Modifications To Insurance Policy

Dallas insurance attorneys understand that the way an insurance policy is interpreted is key to whether there is coverage and the extent of that coverage.
The Houston Court of Appeals [14th Dist.] issued an opinion last month that dealt with policy interpretation. The style of the case is, Shafaii Children’s Trust and Party and Reception Center, Inc. v. West American Insurance Company, Liberty Mutual Insurance Company, Ohio Casualty Insurance Company, and America First Insurance Company. Here is some of the relevant information.
This is a summary judgment case that was in favor of the insurance companies and Shafaii appealed.
Shafaii had numerous properties that suffered losses. One of the properties was newly acquired.
The original policy provided an extension of coverage to BPP at ―newly acquired locations at 10% of the declared limit, capped at $100,000 per building. An endorsement modified the policy by increasing the $100,000 limit to $250,000. Shafaii interpreted this $250,000 limit to be in addition to the 10% of the declared limit in the policy.
The insurance companies payed some of the losses but did not fully pay the losses to the newly acquired property. The insurers relied on the cap on coverage. Shafaii sued for breach of contract, Insurance Code and DTPA violations, and breach of the duty of good faith and fair dealing.
In upholding the trial court summary judgment in favor of the insurers, this court cited relevant Texas law saying:
“When interpreting an insurance policy, courts apply the general rules of contract construction to ascertain the parties’ intent. Our primary concern when we construe an insurance contract is to ascertain the parties’ true intent as expressed in the contract. We examine the entire agreement and seek to harmonize and give effect to all provisions so that none will be rendered meaningless. We begin our analysis with the policy’s language.
Whether an insurance contract is ambiguous is a question of law. If a policy provision has only one reasonable interpretation, it is unambiguous and we must construe it as matter of law. If the agreement is susceptible to more than one reasonable interpretation, the agreement is ambiguous. Parties’ conflicting interpretations alone do not establish ambiguity.”

Here is the policy language:
A. COVERAGE We will pay for direct physical loss of or damage to Covered Property at the premises described in the Declarations caused by or resulting from any Covered Cause of Loss.
5. Coverage Extensions 5 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 described 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:
Newly Acquired or Constructed Property ***
(2) You may extend the insurance that applies to Your Business Personal Property to apply to that property at any location you acquire other than at fairs or exhibitions.
The most we will pay for loss or damage under this Extension is 10% of the Limit of Insurance for Your Business Personal Property shown in the Declarations, but not more than $100,000 at each building.
The endorsement modifies the insurance provided as follows:
COMMERCIAL PROPERTY COVERAGE PART The following is a summary of the enhancements provided in this endorsement. The limits and deductibles shown below apply at each designated location. If a limit is shown elsewhere in the policy for any of these coverages, then that limit applies in addition to the limits shown below. If a different deductible amount is shown in the policy for any of these coverages, then that deductible will be the applicable deductible. For complete details on the coverages provided, refer to the specific policy language.
The Coverage Extensions section of Part A COVERAGE in the Building and Personal Property Coverage Form attached to this policy is changed as follows:
B. The Your Business Personal Property limit of $100,000 shown in paragraph A.5.a.(2) is replaced with a $250,000 limit.

The court then went on to explain why they supported the trial court decision.
An experienced insurance law attorney needs to be able to read the policy language and understand the facts of a situation to be able to adequately discuss with their client the best course of action.

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