

 
Reversed and Rendered and Opinion filed May 20, 2010.
 
In The
 
Fourteenth Court of
Appeals
___________________
 
NO. 14-09-00619-CV
___________________
 
Essex Insurance Company, Appellant
 
V.
 
Eldridge Land, L.L.C., Appellee

 

 
On
Appeal from the 234th District Court
Harris County,
Texas

Trial Court Cause No. 2007-41776
 

 
 
OPINION
In this cause, we are called
upon to interpret provisions in a commercial property insurance policy concerning
vandalism and damage from theft.  Although courts in other jurisdictions have
addressed substantially similar provisions, arriving at conflicting results, this
is the first Texas appellate case to raise these precise issues.
Eldridge Land, L.L.C. sued Essex Insurance Company,
after Essex denied coverage for damage to Eldridge’s property which was insured
under a policy issued by Essex.  Both parties filed motions for summary
judgment, asserting that there were no issues of material fact and that resolution
of the case principally involved interpretation of policy language.  The
parties also entered into a limited stipulation of evidence regarding damages. 
The trial court held that the damage to Eldridge’s property was covered under
the terms of the policy.  Accordingly, the trial court granted Eldridge’s
motion, denied Essex’s motion, and awarded judgment favoring Eldridge for
$300,000 in actual damages, plus prejudgment interest and attorney’s fees.  The
judgment also contained an award of attorney’s fees favoring Essex and
conditioned on Essex prevailing on appeal.
In this proceeding, Essex has challenged the rulings
on the motions for summary judgment, and Eldridge has filed a cross-appeal
challenging the contingent award of attorney’s fees for Essex.  We reverse the
trial court’s judgment and render judgment favoring Essex but without an award
of attorney’s fees.
I.      
Background
Eldridge owns a vacant building, which once housed a
grocery store.[1] 
To insure the building, Eldridge purchased a commercial property insurance
policy from Essex.  Among other provisions, this policy contains a clause
providing coverage for vandalism, an exclusion for damage “[c]aused by or
resulting from theft,” and an exception to the theft damage exclusion for
“damage caused by the breaking in or exiting of burglars.”  The language of
these provisions reads as follows:
A.        COVERED CAUSES OF LOSS
When Basic is shown in the Declarations,[2] Covered Causes of
Loss means the following:
. . . .
8.         Vandalism, meaning willful and malicious damage
to, or destruction of the described property.
            We will not pay for loss or damage:
            a.         . . . .
            b.         Caused by or resulting from theft, except for
building damage caused by the breaking in or exiting of burglars.
On March 28, 2006, Eldridge’s property sustained considerable
damage.  Some intruders apparently forced their way into the building and
damaged sheetrock, ceiling tiles, electrical conduit boxes, and wall
coverings.  They also removed copper wiring and copper pipe from the building. 
Eldridge thereafter filed a claim with Essex seeking coverage for this damage
under the policy.  Essex denied the claim based primarily on the policy
exclusion for loss or damage caused by or resulting from theft.  Paul R. White
& Company, Inc., the independent claims adjuster hired by Essex, further took
the position that the value of the damage done by the intruders in gaining
entrance to the building was below the $5,000 policy deductible, with the
result that there was no coverage under the policy.  Eldridge then filed the
present lawsuit against Essex and Paul R. White & Company.
In its petition, Eldridge alleged that “vandals broke
into the Building and proceeded to commit multiple acts of vandalism[ i.e.,]
willful and malicious damage to, and destruction of, the Building.”  Against
both Essex and White, Eldridge asserted claims for negligent misrepresentation,
fraud, and Insurance Code and Deceptive Trade Practices Act violations. 
Against Essex, Eldridge further asserted claims for breach of contract and bad
faith.  And against Paul R. White & Company, Eldridge additionally asserted
a claim for tortious interference with contract.
 Eldridge and Essex each filed motions for summary
judgment on the limited issue of “policy coverage,” i.e., Eldridge’s
breach of contract cause of action.  In its motion, Eldridge maintained that
the property damage was primarily caused by vandalism and that only items
actually removed from the property (the copper wiring and pipes) should be
excluded from coverage.  In its motion, Essex contended that all of the damage,
except that caused by the intruders’ initial entry, should be excluded under
the exclusion for loss or damage caused by or resulting from theft.
In a deposition excerpt attached to Essex’s motion, Eldridge’s
corporate representative, Jay Azimpoor, acknowledged that he did not see any
damage in the building that he believed was caused other than “during the
