WMS Industries, Inc. v. Federal Insurance Co.

Filing 511158514

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WMS Industries, Inc. v. Federal Insurance Co. Doc. 511158514 Case: 09-60661 Document: 00511158514 Page: 1 Date Filed: 06/29/2010 IN THE UNITED STATES COURT OF APPEALS United States Court of Appeals FOR THE FIFTH CIRCUIT Fifth Circuit FILED June 29, 2010 N o . 09-60661 Lyle W. Cayce Clerk W M S INDUSTRIES, INC., Plaintiff - Appellant, v. F E D E R A L INSURANCE CO., Defendant - Appellee A p p e a l from the United States District Court for the Southern District of Mississippi USDC No. 1:06-CV-977 B e fo r e JONES, Chief Judge, and KING and HAYNES, Circuit Judges. P E R CURIAM:* W M S Industries, Inc., appeals a final judgment entered in favor of Federal I n s u r a n c e Co. following a bench trial. This appeal centers on a dispute over the in terp reta tio n of a business interruption insurance policy under Mississippi law. The parties disagree over the correct interpretation of multiple provisions of the p o lic y . We AFFIRM the district court's resolution of these disputes. Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not be published and is not precedent except under the limited circumstances set forth in 5TH CIR. R. 47.5.4. * Dockets.Justia.com Case: 09-60661 Document: 00511158514 Page: 2 Date Filed: 06/29/2010 No. 09-60661 I . Facts W M S manufactures electronic slot machines and provides different options fo r continuing services for those slot machines. Casinos can lease from WMS (1) s t a n d -a lo n e slot machines, which operate individually; (2) "local-area p r o g r e s s iv e " ("LAP") slot machines, which are networked within a casino; or (3) " w id e -a r e a progressive" ("WAP") slot machines, which are networked across m u lt ip le casinos and centrally monitored by WMS. Each class of WMS's WAP m a c h in e s participates in a single progressive jackpot, with WMS taking all w a g e r s from a central monitoring location and paying out from that location. In M is s is s ip p i, WMS operated its WAP machines from a central facility known as " P r e m is e s 24" in Gulfport, which was connected to the actual slot machines at p a r tic ip a t in g casinos by T-1 data lines provided by a third party. O n August 29, 2005, Hurricane Katrina struck the Mississippi Gulf Coast. A m o n g many other effects, the hurricane caused extensive damage to the casino in d u s t r y in Gulfport, Mississippi, including WMS's Premises 24 WAP monitoring fa c ilit y . Premises 24 suffered extensive physical damage and lost utility service in the storm. WMS obtained permission from Mississippi authorities to temporarily m o v e its WAP monitoring for Mississippi to a different facility in Reno, Nevada, a n d succeeded in doing so on September 11, 2005. WMS repaired the physical d a m a g e to Premises 24 on November 14, 2005, and ultimately moved its WAP o p e r a t io n s back to Premises 24 on December 2, 2005. W M S was covered by Federal's policy for $100 million in losses under the " B u s in e s s Income and Extra Expenses" ("BI/EE") coverage, but only $1 million u n d e r the "Dependent Business Premises" coverage. Concluding that the bulk o f WMS's losses resulted from a loss of income because WMS's casino customers d id not reopen for some time rather than from damage to WMS's own premises, F e d e r a l ultimately paid policy limits under the Dependent Business Premises 2 Case: 09-60661 Document: 00511158514 Page: 3 Date Filed: 06/29/2010 No. 09-60661 c o v e r a g e . WMS's losses, however, far exceeded these policy limits. As a result, W M S contended that losses attributable to the casinos' closures were also c o v e r e d under the much higher limit BI/EE coverage. Federal disagreed, and t h is lawsuit resulted.1 I I . Standard of Review " T h e interpretation of an insurance policy, like any contract, is a legal q u e s t io n reviewed de novo . . . ." Leonard v. Nationwide Mut. Ins. Co., 499 F.3d 4 1 9 , 428 (5th Cir. 2007) (citing Welborn v. State Farm Mut. Auto. Ins. Co., 480 F .3 d 685, 687 (5th Cir. 2007) (per curiam)). After a bench trial, "[f]actual fin d in g s are upheld on appeal unless clearly erroneous." Leonard, 499 F.3d at 4 2 9 (citing Provident Life & Accident Ins. Co. v. Sharpless, 364 F.3d 634, 641 (5 t h Cir. 2004)). I I I . Discussion T h e primary dispute2 between the parties dispute boils down to the q u e s t io n of whether, for BI/EE coverage, this policy requires that the