     Case: 09-60661     Document: 00511158514          Page: 1    Date Filed: 06/29/2010




            IN THE UNITED STATES COURT OF APPEALS
                     FOR THE FIFTH CIRCUIT  United States Court of Appeals
                                                     Fifth Circuit

                                                  FILED
                                                                            June 29, 2010

                                       No. 09-60661                         Lyle W. Cayce
                                                                                 Clerk

WMS INDUSTRIES, INC.,

                                                   Plaintiff - Appellant,
v.

FEDERAL INSURANCE CO.,

                                                   Defendant - Appellee




                   Appeal from the United States District Court
                     for the Southern District of Mississippi
                              USDC No. 1:06-CV-977


Before JONES, Chief Judge, and KING and HAYNES, Circuit Judges.
PER CURIAM:*
        WMS Industries, Inc., appeals a final judgment entered in favor of Federal
Insurance Co. following a bench trial. This appeal centers on a dispute over the
interpretation of a business interruption insurance policy under Mississippi law.
The parties disagree over the correct interpretation of multiple provisions of the
policy. 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 R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR .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.
   Case: 09-60661   Document: 00511158514      Page: 2   Date Filed: 06/29/2010

                                 No. 09-60661

                                    I. Facts
      WMS manufactures electronic slot machines and provides different options
for continuing services for those slot machines. Casinos can lease from WMS (1)
stand-alone slot machines, which operate individually; (2) “local-area
progressive” (“LAP”) slot machines, which are networked within a casino; or (3)
“wide-area progressive” (“WAP”) slot machines, which are networked across
multiple casinos and centrally monitored by WMS. Each class of WMS’s WAP
machines participates in a single progressive jackpot, with WMS taking all
wagers from a central monitoring location and paying out from that location. In
Mississippi, WMS operated its WAP machines from a central facility known as
“Premises 24” in Gulfport, which was connected to the actual slot machines at
participating casinos by T-1 data lines provided by a third party.
      On August 29, 2005, Hurricane Katrina struck the Mississippi Gulf Coast.
Among many other effects, the hurricane caused extensive damage to the casino
industry in Gulfport, Mississippi, including WMS’s Premises 24 WAP monitoring
facility. Premises 24 suffered extensive physical damage and lost utility service
in the storm.
      WMS obtained permission from Mississippi authorities to temporarily
move its WAP monitoring for Mississippi to a different facility in Reno, Nevada,
and succeeded in doing so on September 11, 2005. WMS repaired the physical
damage to Premises 24 on November 14, 2005, and ultimately moved its WAP
operations back to Premises 24 on December 2, 2005.
      WMS was covered by Federal’s policy for $100 million in losses under the
“Business Income and Extra Expenses” (“BI/EE”) coverage, but only $1 million
under the “Dependent Business Premises” coverage. Concluding that the bulk
of WMS’s losses resulted from a loss of income because WMS’s casino customers
did not reopen for some time rather than from damage to WMS’s own premises,
Federal ultimately paid policy limits under the Dependent Business Premises

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                                       No. 09-60661

coverage. WMS’s losses, however, far exceeded these policy limits. As a result,
WMS contended that losses attributable to the casinos’ closures were also
covered under the much higher limit BI/EE coverage. Federal disagreed, and
this lawsuit resulted.1
                                 II. Standard of Review
       “The interpretation of an insurance policy, like any contract, is a legal
question reviewed de novo . . . .” Leonard v. Nationwide Mut. Ins. Co., 499 F.3d
419, 428 (5th Cir. 2007) (citing Welborn v. State Farm Mut. Auto. Ins. Co., 480
F.3d 685, 687 (5th Cir. 2007) (per curiam)). After a bench trial, “[f]actual
findings are upheld on appeal unless clearly erroneous.” Leonard, 499 F.3d at
429 (citing Provident Life & Accident Ins. Co. v. Sharpless, 364 F.3d 634, 641
(5th Cir. 2004)).
                                      III. Discussion
       The primary dispute2 between the parties dispute boils down to the
question of whether, for BI/EE coverage, this policy requires that the property
damage at WMS’s own premises cause the loss (Federal’s contention) or instead
that there must be property damage at WMS’s own facility as a “trigger” – but
then the “scope” of the coverage is for losses caused to WMS by property damage
anywhere (i.e., the affected casino customers) (WMS’s contention).
       The policy provides in part –




       1
        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.
       2
         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.

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                                            No. 09-60661

BI/EE Coverage
        The following Premises Coverages apply only at those premises for
        which a Limit Of Insurance applicable to such coverages is shown
        in the Declarations.
        Except as otherwise provided, direct physical loss or damage must:
        C         be caused by or result from a covered peril; and
        C         be at, or within 1,000 feet of, the premises, other than a
                  dependent business premises, shown in the Declarations.
        ...
        This actual or potential impairment of operations must be caused
        by or result from direct physical loss or damage by a covered peril
        to property, unless otherwise stated.
        This Premises Coverage applies only at those premises:
        C         where you incur a business income loss or extra expense;
                  and
        C         for which a Limit Of Insurance for Business Income With
                  Extra Expense is shown in the Declarations.
Dependent Business Premises
        This actual or potential impairment of operations must be caused
        by or result from direct physical loss or damage by a covered peril
        to property or personal property of a dependent business
        premises at a dependent business premises.3
        “Because this is a diversity case involving a Mississippi [insurance]
contract, we apply Mississippi contract law to interpret the policy.” Catlin
Syndicate Ltd. v. Imperial Palace of Miss., Inc., 600 F.3d 511, 513 (5th Cir. 2010)
(citing Ideal Mut. Ins. Co. v. Last Days Evangelical Ass’n, 783 F.2d 1234, 1240
(5th Cir. 1986)). Mississippi law provides a familiar standard for interpreting
insurance policies:




        3
            Boldface in the text of these provisions is in the original policy and indicates a defined
term.

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                                  No. 09-60661

      [I]f a contract is clear and unambiguous, then it must be interpreted
      as written. A policy must be considered as a whole, with all
      relevant clauses together. If a contract contains ambiguous or
      unclear language, then ambiguities must be resolved in favor of the
      non-drafting party. Ambiguities exist when a policy can be logically
      interpreted in two or more ways, where one logical interpretation
      provides for coverage. However, ambiguities do not exist simply
      because two parties disagree over the interpretation of a policy.
      Exclusions and limitations on coverage are also construed in favor
      of the insured. Language in exclusionary clauses must be clear and
      unmistakable, as those clauses are strictly interpreted.
      Nevertheless, a court must refrain from altering or changing a
      policy where terms are unambiguous, despite resulting hardship on
      the insured.
U.S. Fid. & Guar. Co. of Miss. v. Martin, 998 So. 2d 956, 963 (Miss. 2008)
(citations and quotation marks omitted). Neither side contends that the policy
is ambiguous, though both advance contrary interpretations of it.
      We conclude that the BI/EE coverage under this policy unambiguously
requires that the losses in question flow from the damage to one of the listed
WMS 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’
facilities for an extended time are not covered under this portion of the policy
(though, of course, they are covered by the Dependent Business Premises
coverage). As a result, the district court did not err in denying relief for these
amounts in excess of the policy limits of the Dependent Business Premises
coverage.
      AFFIRMED.




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