process of removing either copper piping or copper wiring or anything else from
the building.”  He further acknowledged that various types of specific damage
that he was asked about were caused in the process and for the purpose of
taking either copper pipes or copper wiring from the building.  Also attached
to Essex’s motion was an affidavit from William J. Price, a claims manager for
Paul R. White & Company, who averred that the damage caused to the building,
where both he and an Eldridge representative believed the intruders had broken in,
was valued below $5,000.
After the trial court granted Eldridge’s motion and
denied Essex’s motion,   Eldridge nonsuited its claims against Paul R. White
& Company.  Eldridge and Essex then entered an agreed statement of facts
establishing amounts for damages, attorney’s fees, and prejudgment interest. 
The trial court entered a final judgment favoring Eldridge for $384,147.90
(actual damages plus prejudgment interest and attorney’s fees).  The trial
court also included in its judgment an amount for Essex’s attorney’s fees
should Essex prevail on appeal.  Lastly, the trial court expressly stated that “[a]ll
relief requested in this case that has not been expressly granted is hereby
denied,” and “[t]his judgment finally disposes of all parties and claims and is
appealable.”
II.  Standards
of Review
We review a grant of summary judgment de novo.  Provident
Life & Accident Ins. Co. v. Knott, 128 S.W.3d 211, 215 (Tex. 2003). 
The party moving for traditional summary judgment bears the burden of showing
no genuine issue of material fact exists and it is entitled to judgment as a
matter of law.  Tex. R. Civ. P. 166a(c); see also Knott, 128 S.W.3d at
216.  “A summary judgment may be based on uncontroverted testimonial evidence
of an interested witness . . . if the evidence is clear, positive, direct,
otherwise credible and free from contradictions and inconsistencies, and could
have been readily controverted.”  Tex. R. Civ. P. 166a(c).  When both sides
have moved for summary judgment, and the trial court has granted one motion and
denied the other, we will review the summary judgment arguments and evidence
presented by both sides and determine all questions raised therein.  Comm’rs
Court of Titus County v. Agan, 940 S.W.2d 77, 81 (Tex. 1997).  In such a
situation, we will render the judgment that the trial court should have
rendered.  Id.
The parties concur that the primary question before
us concerns the correct interpretation of the insurance policy.  We generally construe
insurance policies in accordance with the ordinary rules of contract
construction.  Am. Mfrs. Mut. Ins. Co. v. Schaefer, 124 S.W.3d 154, 157
(Tex. 2003).  In applying these rules, our ultimate goal is to ascertain the
parties’ intent as expressed in the language of the policy.  Kelley-Coppedge,
Inc. v. Highlands Ins. Co., 980 S.W.2d 462, 464 (Tex. 1998).  In order to
achieve this goal, we will examine and consider the entire writing in an effort
to harmonize and give effect to all of the policy provisions “so that none will
be rendered meaningless.”  Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983). 
We interpret language in a policy according to its ordinary and generally
accepted meaning unless the policy indicates that the words used are intended
to impart a particular technical or otherwise different meaning.  Shaefer,
124 S.W.3d 158.
Whether policy language is ambiguous is a question of
law.  Id. at 157.  Ambiguity does not arise simply because the parties
offer conflicting interpretations; rather, ambiguity exists only when the
contract is susceptible of two or more reasonable interpretations.  Id.  Usually,
if language in an insurance policy is deemed susceptible to more than one
reasonable interpretation, the reasonable construction most favorable to the
insured will be imposed.  See Nat’l Union Fire Ins. Co. of Pittsburgh, Pa.
v. Hudson Energy Co., 811 S.W.2d 552, 555 (Tex. 1991).  Consequently, we
construe an ambiguous insurance policy strictly against the insurer and liberally
in favor of the insured.  Barnett v. Aetna Life Ins. Co., 723 S.W.2d
663, 666 (Tex. 1987).
III.  Analysis of Policy Provisions
The policy provisions at the heart of the dispute
here provided coverage for “[v]andalism, meaning willful and malicious damage
to, or destruction of the described property,” but excluded coverage for damage
“[c]aused by or resulting from theft, except for building damage caused by the
breaking in or exiting of burglars.”  In its appellate briefing, Eldridge
contends that (1) the damage caused to the property in the course of removing
the copper wiring and pipes was vandalism and was not excluded from coverage by
the theft exclusion; (2) alternatively, the damage was caused by the intruders
“breaking in” to parts of the building to retrieve the copper and thus fell
under the exception to the theft exclusion; and (3) at a minimum, the
interpretation propounded by Eldridge is reasonable and thus the contract
