                   IN THE SUPREME COURT OF MISSISSIPPI

                               NO. 2008-IA-00645-SCT

MARGARET CORBAN AND MAGRUDER S.
CORBAN

v.

UNITED SERVICES AUTOMOBILE
ASSOCIATION a/k/a USAA INSURANCE AGENCY

DATE OF JUDGMENT:                        03/27/2008
TRIAL JUDGE:                             HON. LISA P. DODSON
COURT FROM WHICH APPEALED:               HARRISON COUNTY CIRCUIT COURT
ATTORNEYS FOR APPELLANTS:                JUDY M. GUICE
                                         CLYDE H. GUNN, III
                                         RICHARD T. PHILLIPS
                                         CHRISTOPHER COLLINS VAN CLEAVE
                                         DAVID NEIL HARRIS, JR.
                                         WILLIAM CORBAN GUNN
ATTORNEYS FOR APPELLEE:                  CHARLES G. COPELAND
                                         ROBERT P. THOMPSON
                                         ROBERT L. GOZA
                                         JANET G. ARNOLD
NATURE OF THE CASE:                      CIVIL - PROPERTY DAMAGE
DISPOSITION:                             AFFIRMED IN PART; REVERSED IN PART;
                                         REMANDED - 10/08/2009
MOTION FOR REHEARING FILED:
MANDATE ISSUED:

      EN BANC.

      RANDOLPH, JUSTICE, FOR THE COURT:

¶1.   Dr. Magruder S. and Margaret Corban (“Corbans”) incurred losses caused by physical

damage to their Long Beach, Mississippi, residence during Hurricane Katrina on August 29,

2005. The Corbans had purchased a homeowner’s policy and a flood policy from United
Services Automobile Association Insurance Agency (“USAA”), both of which were in force

at the time the losses were suffered.

¶2.    The Corbans notified USAA of their claim for losses. USAA adjusters inspected the

property and obtained an engineering report for an opinion as to whether the losses were

caused by “wind damage . . . versus flood damage.” Subsequently, USAA informed the

Corbans that the majority of the physical damage to their property was the result of flooding

and that payment for losses caused by flood, an excluded peril in the homeowner’s policy,

would not be made under that policy.

¶3.    Dissatisfied with USAA’s decision, the Corbans filed suit. After answering the

Complaint, USAA filed a “Motion for Partial Summary Judgment.” Subsequently, the

Corbans filed a “Motion for Partial Summary Judgment.” The competing motions focused

on the ambiguity, vel non, of the “water damage” exclusion and the “anticoncurrent cause”

(“ACC”) clause contained in the homeowner’s policy, inter alia. The Corbans further

asserted that if the policy language was determined to be unambiguous, then the provisions,

when read together, were contrary to Mississippi public policy.

¶4.    Following a hearing, the Circuit Court of Harrison County, Mississippi, First Judicial

District, entered an “Order Granting Partial Summary Judgment to [USAA] and Denying

Partial Summary Judgment to [the Corbans] Regarding Anticoncurrent Causation Clause and

Storm Surge Issues (With Findings of Fact and Conclusions of Law).” The circuit judge

found that “storm surge” is an “excluded peril” within the “water damage definition of the

subject policy”; that the “water damage” exclusion and ACC clause are “unambiguous”; and

that, although expressing a contrary interpretation of the policy language, “the anticoncurrent


                                              2
causation clause will be applied herein as interpreted by the United States Fifth Circuit Court

of Appeals, thereby barring coverage under the homeowner’s policy for any damage caused

by water as defined in the policy or caused concurrently or sequentially by wind and water

in combination.” The Corbans sought an interlocutory appeal of these rulings, which this

Court granted.1 See Miss. R. App. P. 5.

                                           FACTS

¶5.    The Corbans had resided on East Beach Boulevard, Long Beach, Mississippi, several

hundred feet from the Mississippi Gulf Coast,2 since 1988. The subject property was insured

by two policies, a homeowner’s policy and a flood policy,3 each procured from USAA. The

insured property included a two-story dwelling, multi-car garage, guest cottage, gazebo, and

potting shed, among other structures. Significant damage was wrought upon the Corbans’

real and personal property during Hurricane Katrina, causing significant losses. The Corbans

filed a claim seeking indemnity for their losses, in the amount of $1,607,926.



