Coverage Extensions In Insurance Policies

Fort Worth insurance lawyers who handle commercial case need to read a 2015, Austin Court of Appeals opinion. It is styled, 3109 Props, L.L.C.; Detour, Inc.; and Richard Linklater v. Truck Insurance Exchange.
Linklater appealed a summary judgement in the trial court in favor of TIE on their claims for breach of contract, unfair insurance practices, and violation of the prompt payment statute. This appeals court upheld the summary judgment.
3109 Props and Linklater, a filmmaker, were the named insureds on a commercial property insurance policy issued by TIE. A property owned by Linklater located at Cardinal Drive in Paige, Texas was destroyed by fire. Stored in the building and also destroyed in the fire was Linklater’s archive of materials from his various film projects. The archive had been appraised and was estimated to be worth at least $500,000. According to Linklater, the archive had been stored at 171 Cardinal Drive since at least 2010 in a building erected for that purpose and owned by Linklater.
Linklater made a claim under the commercial property insurance policy, which TIE denied. TIE stated that its reason for denying the claim was that the policy did not cover Linklater’s business personal property if it was in a location Linklater owned that was not a “described location” in the policy and that the archive did not qualify for coverage under the policy’s “Coverage Extensions” provision.
Linklater contends that the trial erred in granting TIE’s motion for summary judgment because the “Coverage Extensions” provision of the policy provides coverage for the archive despite the fact that it was not located at either 1901 East 51st Street or 3109 North IH 35. The commercial property insurance policy, as modified by the endorsement, includes the following provision:
5. Coverage Extensions Except as otherwise provided, the following Extensions apply to property located in or on the building described in the Declarations or in the open (or in a vehicle) within 100 feet of the premises.
If a Coinsurance percentage of 80% or more or, a Value Reporting period symbol, is shown in the Declarations, you may extend the insurance provided by this Coverage Part as follows:
a. Newly Acquired or Constructed Property (1) Buildings You may extend the insurance that applies to Covered Property to apply to:
(a) Your new buildings while being built on the described premises; and (b) Buildings you acquire at locations, other than the described premises, intended for:
(i) Similar use as the building described in the declarations; or (ii) Use as a warehouse.
The most we will pay for loss or damage caused by a Coverage Cause of Loss in any one occurrence under this Coverage Extension is $1,000,000.
(2) Your Business Personal Property (a) If this policy covers Your Business Personal Property you may extend that insurance to apply to:
(i) Business Personal Property at any location you acquire within the Coverage Territory other than at any fairs, trade shows or exhibitions;
(ii) Business Personal Property at your newly constructed or acquired buildings at the location described in the Declarations; or (iii) Business Personal Property that you newly acquire located at the described premises.
The most we will pay for loss or damage caused by a Covered Cause of Loss in any one occurrence under this Extension is $250,000.
(3) Period of Coverage Insurance under this Coverage Extension at each newly acquired or constructed property will end when any of the following occurs:
(a) (b)
(c)
This policy expires;
60 days expires after you acquire or begin to construct the property; or You report values to us.
We will charge you additional premium for values reported from the date you acquire the property, or construction begins on that part of the building that would qualify as covered property.
Linklater relies on section 5(a)(2)(a)(i), which provides that coverage can be extended to “business personal property at any location you acquire within the Coverage Territory.” Linklater contends that because he owned 171 Cardinal Drive during the policy period, section 5(a)(2)(a)(i) extends coverage to the archive located thereon. TIE maintains that section 5(a)(2)(a)(i) extends coverage to business personal property at locations Linklater acquires during the policy period, not those he already owns. This court agreed with TIE. Because Linklater did not acquire 171 Cardinal Drive during the policy period, but rather already owned it, the coverage extensions do not apply to the archive.
Linklater’s interpretation of section 5(a)(2)(a)(i) ignores the active nature of the dynamic verb “acquire.” According to Black’s Law Dictionary “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) thus 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. This interpretation is consistent with the fact that section 5(a)(2)(a)(i) is found in a provision entitled “Newly Acquired or Constructed Property.” Moreover, construing section 5(a)(2)(a)(i) to mean that the policy covers Linklater’s business personal property in any location he owns, rather than at locations he acquires during the policy period, would render the policy’s geographic limitations on covered business personal property meaningless.