should be construed in its favor, as the insured, under the rules of policy
construction.[3] 
Essex, on the other hand, contends that the damage caused by the intruders’
removing the copper was (1) not vandalism as defined by the policy; (2)
expressly excluded by the theft exclusion; and (3) not included in the narrow
exception to that exclusion for the “breaking in or exiting of burglars.”
Several cases in other jurisdictions have considered
substantially similar if not identical policy language and have applied it to generally
analogous fact patterns.  These cases have arrived at different conclusions. 
We will briefly discuss each of the cases on which the parties place the most
emphasis before turning to our own analysis of the policy language.
A.  Eldridge’s Cases
Eldridge relies primarily on the Alabama Supreme
Court’s opinion in Aetna Casualty & Surety Co. v. Ardizone, 481
So.2d 380 (Ala. 1985), and the Louisiana court of appeals opinion in Haas v.
Audubon Indemnity Company, 722 So.2d 1022 (La. App. 3d Cir. 1998).[4]  In Ardizone,
the Alabama Supreme Court considered circumstances in which “vandals . . .
destroyed or removed electrical and refrigeration fixtures,” causing “extensive
damage” to a warehouse.  481 So.2d at 381.  The court determined that the term
“vandalism” should be construed quite broadly in keeping with its common
usage.  Id. at 384.[5] 
The court further concluded that the policy provided “coverage for acts of
vandalism or damage done to the building in connection with a burglary or
theft” and that “[t]he intent of the vandals at the time of the destructive act
[was] irrelevant to [the] issue of liability.”  Id. at 384-85.  Ultimately,
the court held the insurer liable for all of the damage inflicted except for
certain stolen items; however, the court held the insurer liable for wiring and
tubing that was removed based on the notion that such items were damaged or
vandalized regardless of whether they were then removed from the premises.  Id.
at 385.
In Haas, the Louisiana court of appeals considered
a fact pattern wherein unknown persons “broke into” a large building and caused
“massive damage to its interior,” including to the walls, flooring, fixtures,
and duct system, apparently while removing pipes and wires for their salvage
value.  722 So.2d at 1023-24.  The court explained that the theft provision was
merely “a narrow exception to the vandalism coverage” and did “not exclude
vandalism damage caused prior to or concurrently with a theft.”  Id. at
1027.  The court then concluded that because of the extensive nature of the
damage done to the building (“utter destruction”), the evidence was sufficient
to demonstrate that the damage was done maliciously and thus should be
considered to have resulted from vandalism.  Id.  Ultimately, the court
described the theft exclusion as patently ambiguous and therefore construed the
policy in favor of coverage.  Id.
In the trial court, Eldridge also placed considerable
emphasis on the Texas Supreme Court’s opinion in United States Fidelity
& Guaranty Co. v. Bimco Iron & Metal Corp., 464 S.W.2d 353 (Tex.
1971).  Eldridge appears to have decided against such emphasis on appeal. 
Although that opinion dealt with a substantially similar fact pattern—building
damage inflicted by thieves—the insurance policy provisions at issue were
significantly distinct from those at issue in the present case.  Id. at
354-55; see also Certain Underwriters at Lloyds, London v. Law,
570 F.3d 574, 578 n.11 (5th Cir. 2009) (distinguishing Bimco because of
differing policy language).  In Bimco, the policy specifically covered
“damage to the building(s) . . . caused by burglars.”  464 S.W.2d at 354-55.  The
policy at issue in the present case did not contain such a provision, or such
broad coverage, respecting damage by burglars.
B.  Essex’s Cases
Essex relies primarily upon the Florida court of
appeal’s opinion in General Star Indemnity Co. v. Zelonker, 769 So. 2d
1093 (3rd D. Fla. 2000), the Tennessee court of appeals opinion in Smith v.
Shelby Insurance Company of Shelby Insurance Group, 936 S.W.2d 261 (Tenn.
Ct. App. 1996), and the Fifth Circuit’s analysis in Law, 570 F.3d at
583-86.  In Zelonker, the Florida court considered a highly similar
fact-pattern wherein unknown individuals entered a warehouse owned by the
insured and removed copper wiring from an electric meter box and conduits,
leaving holes apparently used to extract the wiring.  769 So.2d at 1094.  The
court held that such damage was plainly “damage . . . [c]aused by or resulting
from theft.”  Id.  Further, the court expressly rejected the insured’s
argument that breaking into fixtures within the building constituted “breaking
into the building itself,” holding instead that the policy provided coverage
only for “where thieves bodily enter or exit the building, as by breaking a door
or window.”  Id.  The court explained that such was the “everyday
meaning” of the policy terms.  Id. at 1094-95.