       1
         Amicus curiae briefs were filed by United Policyholders; Mississippi Attorney
General Jim Hood; Nationwide Mutual Fire Insurance Company and Nationwide Property
and Casualty Company (“Nationwide”); Allstate Property and Casualty Insurance Company;
and the National Association of Mutual Insurance Companies and State Farm Fire and
Casualty Company. Given the extraordinary impact of the resolution of these issues on
citizens of this state and the insurance industry, this Court granted the motions of the
Attorney General and Nationwide seeking leave to participate in oral argument as amicus
curiae. See Miss. R. App. P. 29(d). The oral argument webcast can be found online at
http://lawwin2k3.mc.edu/videoarchive/video.asp?dn=2008-IA-00645-SCT.
       2
        The location of the Corbans’ home is more accurately described as being on the
Mississippi Sound.       See National Oceanic and Atmospheric Administration,
http://www.noaa.gov (last visited October 6, 2009).
       3
       While issued by USAA, the flood policy was provided through the National Flood
Insurance Program.

                                              3
¶6.    USAA assigned Chris Sims and Joe Howell to adjust the Corbans’ claim. According

to Howell, Sims retained an engineer to inspect the property because “[w]e were using

engineers on large, significant losses to help determine whether there was wind damage . .

. versus flood damage.” Paul R. William, P.E., and Jim D. Wiethorn, P.E., of Haag

Engineering Company (“Haag”) inspected the property. Howell testified that no engineering

report was necessary for a flood-policy claim as “it’s obviously total flood damage in excess

of the [flood] policy limit . . . .”

¶7.    In October 2005, the Corbans received $250,000, the limit of liability for loss to the

dwelling under the flood policy. Thereafter, the Corbans received an additional $100,000,

the limit of liability for loss to contents under the flood policy. The Corbans also received

$4,000 under the homeowner’s policy for loss of jewelry, watches, furs, and silverware, and

$1,900 under the homeowner’s policy for refrigerated food losses.

¶8.    In early 2006, Howell received the Haag report, which attributed all damage to “the

first story living area to flooding and wave wash.” After receiving the report, Howell

inspected the property. Howell “determined what was to be paid on the wind loss[,]” relying

on the Haag report and “[m]y observations of the loss and looking at the house and the

damage that presented itself.” Howell attributed none of the first-floor damage to wind,

concluding that payment to the Corbans was limited to “replac[ing] the cottage roof and . .

. replac[ing] the roof and some fascia repair and paint around the main house[,]” as well as

for power washing and a “repair allowance” on the gazebo and the potting shed.4



       4
        Experts subsequently employed by the Corbans contend that the home and other
structures were destroyed by wind before the “storm surge” arrived.

                                             4
¶9.    In January 2006, the Corbans received $39,971.91 under “Coverage A - Dwelling”

and “Coverage B - Other Structures” of the homeowner’s policy for losses USAA attributed

to wind damage. The Corbans also received $16,955.38 under the homeowner’s policy for

additional living expenses incurred. In February 2006, USAA issued a letter to the Corbans,

stating that, based upon the Haag report, “[i]t was determined that the majority of the damage

to your home was the result of flooding. Unfortunately, flood is an excluded peril in your

HO-3 Homeowners Policy[5 ] and payment cannot be made for these damages.” The Corbans

finally received a payment of $21,077 under the homeowner’s policy for personal property

insured under a “personal articles floater.” Thus, the Corbans received a total of $433,903.77

($350,000 under the flood policy and $83,903.77 under the homeowner’s policy), leaving

$1,174,022.23 in claimed losses unsatisfied.

¶10.   The Corbans filed suit based on a variety of contract and tort theories. 6 According to

the Complaint, “USAA marketed, packaged, presented, and sold the subject [homeowner’s]

policy to the Corbans in such a manner as to cause them to believe they had coverage under

the subject policy for all damages that could be caused by a hurricane.” The Corbans

contended, inter alia, that the “water damage” exclusion and accompanying ACC clause,

when considered “with the policy’s intent to provide coverage for hurricane losses, are

ambiguous as a matter of law.” USAA answered and affirmatively pleaded “that certain of




       5
           This statement references the “water damage” exclusion, see ¶ 23 infra.
       6
       The parties subsequently agreed to bifurcate the Corbans’ claims for “insurance
coverage/breach of contract from their claims for extracontractual emotional distress
damages, attorneys fees and expenses, and punitive damages.”

                                               5
the damages . . . were the result of water damages as defined in the policy. Such damages

are excluded under ‘Section I - Exclusions, 1.c.(1).’”

¶11.   USAA later filed a “Motion for Partial Summary Judgment,” asserting, inter alia, that:

       (1)    Storm surge is flood and is an excluded peril under the water damage
              exclusion.
       (2)    The [Corbans] are judicially estopped from denying that the insured
              structures and contents were damaged by flood at least to the extent of
              the amount paid under the flood insurance policy.
       (3)    The wind and hail deductible (incorrectly referred to by [the Corbans]
              as “a hurricane deductible endorsement”) does not affect the policy
              provisions.
       (4)    The [Corbans’] claims for misrepresentation by USAA or its agents is
              without merit because the policy is not ambiguous and the provisions
              pertaining to covered and excluded perils are plainly stated.