property d a m a g e at WMS's own premises cause the loss (Federal's contention) or instead t h a t there must be property damage at WMS's own facility as a "trigger" but t h e n the "scope" of the coverage is for losses caused to WMS by property damage a n y w h e r e (i.e., the affected casino customers) (WMS's contention). T h e policy provides in part Federal refused to make any payments under the BI/EE coverage. The district court found some losses due to damage at Premises 24 and ordered a small amount of payments under this coverage. However, the bulk of WMS's claimed losses remained unsatisfied. We find no reversible error in the district court's resolution of the other disputes between the parties and, for substantially the same reasons given by the district court, affirm those decisions as well. 2 1 3 Case: 09-60661 Document: 00511158514 Page: 4 Date Filed: 06/29/2010 No. 09-60661 B I / E E Coverage T h e following Premises Coverages apply only at those premises for w h ic h a Limit Of Insurance applicable to such coverages is shown in the Declarations. E x c e p t as otherwise provided, direct physical loss or damage must: C C ... T h is actual or potential impairment of operations must be caused b y or result from direct physical loss or damage by a covered peril t o property, unless otherwise stated. T h is Premises Coverage applies only at those premises: C C w h e r e you incur a business income loss or extra expense; and fo r which a Limit Of Insurance for Business Income With E x t r a Expense is shown in the Declarations. b e caused by or result from a covered peril; and b e at, or within 1,000 feet of, the premises, other than a d e p e n d e n t business premises, shown in the Declarations. D e p e n d e n t Business Premises T h is actual or potential impairment of operations must be caused b y or result from direct physical loss or damage by a covered peril t o property or personal property of a dependent business p r e m i s e s at a dependent business premises.3 " B e c a u s e this is a diversity case involving a Mississippi [insurance] c o n t r a c t, we apply Mississippi contract law to interpret the policy." Catlin S y n d ic a te Ltd. v. Imperial Palace of Miss., Inc., 600 F.3d 511, 513 (5th Cir. 2010) (c it in g Ideal Mut. Ins. Co. v. Last Days Evangelical Ass'n, 783 F.2d 1234, 1240 (5 t h Cir. 1986)). Mississippi law provides a familiar standard for interpreting in s u r a n c e policies: 3 Boldface in the text of these provisions is in the original policy and indicates a defined term. 4 Case: 09-60661 Document: 00511158514 Page: 5 Date Filed: 06/29/2010 No. 09-60661 [I ]f a contract is clear and unambiguous, then it must be interpreted a s written. A policy must be considered as a whole, with all r e le v a n t clauses together. If a contract contains ambiguous or u n c le a r language, then ambiguities must be resolved in favor of the n o n -d r a ft in g party. Ambiguities exist when a policy can be logically in t e r p r e t e d in two or more ways, where one logical interpretation p r o v id e s for coverage. However, ambiguities do not exist simply b e c a u s e two parties disagree over the interpretation of a policy. Exclusions and limitations on coverage are also construed in favor o f the insured. Language in exclusionary clauses must be clear and u n m is t a k a b l e , as those clauses are strictly interpreted. Nevertheless, a court must refrain from altering or changing a p o lic y where terms are unambiguous, despite resulting hardship on t h e insured. U .S . Fid. & Guar. Co. of Miss. v. Martin, 998 So. 2d 956, 963 (Miss. 2008) (c it a t io n s and quotation marks omitted). Neither side contends that the policy is ambiguous, though both advance contrary interpretations of it. W e conclude that the BI/EE coverage under this policy unambiguously r e q u ir e s that the losses in question flow from the damage to one of the listed W M S premises, i.e., Premises 24, and not just to property damage anywhere. Accordingly, the losses caused to WMS by the closure of its casino customers' f a c ilitie s for an extended time are not covered under this portion of the policy (t h o u g h , of course, they are covered by the Dependent Business Premises c o v e r a g e ). As a result, the district court did not err in denying relief for these a m o u n t s in excess of the policy limits of the Dependent Business Premises coverage. AFFIRMED. 5

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