In Smith, the Tennessee court also addressed
similar facts where an unknown person or persons entered a building and “ripped
out electrical wiring, plumbing pipes, and condenser coils in the air
conditioning system, in order to extract copper wiring and tubing.”  936 S.W.2d
at 262.  The interior of the building, including the air conditioning system,
suffered extensive damage.  Id.  The court concluded that the damage was
“[c]aused by or resulting from theft” and did not result from vandalism.  Id.
at 265.  In doing so, the court emphasized that the policy’s definition of
“vandalism” contemplated “willful and malicious damage,” and that “every
knowledgeable witness [including Smith himself] testified that the apparent
motivation for the entry . . . was for the stealing of copper wiring and
tubing,” not for maliciously inflicting property damage.  Id. at
265-66.  The court found the policy language “clear and unambiguous” and held
that the damage was excluded by the theft provision.  Id. at 266.
In Law, the Fifth Circuit considered a situation
in which thieves stole copper tubing from inside seventeen commercial air
conditioning units affixed to the roof of a vacant office building.  570 F.3d
at 575.  In order to extract the tubing, the thieves “tore off” panels in the
exterior housing of the units, “then broke into the units themselves.”  Id. 
The court recognized that the question of coverage turned “on whether the
damage to the . . . air conditioners [was] (1) vandalism, (2) damage caused by
or resulting from theft, or (3) building damage caused by the breaking in or
exiting of burglars.”  Id. at 576 (internal parentheticals omitted). 
Utilizing Texas insurance policy construction law, the majority of the court
determined that the policy was not ambiguous but instead expressed the parties’
clear intent not to cover the type of damage claimed.  Id. at 578. 
“Vandalism,” the majority explained, is broad enough in common parlance to
cover damage caused by burglars, but the contract provided a more precise
definition:  “willful and malicious damage.”  Based on this definition, the
majority concluded that coverage turned on the purpose for which particular
damage was done:
(1) Damage done for no purpose other than to destroy
property for destruction’s sake is “vandalism;” (2)
incidental damage done in furtherance of thievery falls within the narrower
category of damage resulting from theft; (3) damage to the insured building
done by burglars entering or leaving the building that they attempt to
burglarize falls into the even narrower ingress/egress exception.
Id. at 578-79.  Because
the damage at issue in Law appeared to have been done solely to gain
access to the copper tubing, the majority held that the damage was excluded
under the theft exclusion.  Id. at 579.
The majority further rejected the notion that the
thieves’ entry into the air conditioning units constituted “breaking in” to the
building under the policy exception.  Id. at 580.  Instead, the majority
interpreted the breaking-in exception, pursuant to the “common understanding,”
as contemplating “nothing more expansive than an attempt to enter bodily into
the interior space of the building as bounded by the walls, floors, and
ceilings.”  Id. at 580-81.   Referring specifically to the policy, the
majority stated that coverage existed under the “breaking in” exception only
“where thieves bodily enter or exit the building, as by breaking a door or
window.”  Id. at 581 (quoting Zelonker, 769 So.2d at 1094).  The
majority further indicated that the “or exiting” language in the exception also
suggested that a bodily intrusion was required for “breaking in.”  Id.  Ultimately,
the majority concluded that the damage caused by the burglars to the air
conditioning units was not covered under the policy as either vandalism or as
damage caused by the breaking in or exiting of burglars from the building.  Id.
at 583.
In her dissent in Law, Justice Sandra Day
O’Connor, sitting by assignment, first agreed with the majority that the damage
to the air conditioning units was not covered as vandalism under the policy,
but she then disagreed with the majority as to whether the damage was caused by
the “breaking in . . . of burglars.”  Law, 570 F.3d at 583 (O’Connor,
S.C.J., dissenting).  Deeming the policy language ambiguous, Justice O’Connor adopted
a construction that she considered reasonable favoring the insured.  Id.
at 583-84.  She explained that the air conditioning units were part of the building
and thus the burglars’ penetration of those units constituted “breaking in” to
the building.  Id. at 584-85.
C.  Our Conclusions
We begin our analysis by noting that the cases cited
by Eldridge are, at least to some degree, distinguishable from the circumstances
presented in the case before us.  For example, the court in Haas emphasized
the extensive nature of the damage, stating “in view of the utter destruction
done to the building, the acts should be considered vandalism.”  722 So.2d at