The Corbans then filed a “Motion for Partial Summary Judgment,” maintaining that the ACC

clause in the policy should be invalidated as ambiguous and contrary to Mississippi public

policy, such that “Plaintiffs are entitled to judgment as a matter of law . . . .” USAA

responded that “the ACC clause contained in [the] policy is unambiguous and should be

enforced as written.”

¶12.   Following a hearing, the circuit court conducted a conference with counsel to discuss

its rulings prior to entry. During that conference, the Corbans stated their intention to seek

an interlocutory appeal. USAA agreed that such was appropriate. The circuit court then

entered an “Order of Continuance and Stay” providing that “trial of this cause is hereby

continued and the case is stayed pending entry of orders of the Court . . . and interlocutory

appeal thereof.”

¶13.   Relevant to the disposition of this appeal, the circuit court entered an “Order Granting

Partial Summary Judgment to Defendant and Denying Partial Summary Judgment to


                                              6
Plaintiffs Regarding Anticoncurrent Causation Clause and Storm Surge Issues (With

Findings of Fact and Conclusions of Law).” The circuit judge found “storm surge” to be

within the “water damage definition . . . and . . . , therefore, an excluded peril.” The circuit

judge further found that the “water damage” exclusion and ACC clause were “unambiguous.”

Finally, the circuit judge concluded that “the anticoncurrent causation clause will be applied

herein as interpreted by the United States Fifth Circuit Court of Appeals, thereby barring

coverage under the homeowner’s policy for any damage caused by water as defined in the

policy or caused concurrently or sequentially by wind and water in combination.”

¶14.   The Corbans’ “Petition for Interlocutory Appeal” followed entry of the

aforementioned order, and was granted by this Court.

                                           ISSUES

¶15.   On interlocutory appeal, the Corbans identified the following issues:

       1.     Is the water damage exclusion purporting to exclude concurrent or
              sequential contributing causes ambiguous and therefore void as to
              hurricane losses where multiple courts and parties have struggled for
              years and are unable to determine what the language means and how it
              affects Hurricane Katrina losses?

       2.     If construed to exclude losses caused by wind merely because water
              later impacted the property or to alter contract law requiring an insurer
              to prove what part of the loss was caused by an excepted event, does
              the water exclusion violate Mississippi public policy in the context of
              hurricane claims?

       3.     In an “all risk” homeowner’s policy containing an anti-concurrent cause
              clause as part of its exclusion, which party – the insurance company or
              the insured – must establish causation on that part of the loss that is
              excluded?




                                               7
       4.        Did not the Fifth Circuit Court of Appeals err in its “Erie-guess”[7 ] in
                 Leonard[8 ] and Tuepker[9] that under Mississippi insurance contract
                 law “indivisible damage” caused by both wind and water in a hurricane
                 is excluded under the contract terms of the homeowner’s policies at
                 issue?

       5.        Does the USAA insurance policy preclude recovery for hurricane loss
                 where the efficient proximate cause is a covered event?

       6.        Did the trial court err in its interpretation of the anti-concurrent cause
                 clause?

No cross-appeal was filed by USAA.

¶16.   After due consideration, this Court restates, and will consider only, the following

issues:10

       (1)       Whether the circuit court erred in finding that “storm surge” is included
                 in the “water damage” exclusion.
       (2)       Whether the circuit court erred in finding that the ACC clause is
                 applicable in the case sub judice.
       (3)       Which party bears the burden of proof.

                                           ANALYSIS

¶17.   Our analysis begins by focusing on the wording of the policy,11 which is the subject

of this dispute. We have examined the policy to discern the meaning of its words and



       7
           See Erie R.R. v. Tompkins, 304 U.S. 64, 58 S. Ct. 817, 82 L. Ed. 1188 (1938).
       8
           See Leonard v. Nationwide Mut. Ins. Co., 499 F.3d 419 (5th Cir. 2007).
       9
           See Tuepker v. State Farm Fire & Cas. Co., 507 F.3d 346 (5th Cir. 2007).
       10
         See Mayor and Bd. of Aldermen, City of Ocean Springs v. Homebuilders Ass’n
of Miss., 932 So. 2d 44, 60 (Miss. 2006) (declining to address an issue, “[a]s the other issues
were case dispositive[.]”).
       11
        Excerpted portions of the policy packet, with emphasis provided by this Court, are
attached. See Appendix.

