Opinion
CIVIL ACTION NO: 07-976.
July 3, 2008
SECTION: "A" (4)
ORDER AND REASONS
Before the Court is a Motion for Summary Judgment (Rec. Doc. 60) filed by defendant Massachusetts Bay Insurance Co. Plaintiff, Courtenay, Hunter Fontana, LLP., opposes the motion. The motion, set for hearing on June 25, 2008, is before the Court on the briefs without oral argument. For the reasons that follow the motion is DENIED.
I. BACKGROUND
Plaintiff Courtenay, Hunter Fontana, LLP ("Plaintiff") initiated this suit in state court against Massachusetts Bay Insurance Co. ("Massachusetts Bay" or "Defendant"). Plaintiff filed suit alleging "significant loss of business income." (Pet. ¶ 5). Plaintiff claims that its policy with Massachusetts Bay provides coverage for the full amount of its business losses and that Defendant "has failed to pay the total amount due under the policy." (Pet. ¶ 8). Plaintiff was paid $272,939 for lost business income under the policy's Civil Authority and Utility Services provisions but Plaintiff seeks in excess of $1,600,000. Defendant removed the suit to this Court and Plaintiff's motion to remand was subsequently denied.
Defendant now moves for summary judgment on a coverage issue that it contends has deadlocked the parties' settlement negotiations. Defendant contends that Plaintiff cannot recover under the Business Income section of the policy, section A(5)(f), because its business operations were not suspended due to a covered cause of loss. Defendant contends that business operations were not suspended due to a covered cause of loss because Plaintiff did not sustain damage to its business personal property and because Plaintiff did not purchase building coverage under the policy to cover the damage to its suite.
Plaintiff leases office space in the Texaco Center, a multistory office building located in downtown New Orleans.
In opposition, Plaintiff contends that its operations were suspended because the Texaco Center sustained direct physical damage during Hurricane Katrina. Plaintiff also contends that its access to its offices was prohibited while the Texaco Center was under repair and that under the explicit language of the policy lost business income is payable if damage to common areas of the premises causes a suspension in business operations.
II. DISCUSSION
An insurance policy is an agreement between the parties and should be interpreted by using ordinary contract principles.Andrews v. Columbia Cas. Ins. Co., 960 So. 2d 134, 139 (La.App. 1st Cir. 2007) (citing Smith v. Matthews, 611 So.2d 1377, 1379 (La. 1993)). The judicial responsibility in interpreting insurance contracts is to determine the parties' common intent.Id. (citing LSA-C.C. art. 2045; Louisiana Ins. Guar. Ass'n v. Interstate Fire Cas. Co., 630 So. 2d 759, 763 (La. 1994)). If the language in an insurance contract is clear and explicit, no further interpretation may be made in search of the parties' intent. Id. (citing LSA-C.C. art. 2046).
However, if there is ambiguity in an insurance policy, it must be resolved by construing the policy as a whole; one policy provision is not to be construed separately at the expense of disregarding other policy provisions. Andrews, 960 So. 2d at 139 (citing LSA-C.C. art. 2050; Louisiana Ins. Guar. Ass'n, 630 So.2d at 763). Ambiguity will also be resolved by ascertaining how a reasonable insurance policy purchaser would construe the clause at the time the insurance contract was entered. Id. (citingBreland v. Schilling, 550 So. 2d 609, 610-11 (La. 1989)). If, after applying the other general rules of construction, an ambiguity remains, the ambiguous contractual provision is to be construed against the insurer who issued the policy and in favor of coverage for the insured. Id. (citing LSA-C.C. art. 2056). Under this rule of "strict construction," equivocal provisions seeking to narrow an insurer's obligation are strictly construed against the insurer. Id. For the rule of strict construction to apply, the policy must be susceptible to two or more interpretations, and the alternative interpretations must be reasonable. Id. (citing Bonin v. Westport Ins. Corp., 930 So.2d 906, 911 (La. 2006)).