1027.  In contrast, in the present case, as in Smith, the evidence was
clear that all of the damage was done for the purpose of removing the stolen
pipes and wiring.  936 S.W.2d at 265-66.  The policy provisions in Ardizone
appear to differ significantly from those at issue in the present case, although
because the Ardizone court does not provide the exact wording for the
vandalism coverage in that case, it is impossible to determine just how
different it is from that in the policy before us.  481 So.2d at 382 (quoting
significantly different theft exclusion).  Furthermore, the Ardizone
court relied heavily on the Texas Supreme Court’s Bimco opinion which,
as explained above, is readily distinguishable from the facts of the present
case based on significant differences in the policy language at issue.  Because
of the differing circumstances presented in these cases, we do not find them persuasive.
Turning to the policy language itself, we find it to
be unambiguous, i.e., not susceptible of two or more reasonable
interpretations.  See Am. Mfrs. Mut. Ins. Co. v. Schaefer, 124 S.W.3d
154, 157 (Tex. 2003).  The fact that other courts have found ambiguity and have
reached differing interpretive conclusions does not, by itself, persuade us
otherwise.  See Betco Scaffolds Co. v. Houston United Cas. Ins. Co., 29
S.W.3d 341, 344 (Tex. App.—Houston [14th Dist.] 2000, no pet.).  The policy
covered “[v]andalism, meaning willful and malicious damage to, or destruction
of the described property,” but excluded coverage for damage “[c]aused by or
resulting from theft, except for building damage caused by the breaking in or
exiting of burglars.”  The theft exclusion appears within the paragraph
providing coverage for vandalism and was clearly intended as an exclusion or
exception to the vandalism coverage.[6] 
In circumstances where the more specific exclusion applies, it is axiomatic
that there is no coverage under the more general coverage provision.  See,
e.g., Gomez v. Hartford Co. of the Midwest, 803 S.W.2d 438, 442
(Tex. App.—El Paso 1991, writ denied).  Here, the summary judgment evidence
established that all damage above the policy deductible was caused by or resulting
from theft.  Thus, as explained in the Law majority, Smith, Zelonker,
and the Law dissent, the theft exclusion governs unless the “breaking
in” exception applies.
We concur with the Law majority and the Zelonker
court in concluding that the “breaking in” exception does not contemplate that
breaking into fixtures (or walls, ceilings, and floors) for purposes of
extracting pipe or wiring would fall within the exception.  Law, 570
F.3d at 579; Zelonker, 769 So.2d at 1094.  As explained in Law,
this is not the common usage of the phrase “breaking in.”  570 F.3d at 580-81. 
Causing “building damage” by “breaking in” contemplates the gaining of bodily
entry into the interior space of a building, not knocking holes in walls once
inside.[7]
 Furthermore, the policy language itself supports this conclusion in that
“breaking in” is paired with “exiting” in such a way that the two concepts can
be viewed as opposites.  In common parlance, one would not speak of exiting a
fixture (or a wall, ceiling, or floor) that had been opened up to extract pipes
or wiring.  Instead, the exception is logically read as being limited to the
bodily entry or exit of thieves from a building.  See id. at 581; see
also Zelonker, 769 So.2d at 1094.
Because (1) the policy excluded damage caused by or
resulting from theft, (2) the evidence established that all damage above the
amount of the policy deductible was caused by or resulting from theft, and (3)
no exception to the theft exclusion applies, the trial court erred in holding
that the policy provided coverage for the stipulated damage.  We sustain
Essex’s sole issue.
IV.  Cross Appeal
In its cross-appeal, Eldridge contended that the
trial court erred in awarding attorney’s fees to Essex in the event that Essex
prevailed on appeal.  Specifically, Eldridge contended that there was no
contractual or statutory basis for such an award in this case.  In a letter
filed with this court, Essex agreed with Eldridge’s “arguments and authorities”
and conceded that there was no contractual or statutory basis for the award. 
We also agree that the trial court erred in conditionally awarding fees to
Essex.  The insurance policy does not provide for such a recovery; neither does
any statute.  See Holland v. Wal-Mart Stores, Inc., 1 S.W.3d 91, 95
(Tex. 1999) (“We have consistently held that a prevailing party cannot recover
attorney’s fees from an opposing party unless permitted by statute or by contract
between the parties.”); Cytogenix, Inc. v. Waldroff, 213 S.W.3d 479,
490-91 (Tex. App.—Houston [1st Dist.] 2006, pet. denied) (explaining that party
successfully defending against breach of contract action was not entitled to
attorney’s fees under Texas Civil Practice and Remedies Code § 38.001).  Accordingly,
we sustain Eldridge’s cross-appeal.
 