                                                 8
sentences and to assure the accuracy of our determinations. We have perused the disputed

clauses, scrutinized the use of the same words in clauses in other provisions of the policy not

subject to dispute, and, finally, consulted standard and legal dictionaries for definitions of

words not defined within the policy. Our role is to render a fair reading and interpretation

of the policy by examining its express language and applying the “ordinary and popular

meaning” to any undefined terms. Noxubee County Sch. Dist. v. United Nat’l Ins. Co., 883

So. 2d 1159, 1165 (Miss. 2004) (citing Blackledge v. Omega Ins. Co., 740 So. 2d 295, 298

(Miss. 1999)). Once accomplished, we apply that reading to the specific issues presented to

this tribunal, for a determination of whether the disputed clauses apply, vel non, to the losses

for which the Corbans seek indemnity.

¶18.   “The interpretation of an insurance policy is a question of law, not one of fact.”

Noxubee County, 883 So. 2d at 1165 (citing Lewis v. Allstate Ins. Co., 730 So. 2d 65, 68

(Miss. 1998)). “[W]hen a question of law is raised, we apply a de novo standard of review.”

Delashmit v. State, 991 So. 2d 1215, 1218 (Miss. 2008) (citation omitted).

¶19.   In Mississippi, insurance policies:

       are contracts, and as such, they are to be enforced according to their
       provisions. When parties to a contract make mutual promises (barring some
       defense or condition which excuses performance), they are entitled to the
       benefit of their bargain. Thus, insurance companies must be able to rely on
       their statements of coverage, exclusions, disclaimers, definitions, and other
       provisions, in order to receive the benefit of their bargain and to ensure that
       rates have been properly calculated.

Noxubee County, 883 So. 2d at 1166 (citations omitted). See also Simmons v. Bank of

Mississippi, 593 So. 2d 40, 42-43 (Miss. 1992) (quoting Cherry v. Anthony, Gibbs, Sage,

501 So. 2d 416, 419 (Miss. 1987)) (“[a] court must effect a determination of the meaning of

                                               9
the language used, not the ascertainment of some possible but unexpressed intent of the

parties.”). “[I]n interpreting an insurance policy, this Court should look at the policy as a

whole, consider all relevant portions together and, whenever possible, give operative effect

to every provision in order to reach a reasonable overall result.” J&W Foods Corp. v. State

Farm Mut. Auto. Ins. Co., 723 So. 2d 550, 552 (Miss. 1998) (citing Cont’l Cas. Co. v.

Hester, 360 So. 2d 695, 697 (Miss. 1978)).

¶20.   The substantive contract law of this state likewise has been clearly declared by this

Court to include the following concepts:

       if a contract is clear and unambiguous, then it must be interpreted as written.
       . . . 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.

United States Fid. & Guar. Co. v. Martin, 998 So. 2d 956, 963 (Miss. 2008) (internal

citations omitted). See also Frazier v. N. Miss. Shopping Ctr., Inc., 458 So. 2d 1051, 1054

(Miss. 1984) (“[a] construction leading to an absurd, harsh or unreasonable result in a

contract should be avoided unless the terms are express and free of doubt.”).

¶21.   It is undisputed that the policy provides “all-risk” coverage as to “Coverage A -

Dwelling” and “Coverage B - Other Structures,” such that “direct physical loss” caused by

any risk (i.e., peril(s)) not expressly excluded is covered. USAA concedes that “[t]his means

that all risks to the structures are covered, other than those risks specifically excluded from

coverage.” It is likewise undisputed that the policy provides only “named-perils” coverage

                                              10
as to “Coverage C - Personal Property,” such that only “direct physical loss” caused by a

listed peril is covered, unless such loss is expressly excluded. The Corbans concede that the

policy provides only “named perils” coverage as to “Coverage C - Personal Property.”

Finally, it is undisputed that the provision excluding “water damage” loss, which includes

the ACC clause, excludes loss, not perils.

¶22.   Regarding pertinent coverage and exclusions, there is no dispute that under Coverages

A, B, and C, any loss caused by wind is covered, while any loss caused by “water damage,”

as defined, is excluded.12 USAA provided the following example:

       if an insured’s roof is breached and rainwater comes in, damaging a carpet,
       USAA pays for rainwater damage to the carpet. This is so, even if storm surge
       subsequently breaches the walls of the house and floods it, destroying the
       carpet. USAA would still owe for drying and cleaning the carpet to repair the
       rainwater damage. It would not owe for a replacement carpet, since the
       destruction of the carpet resulted from excluded storm surge flooding.[13 ]

       1.     Whether the circuit court erred in finding that “storm surge” is
              included in the “water damage” exclusion.

