a time when the alarm should have been armed but was not. No evidence has been offered to suggest that Lloyd's agreed to or knew about the way Warehouse was leaving the alarm unarmed to accommodate the dual businesses.
In its opposition to APS's motion for summary judgment which the Court previously denied, Warehouse tried to argue that Tewelde and Charles had no way of knowing whether Uncle Sammy had set the alarm that night and that they had no way of knowing that the alarm was or was not set at the time of the burglary. Although it was unnecessary for the Court to address that argument in its prior order, the Court notes for the record that no affidavit or evidence of any kind has ever been offered by Uncle Sammy so as to create an issue of fact as to whether he had in fact set the alarm. Instead, the deposition testimony of Tewelde and Charles remains uncontradicted.
Given then that the alarm was not set on the night in question, and that Warehouse was less than diligent in its efforts to use and arm the alarm, the remaining question for the Court to resolve is whether pursuant to the terms of the Lloyd's policy these omissions voided coverage for the losses incurred during the November 13, 2000, burglary.
b. The Lloyd's Policy
An insurance policy is a contract between the parties and should be construed by using the general rules of interpretation of contracts.Louisiana Ins. Guar. Assoc. v. Interstate Fire Cas. Co., 630 So.2d 759, 763 (La. 1994). The ordinary meaning of the text governs in the absence of an absurd result, and each provision is read in light of the others. Williamson v. J.C. Penney Life Ins. Co., 226 F.3d 408, 409 (5th Cir. 2000). The intent of the parties is to be determined by construing the entirety of the document on a practical, reasonable, and fair basis. Hartford Accident Indem. Co. v. Joe Dean Constr., Inc., 584 So.2d 1226, 1229 (La.App. 2nd Cir. 1991). A policy of insurance should not be interpreted in an unreasonable or strained manner so as to enlarge or restrict its provision beyond what is reasonably contemplated by its terms or so as to achieve an absurd conclusion.Louisiana Ins. Guar. Assoc., 630 So.2d at 763. Rather, the intentions of the parties, as reflected by the words of the policy, determines the extent of coverage. Trinity Indus., Inc. v. Insurance Co. of N. Amer., 916 F.2d 267, 269 (5th Cir. 1990) (citing Parete v. Sentry Indem. Co., 536 So.2d 471 (La. 1988); La. Civ. Code arts. 2045 2046 (West 1987)). The court is to consider the policy as a whole, and interpret it to fulfill the reasonable expectations of the parties in light of the customs and usages of the industry. Id. (citing Benton Casing Serv., Inc. v. Avemco Ins., 379 So.2d 225 (La. 1979); La. Civ. Code arts. 2045, 2050, 2053, 2054 (West 1987)). If the policy remains ambiguous after such consideration, then it will be construed against the insurer.Id. (citing Breland v. Schilling, 550 So.2d 609 (La. 1989))
The Lloyd's commercial policy at issue includes a Burglary and Robbery Protective Systems endorsement which states that "[a] s a condition of this insurance, you are required to maintain the protective systems listed above." Lloyd's Exhibit I. The listed system is a C-lA, which requires an alarm which communicates to a central monitoring station, whose staff has no keys to the property, and an alarm of "A" grade. Id. Lloyd's has never contended that Warehouse's alarm system failed to meet the C-lA alarm specification.
The endorsement contains an exclusion which states that coverage does not apply if Warehouse
b. Failed to maintain any protective system listed in the Schedule above, and over which [Warehouse] had control, in complete working order.
Lloyd's Exhibit I (emphasis added).
The endorsement does not state with any specificity what Warehouse was required to do in order to "maintain" the alarm system. Likewise, the endorsement does not expressly state that Warehouse was required to actually set the alarm in order to obtain coverage.
Nevertheless, applying the principles of insurance contract interpretation discussed above, the Court reaches the inescapable conclusion that the term "maintain," surely contemplates that Warehouse would set and use the alarm that the policy required Warehouse to install. To conclude otherwise, the Court would have to interpret the policy such that the endorsement merely required Warehouse to install the alarm system to obtain coverage. Such a conclusion would be absurd given that the policy called for a very specific type of alarm specification with the clear intent being that the chance of a loss due to burglary would be reduced by using a central station monitor alarm. Clearly when the alarm is not set, it cannot perform the very function that it was installed to perform-the very function that prompted Lloyd's to make the alarm a condition of coverage. Therefore, notwithstanding the lack of express policy language requiring Warehouse to actually use the alarm it installed, the intent of the parties was that the alarm was to be armed when the club was unoccupied. On this point, the policy is not ambiguous as a matter of law.
The Fifth Circuit has recognized that a policy is not ambiguous simply because its terms require interpretation by the court to glean the parties' intent. See Trinity Indus., Inc. v. Insurance Co. of N. Amer., 916 F.2d 267 (5th Cir. 1990) ("We do not feel that ambiguity "in the air' justifies a strict construction against the insurer.")
In SFI, Inc. v. United States Fire Insurance Co., the district court reached the same conclusion under very similar circumstances. 453 F. Supp. 502 (M.D. La. 1978). The policy in that case required the insured to exercise "due diligence" in "maintaining [the alarm] in complete working order." Id. at 503. The court held that this phraseology required that the alarm be turned on because the whole point in requiring any alarm system was to thwart burglars and lessen the chance of loss.Id. at 505. The court recognized that if it were to find that the insured was not required to set the alarm in order to comply with the policy, then the requirement of "due diligence" would be meaningless. Id. The same reasoning applies to the Lloyd's policy herein.
The SFI court did ultimately find coverage, however, because the unset alarm was a one-time negligent act that just happened to have occurred on the very night the burglary took place. 453 F. Supp. at 507. The court concluded that "due diligence" could still be met notwithstanding the one slip-up. Id. Unlike the situation in SFI, the Warehouse alarm was left unset on a regular basis and was intentionally left unarmed when the burglary occurred. Thus, the Court need not try to determine whether Warehouse had "maintained" the alarm notwithstanding a single negligent act as in SFI.
In its attempt to avoid summary judgment, Warehouse raises several arguments as to why the policy exclusion should not be enforced. Those arguments range from an assertion that the policy exclusion was not adequately communicated to Warehouse, to an assertion that Lloyd's "materially misled" Warehouse into thinking that it was properly maintaining the alarm system. If these contentions had any support based upon the evidence of record, perhaps Warehouse could have survived summary judgment. However, there is nothing before the Court to create an issue of fact as to any of the assertions Warehouse makes in its memorandum. Rather, Warehouse's assertions, as mere legal argument with no evidentiary support whatsoever, are insufficient to avoid summary judgment.
In sum, Warehouse is not entitled to coverage under the Lloyd's policy for the losses incurred in the November 13, 2000, burglary.
Accordingly;
IT IS ORDERED that the Motion for Summary Judgment (Rec. Doc. 37 filed by plaintiff Certain Underwriters at Lloyd's London should be and is hereby GRANTED. Judgment shall issue accordingly.