Dallas Fort Worth Insurance Lawyer Blog
Bad Faith lawyers who handle commercial policy claims will want to read this 2023 case. This case is from the Southern District of Texas, Corpus Christi Division. It is styled, Laguna Enterprises, LLC v. Westchester Surplus Lines Insurance Company, et al.
A big difference between commercial policies and the policies covering a normal person who has a homeowners or auto is that the commercial policies will have a greater number of exclusions and limitations to coverage and conditions that have to be satisfied for coverage to apply. That is the situation in this case.
Plaintiff’s proper was insured through Westchester. Plaintiff suffered a fire loss and Plaintiff made a claim for benefits. Westchester denied the claim because the property lacked smoke detectors as required by the policy. Plaintiff sued for violations of the Texas Insurance Code and breach of contract. Westchester filed a motion for summary judgement based on the facts of the case and the policy language.
Texas law applies. Under Texas law, insurance policies are interpreted in accordance with the rules of construction that apply to all contracts generally.
Whether the policy is ambiguous is a question of law for the court to decide as a whole in light of the circumstances present when the contract was entered. The fact that the parties disagree as to coverage does not create an ambiguity, nor may extrinsic evidence be admitted for the purpose of creating an ambiguity.
The Court examines the Policy’s language to determine whether it is ambiguous. The relevant section is the Protective Safeguards Endorsement. The Protective Safeguard Endorsement states that “as a condition of this insurance, the insured is required to maintain the protective devices or services listed in the Schedule. The Schedule provides:
“Functioning and operating smoke detectors in all units and/or occupancies.”
The Protective Safeguards Endorsement also states that Westchester “will not pay for loss or damage caused by or resulting from fire if, prior to the fire,” the insured “knew of any suspension or impairment in any any protective safeguard listed in the Schedule above and failed to notify Westchester of that fact,” or “failed to maintain any protective safeguard listed in the Schedule above, and over which you had control, in complete working order.”
This language is not ambiguous. It is uncontested that Plaintiff failed to maintain smoke detectors in functioning and operating order on its premises.
The Court ruled in favor of Westchester.