¶23.   The policy expressly excludes, in pertinent part, “[w]ater damage, meaning: (1) flood,

surface water, waves, tidal water, overflow of a body of water, or spray from any of these,

whether or not driven by wind . . . .” The Corbans maintain that “storm surge” is a covered

peril because “[t]he policy itself defines ‘water damage’ and purposely does not include




       12
        The Corbans contest whether the “water damage” exclusion includes “storm surge.”
See Issue I infra.
       13
        Amicus Nationwide disavows USAA’s interpretive application and advances a more
stringent interpretation. Nationwide argues that USAA’s position “wind[s] up paying a
homeowner to dry and clean a carpet that no longer exists because it was completely
destroyed by floodwater.”

                                             11
storm surge within that definition.” USAA responds that “storm surge” is obviously an

“excluded peril” under the “water damage” exclusion.

¶24.   The circuit court ruled that:

       [a]ll of the sources reviewed by this [c]ourt refer to storm surge as ocean or
       lake water being pushed by or affected by wind causing the water to rise and
       move toward or onto shore. Many of these sources refer to this surge as
       combining with the normal tides or as causing a rising of sea level. Certainly
       by these definitions, storm surge could be considered surface water, waves,
       tidal water, or even overflow of a body of water. Storm surge is included in
       the policy terminology delineating the meaning of “water damage” by virtue
       of its definition. [Leonard] and [Tuepker], and cases cited therein also found
       that “storm surge” is included in such a definition. The lack of the words
       “storm surge” do[es] not either render the provision ambiguous or provide
       coverage for storm surge.

¶25.   “Storm surge is a phenomenon associated with hurricanes. Atmospheric conditions

and wind forces combine to force tidal waters ashore and temporarily inundate areas of

normally dry land.” Leonard v. Nationwide Mut. Ins. Co., 438 F. Supp. 2d 684, 692 (S.D.

Miss. 2006). In Leonard and Tuepker, both the United States district court and the Fifth

Circuit found that “storm surge” was included within comparable “water damage”

exclusions.14 See Tuepker, 507 F.3d at 353; Leonard, 499 F.3d at 436-38; Leonard, 438 F.

Supp. 2d at 693; Tuepker v. State Farm Fire & Cas. Co., 2006 WL 1442489, at *3 (S.D.

Miss. 2006) (affirmed in part; reversed in part and remanded by Tuepker, 507 F.3d at 346).

See also Dickinson v. Nationwide Mut. Fire Ins. Co., 2008 WL 941783, at *6 (S.D. Miss.




       14
         The policy in Leonard excluded “[w]ater or damage caused by water-borne
material.” Leonard, 499 F.3d at 424. That phrase was defined, in pertinent part, as “1.
flood, surface water, waves, tidal waves, overflow of a body of water, spray from these,
whether or not driven by wind.” Id.

                                            12
2008); Buente v. Allstate Prop. & Cas. Ins. Co., 2006 WL 980784, at *1-2 (S.D. Miss.

2006).15 In Leonard, the Fifth Circuit held that:

       [c]ourts have interpreted water-damage exclusions like the one found in the
       Leonards’ policy to encompass the peril of wind-driven inundation by water,
       or storm surge for ages. Mississippi courts have upheld such exclusions before
       and after Hurricane Katrina. . . . Further, this court’s most recent consideration
       of the term “flood” also supports Nationwide’s contention that the term is
       unambiguous and has a concrete meaning, whether or not used in the context
       of an insurance policy. See In re Katrina Canal Breaches Litigation, 495
       F.3d 191, 2007 U.S. App. LEXIS 18349, 2007 WL 2200004, at *16-18 (5th
       Cir. 2007) . . . . No decision of this court or any other of which we are aware
       endorses the Leonards’ view that storm surge is a unique meteorological
       phenomenon not contemplated by water-damages exclusions like
       Nationwide’s. . . .

       The phrase “storm surge” is little more than a synonym for a “tidal wave” or
       wind-driven flood, both of which are excluded perils. The omission of the
       specific term “storm surge” does not create ambiguity in the policy regarding
       coverage available in a hurricane and does not entitle the Leonards to recovery
       for their flood-induced damages.

Leonard, 499 F.3d at 437-38 (footnotes omitted).

¶26.   We affirm the circuit court’s ruling that “storm surge” is contained unambiguously

within the “water damage” exclusion. This Court finds that “storm surge” is plainly




       15
        The referenced federal court decisions are not binding upon this Court, but merely
persuasive. See Bullard v. Guardian Life Ins. Co., 941 So. 2d 812, 819 n.1 (Miss. 2006).

                                              13
encompassed within the “flood” or “overflow of a body of water” portions of the “water

damage” definition, and no other “logical interpretation” exists. Martin, 998 So. 2d at 963.

       2.     Whether the circuit court erred in finding that the ACC clause is
              applicable in the case sub judice.