We reverse the trial
court’s judgment in its entirety, including the conditional award of attorney’s
fees to Essex, and render judgment that Eldridge take nothing on its claims
against Essex.                                                                                   
                                                                        /s/        Adele
Hedges
                                                                                    Chief
Justice
 
 
 
Panel consists of Chief
Justice Hedges and Justices Anderson and Christopher.
 




[1] In its brief, Eldridge
describes the building as “once vacant.”  It is unknown whether the building is
currently occupied, but at all times relevant to this case, the parties agree
that it was vacant.


[2] “Basic” in this context
referred to a level of insurance coverage offered.


[3] In its pleadings at
trial, Eldridge argued only that the damage was covered as vandalism and did
not make the argument that the damage fell under the “breaking in” exception to
the theft exclusion.  We will consider this argument, however, for the sake of
completeness in our construction of the policy language.


[4] As will be discussed
below, Eldridge also places emphasis on the dissent filed in one of the cases
relied upon by Essex.  See Certain Underwriters at Lloyds, London v. Law,
570 F.3d 574, 583-86 (5th Cir. 2009) (O’Connor, S.C.J., dissenting).


[5] The Ardizone court
did not mention whether the policy at issue in that case contained a specific
definition of “vandalism” as the policy before us does.


[6] This view is supported by
the fact that the theft exclusion was contained within subparagraph “b” under
the vandalism coverage paragraph, and subparagraph “a” excluded damage to glass
that was “part of a building structure or an outside sign.”  These paragraphs
exclude coverage for types of damage that would otherwise be included within
the vandalism coverage.


[7] In a sense, the present
case presents an even clearer fact pattern for rejecting application of the
“breaking in” exception than did the facts in Law.  Here, the thieves
caused building damage below the deductible while gaining entry to the interior
space and then proceeded to cause additional damage in order to extract the
copper pipes and wiring; whereas in Law, the thieves gained entry only
to the inside of air conditioning units and the housing surrounding the units. 
570 F.3d at 575.


