I have been handling property damage cases since Hurricane Rita hit the Beaumont, Texas area in 2005. Much more prevalent these days are allegations that a provision of the insurance policy is ambiguous, and therefore, must be interpreted in a way more favorable to the policyholder. What I am about to say might sound like its coming from the mouth of Yogi Berra, but we sometimes get confused about what ambiguity really means. Just because a policy provision is complicated or confusing, or a declarations page is missing something, does not necessarily mean the policy is ambiguous. Last week, the Texas 3rd Court of Appeals in Austin dealt with very interesting facts where the policyholder alleged that the policy was ambiguous. The case, 3109 Props, L.L.C.; Detour, Inc.; and Richard Linklater v. Truck Insurance Exchange,1 centered around native Texan and famous moviemaker Richard Linklater.2
Linklater owned three pieces of commercial property, two in Austin, Texas and one in Paige, Texas, (about 40 miles southeast of Austin). The two Austin properties were insured with Truck Insurance Exchange. No part of the policy identified the Paige property as a location covered by the insurance. The Paige building contained archive materials from Linklater’s film projects, which were estimated at $500,000 in value. The Paige building was destroyed by the Bastrop County Complex Fire of 2011. Linklater filed a claim on the Truck policy for the lost archive material in the Paige building under the Business Personal Property section. Truck denied the claim on the basis that the Paige property was not listed as a premises covered by the policy.
The first page of declarations identified the entire insurance package, including property, auto, and general liability coverage. On that page, the space for “Location of Premises” was blank. However, other pages of the declarations, dealing solely with property insurance, specifically set out the addresses of the two Austin properties as insured premises. Linklater argued that because the “Location of Premises” space was blank on the first page of declarations, the policy had no geographical limitations and therefore the Paige property was covered, even though it was not listed as a covered property. Alternatively, Linklater argued that the lack of a premises address on the first page of declarations rendered the policy ambiguous and it should be interpreted in favor of Linklater.
The court listed four key rules of interpretation for proving (or disproving) ambiguity in a policy of insurance:
- The policy’s terms are given their ordinary and generally accepted meaning unless the policy shows the words were meant in a technical or different sense;3
- If a policy provision has only one reasonable interpretation, it is unambiguous and the court must construe it as a matter of law;4
- If the contract is susceptible of more than one reasonable interpretation, it is ambiguous;5
- The fact that the parties may disagree about the policy’s meaning does not create an ambiguity.6
The court pointed out that to find for Linklater it would have to focus solely on the first page of the declarations where the premises address is blank and ignore the other pages of the declarations where the two Austin properties are specifically set out as covered properties. The court said that such a contention was nonsensical and not supported in the law. The court also held that omitting the property location on the first page of the declarations did not make the policy ambiguous because other pages of the declarations specifically set out the addresses of the property to be covered.
Linklater next argued for coverage under the “Coverage Extensions” portion of the policy. This provision extended coverage to “Business Personal Property at any location you acquire within the Coverage Territory other than at any fairs, trade shows or exhibitions.” Linklater argued that because he owned the Paige property during the policy period7 the Coverage Extension applied to the Paige property. Rejecting this argument, the court focused on the word “acquire” in the Coverage Extensions. Quoting from Black’s Law Dictionary, the court held there was a difference between owning a property and acquiring a property. The court found that to acquire is to obtain and to own is to possess. Since Linklater owned the property during the policy period, and therefore acquired it some time prior to the policy period, the Coverage Extensions did not apply to the Paige property because it was not acquired during the policy period.
There are two important lessons from this Linklater case. First, if an ambiguity is alleged as to one part of a policy the court can look to other parts of the policy to clear up the ambiguity. Second, the court can go to sources outside the policy (in the case Black’s Law Dictionary) for interpretations of words in a policy to clear up any alleged ambiguity.
I cannot finish this blog without saying, “All right, all right, all right.”8