                                              A.

¶27.   The circuit judge first stated that “[a] plain common sense reading of the policy,

without resort to legal jargon or theories, would seem to be the proper means to interpret

provisions in an insurance policy that average citizens are expected to read and understand.”

The circuit judge then deemed the “water damage” exclusion and ACC clause to be

“unambiguous,” observing that:

       [u]sing the simple rules learned in middle school or high school English
       classes, the exclusion provides that it does not cover a loss caused by water
       damage. The second sentence refers to “[s]uch loss” being excluded even if
       in combination with or in any sequence to other causes. The term “[s]uch
       loss” can only refer to the loss caused by water damage mentioned in the first
       sentence of the exclusion. It is that loss and that loss only that is excluded by
       the plain language of the provision. The remainder of the second sentence
       goes on to elaborate on the exclusion by providing that the water damage is
       excluded no matter what other causes exist and whether the water damage
       occurs first, last, or simultaneously with some other cause. This simple, basic
       interpretation of the language used and sentence structure used bars coverage
       for water damage and only the water damage, whether occurring alone or in
       any order with another cause.

Notwithstanding, the circuit court concluded that its analysis of the language:

       will not be substituted for that of the only appeals court precedent available on
       this issue. Further, it is not clear that the appeals courts of Mississippi would
       decline to adopt the analyses and decisions of the Fifth Circuit in this regard.
       The decisions of the Fifth Circuit will, therefore, be applied in this case. The
       Corbans’ motion seeking partial summary judgment on the issue of the
       applicability of the ACC clause will be denied. Pursuant to Leonard and
       Tuepker, the ACC clause will be applied herein. The Corbans may not



                                              14
       recover for any damage caused by water as defined in the policy or a
       combination of that water and wind.[16 ]

That ruling set the stage for this appeal, i.e., a fair reading and interpretation of the policy in

issue by this Court.

¶28.   The ACC clause reads:

                                SECTION I - EXCLUSIONS

       1. We do not insure for loss caused directly or indirectly by any of the
       following. Such loss is excluded regardless of any other cause or event
       contributing concurrently or in any sequence to the loss.

(Emphasis added.) The terms “loss,” “concurrently,” and “in any sequence” are pertinent to

our inquiry. The policy lends limited assistance to this endeavor, as it fails to define those

terms. Thus, “those words are afforded their ordinary and popular meaning.” Noxubee

County, 883 So. 2d at 1165. Additionally, the use of these terms elsewhere in the policy can

assist our inquiry. See Martin, 998 So. 2d at 963 (citing J&W Foods Corp., 723 So. 2d at

552) (“[a] policy must be considered as a whole, with all relevant clauses together.”).

                                             “Loss”

¶29.   We first observe that the parties and trial court in this proceeding, as well as other

courts in cases cited, have conflated the terms “loss” and “damage.” A “loss” is incurred by

an insured and typically, but not always, follows “damage” to his or her property.17

       16
        See Tuepker, 507 F.3d at 354 (“the ACC clause in combination with the Water
Damage Exclusion clearly provides that indivisible damage caused by both excluded perils
and covered perils or other causes is not covered.”); Leonard, 499 F.3d at 430 (“[t]he only
species of damage covered under the policy is damage caused exclusively by wind. But if
wind and water synergistically caused the same damage, such damage is excluded.”).
       17
        An example of loss in the absence of direct physical damage can be found in the
“Credit Card, Fund Transfer Card, Forgery, and Counterfeit Money” provisions of the

                                                15
“Property damage” is defined within the policy as “physical damage to, or destruction of

tangible property, including loss of use of this property.” See Appendix. The policy does

not cover or exclude “damage,” but rather covers or excludes “loss,” and it is to “loss” that

the deductible is applied.

¶30.   With “loss” undefined in the policy, we look for its “ordinary and popular meaning.”

Noxubee County, 883 So. 2d at 1165. Elsewhere, “loss” has been defined as “1. An act or

instance of losing. 2. One that is lost. 3. Injury or suffering caused by losing or by being

lost.” Webster’s II New College Dictionary 647 (3d ed. 2001). See also Bryan A. Garner,

A Dictionary of Modern Legal Usage, 538 (2d ed. 1995) (to “lose” is “to suffer the

deprivation of; to part with.”); Black’s Law Dictionary 54 (4th ed. 1968) (“actual loss” is

defined as “[o]ne resulting from the real and substantial destruction of the property

insured.”).