The declarations page for Plaintiff's policy establishes that Plaintiff had building coverage with a limit of $0 for the office space that it was leasing at Texaco Center. Thus, under the express terms of the policy, the office space itself was not "Covered Property." Plaintiff did, however, carry coverage on its business personal property located on the premises. Thus, the business personal property was Covered Property as that term is defined in the policy. Because Defendant is denying coverage for lost income based on its assertion that the direct physical damage that caused Plaintiff to suspend its business operations,i.e., the physical damage to the premises at the Texaco Center, was not an insured loss, Defendant is in essence arguing that lost business income is only payable when operations are suspended due to damage to Covered Property. However, a careful reading of Defendant's policy does not support this interpretation.
"Covered Property, as used in this policy, means the type of property as described in this section . . . if a Limit of Insurance is shown in the Declarations for that type of property." Def. Exh. A at 3 (emphasis added).
The parties do not agree on the issue of whether Plaintiff sustained damage to its business personal property but the Court has reviewed the record as currently developed very carefully and it is clear that any damages sustained to business personal property did not cause Plaintiff to suspend its business operations at the Texaco Center. In fact, Plaintiff's own submissions, which include its own cross motion for summary judgment, confirm that Plaintiff now takes the position that physical damage to its offices at the Texaco Center, including the common access areas, was the cause of Plaintiff having to suspend its business operations at that location.
Section 5(f)(1), Business Income, states as follows in relevant part:
We will pay for the actual loss of Business Income you sustain due to the necessary suspension of your "operations" during the "period of restoration." The suspension must be caused by direct physical loss of or damage to property at the described premises. The loss of damage must be caused by or result from a Covered Cause of Loss.
Def. Exh. A. at 6 (emphasis added). The second sentence of this paragraph imposes the simple requirement that the suspension be caused by direct physical loss to property at the premises. The term "property" is used generically, without qualification, and more importantly the term Covered Property is not used at all. The next sentence is clearly intended to impose limits on coverage by clarifying that the damage to property causing the interruption in operations must be attributable to a Covered Cause of Loss. The policy defines Covered Cause of Loss in open peril fashion as "Risks of Direct Physical Loss" unless the loss is excluded in Section B or limited in Paragraph A4. (Def. Exh. A at 4). Thus, a peril, such as wind, can be a Covered Cause of Loss without reference to whether coverage has been purchased for certain property. The reference to Covered Cause of Loss in the business income paragraph does not restrict coverage for income losses to situations where operations are suspended due to damage to Covered Property. In other words, the terms "Covered Cause of Loss" and "Covered Property" are not interchangeable in this policy. These terms mean two very different things. In order for the Court to accept Defendant's interpretation of the Business Income section of the policy, the Court would either have to substitute the term "Covered Property" for "property" or assume that the terms "Covered Cause of Loss" and "Covered Property" mean the same thing — an assumption that would be in direct conflict with the definitions given in the policy. Thus, under a plain reading of this policy, if Plaintiff can establish that it suspended its operations due to damage at the premises that resulted from a non-excluded peril then coverage under the Business Income section is triggered. Again, nothing in the policy restricts business income coverage to situations where damage to Covered Property caused the suspension.
None of the exclusions or limitations appear to apply under these facts.
The Court's conclusion today is further buttressed by Section A(f)(1)(b) of the policy which expressly includes in the insured's "premises," for purposes of triggering business income coverage, those portions of the building that service or provide access to the portions of the building that the insured leases. (Def. Exh. A at 6). Typically, an insured who leases space in a building owned by someone else would not purchase building coverage for common areas of the property used by other tenants. In other words, these part of the building would not typically be "Covered Property" as defined in the policy yet the Business Income section specifically includes these portions of the building as part of the premises for purposes of determining when business income coverage applies.
Based on the foregoing, Defendant is not entitled to summary judgment as prayed for.
Accordingly;
IT IS ORDERED that the Motion for Summary Judgment (Rec. Doc. 60) filed by Massachusetts Bay Insurance Co. is DENIED.