¶31.   Based upon policy usage and the “ordinary and popular meaning,” Noxubee County,

883 So. 2d at 1165, we find that loss occurs at that point in time when the insured suffers

deprivation of, physical damage to, or destruction of the property insured.              This

determination is likewise consistent with “Loss Settlement” provisions of the homeowner’s

policy, which grant USAA the option of settling “[c]overed property losses” by paying the

insured “the cost to repair or restore the property to the condition it was in just before the

loss.” See Appendix (emphasis added). Similarly, within the “Replacement Cost Coverage -

Personal Property” section of the homeowner’s policy, “replacement cost” is defined as “the


policy. Additionally, stolen items qualify as losses, even though property is not “physically
damaged.”

                                             16
cost, at the time of loss . . . .” Id. (emphasis added). Additionally, the “Loss Settlement”

portion of the “Special Coverage on Jewelry, Watches, Furs, and Silverware” establishes the

“value of the covered property” as being “set at the time of loss or damage.” Id. (emphasis

added).

¶32.   No reasonable person can seriously dispute that if a loss occurs, caused by either a

covered peril (wind) or an excluded peril (water), that particular loss is not changed by any

subsequent cause or event. Nor can the loss be excluded after it has been suffered, as the

right to be indemnified 18 for a loss caused by a covered peril attaches at that point in time

when the insured suffers deprivation of, physical damage to, or destruction of the property

insured. An insurer cannot avoid its obligation to indemnify the insured based upon an event

which occurs subsequent to the covered loss.19 The insured’s right to be indemnified for a

covered loss vests at time of loss.      Once the duty to indemnify arises, it cannot be

extinguished by a successive cause or event. See Bland v. Bland, 629 So. 2d 582, 589 (Miss.

1993) (“[b]enefits vest under a casualty policy when the event occurs . . . .”) (emphasis

added); Pitts v. Am. Sec. Life Ins. Co., 931 F.2d 351, 358 (5th Cir. 1991) (“[s]ince the policy

. . . was in full force at the time Pitts was injured, his benefits under the policy vested.”)

(emphasis added). The same principle applies in reverse. In the case of a loss caused by an

excluded peril, that particular loss is not changed by any subsequent covered peril or event.

Nor can that excluded loss become a covered loss, after it has been suffered.

       18
        For purposes of this opinion, “indemnity” means “[s]ecurity or protection against
contingent hurt, damage, or loss . . . .” Garner, A Dictionary of Modern Legal Usage at 437.
       19
         Absent a breach of policy conditions by the insured, e.g., engaging in concealment
or fraud relating to the insurance.

                                              17
¶33.   “Loss to property can consist of many losses because property can consist of many

elements, and ‘loss’ need not refer only to the totality of the damage and in fact should not

when different forces have caused different damage.” Appleman on Insurance § 192.03[H]

(2009) (emphasis added). The subject homeowner’s policy insures “for direct, physical loss”

to property. Following the policy language and the principles enumerated herein, the

Corbans are entitled to recover for all covered “direct, physical loss[es]” to the property,20

not otherwise excluded.

                                       “Concurrently”

¶34.   A hurricane includes a number of weather conditions, elements, and/or forces, at times

acting dependently, at other times independently.21 USAA argues that this policy excludes

losses caused by perils which may coexist. We examine the policy to determine if this




       20
       Under Coverages A, B, and C, the “Perils Insured Against” section of the
homeowner’s policy provides coverage “for direct, physical loss to the property . . . .”
(Emphasis added.)
       21
        The subject homeowner’s policy does not expressly provide or exclude coverage for
a hurricane. As such, this Court agrees with the circuit court that the “wind and hail”
deductible in the homeowners policy, see Appendix, “does not . . . create any ambiguity with
regard to any of the other issues . . . by this [c]ourt. Nothing in the terms of the deductible
affects the ACC clause or the water damage exclusion.” The “wind and hail” deductible
makes no reference to being a “hurricane deductible.” In fact, the term “hurricane” is found
nowhere in the homeowner’s policy. Therefore, this Court summarily concludes that the
Corbans’ claims and argument to the contrary are without merit.
       The subject homeowner’s policy does not expressly provide or exclude coverage for
a hurricane. As such, Katrina was neither the covered nor excluded cause or event. Rather,
the perils unleashed by Katrina were the covered or excluded causes or events. Courts and
litigants likewise have conflated cause or event with covered and excluded perils, just as the
terms “damage” and “loss” have been conflated. See ¶ 29 supra. The argument of amicus
Nationwide exemplifies the fallacy of the “hurricane-as-covered-event” proposition vis-a-vis
the USAA policy. See ¶ 46 infra.

                                              18
assertion is supported by its language. Before that determination can be made, we must

render a fair reading and interpretation of the express language “concurrently.”

¶35.   The term “concurrently” is defined as “1. Occurring at the same time. 2. Operating

in conjunction. 3. Meeting or tending to meet at the same point: Convergent.” Webster’s

II New College Dictionary at 234. See also Black’s Law Dictionary at 363 (defining

“concurrent” as “[r]unning together; . . . acting in conjunction; . . . contributing to the same

event; contemporaneous”).

¶36.   Thus, the exclusion applies only in the event that the perils act in conjunction, as an

indivisible force, occurring at the same time, to cause direct physical damage resulting in

loss. In that event, we accept the Fifth Circuit’s interpretation of Mississippi law, and would

apply the ACC clause to exclude coverage.

¶37.   However, the facts presented in the case sub judice do not reveal a claim by either

party that an “indivisible” force (wind and flood), occurring at the same time, caused direct

physical damage resulting in simultaneous loss to the property. Based upon the record as it

now stands, and as presented by both parties, the subject perils acted in sequence, not

concurrently, i.e., at different times, causing different damage, resulting in separate losses.

It is only when the two perils converge at the same point in time, contemporaneously and

operating in conjunction, that there is a “concurrent” cause or event. If the wind peril causes

damage resulting in a loss either before or after the water peril (“flood”) causes damage

resulting in a loss, the losses are not “concurrent.” Only if it can be proven that the perils

(wind and flood) contemporaneously converged, operating in conjunction to cause loss, that




                                              19
the “concurrent” provision will apply. In that circumstance, the policy clearly excludes

coverage.

                                    “In Any Sequence”

¶38.   This Court interprets the term “in any sequence” to mean “sequentially.” The term

“sequentially” is defined as “1. Forming or marked by a sequence, as of notes or units.”

Webster’s II New College Dictionary at 1008. See also Garner, A Dictionary of Modern

Legal Usage at 795 (“‘[s]equential’ means ‘forming a sequence or consequence.’”).

¶39.   “If a contract contains ambiguous or unclear language, then ambiguities must be

resolved in favor of the non-drafting party. . . . 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.” Martin, 998 So. 2d at 963.

Relatedly:

       [w]here the policy is subject to two interpretations, equally reasonable, that
       which gives the greater indemnity to the insured will prevail. If one
       construction, looking to the other provisions of the policy, and to its general
       object and scope, would lead to an unreasonable result, such construction must
       be abandoned, and that construction adopted which will be more consistent
       with reason. In all cases the policy must be liberally construed in favor of the
       insured, in order to accomplish the purpose of the insurance.

Southern Home Ins. Co. v. Wall, 156 Miss. 865, 127 So. 298, 299 (1930).

¶40.   The term “in any sequence” is contained within an exclusionary clause for “water

damage” losses. The term is undefined in the policy. As “loss occurs at that point in time

when the insured suffers deprivation of, physical damage to, or destruction of the property

insured[,]” see ¶ 31 supra, this term cannot be used to devest an insured’s right of indemnity

for a covered loss, as such an interpretation conflicts with other provisions of the USAA

                                             20
policy. For instance, “Section I - Conditions” regarding “Insurable Interest and Limit of

Liability” provides that, “in any one loss,” USAA will not be liable “for more than the

amount of the insured’s interest at the time of loss . . . .” See Appendix (emphasis added).

Moreover, “Section I - Conditions” regarding “Loss Settlement” states that USAA has the

option of paying “the cost to repair or restore the property to the condition it was in just

before the loss.” Id. (emphasis added). Additionally, the “Replacement Cost Coverage -

Personal Property” section states that “[r]eplacement cost means the cost, at the time of loss

. . . .” Id. (emphasis added). Finally, the “Loss Settlement” provision within the “Special

Coverage on Jewelry, Watches, Furs and Silverware” section provides that “[t]he value of

the covered property . . . will be set at the time of loss or damage[,]” and that USAA has the

option of paying “the cost to repair or restore the property to the condition it was in just

before the loss.” See id. (emphasis added).

¶41.   These provisions irreconcilably conflict with the “in any sequence” language, thereby

creating an ambiguity. Our precedent requires this Court to construe an “equally reasonable”

interpretation in favor of the nondrafting, insured party (the Corbans). Wall, 127 So. at 299.

Therefore, this Court concludes that the “in any sequence” language in the policy may not

be used to devest the insureds of their right to be indemnified for covered losses. See

Martin, 998 So. 2d at 963; Wall, 127 So. at 300 (if “[t]he two clauses of the policy are so

conflicting that they cannot stand together – one must give way to the other; and, under the

principles stated, the provision most favorable to the insured must be upheld.”).




                                              21
                                             B.

¶42.   As aptly stated by the circuit judge, “simple rules learned in middle school or high

school English classes” dictate that the ACC clause applies only to losses caused by “water

damage.” As such, with respect to the “water damage” exclusion, based upon the factual

scenario presented to this Court, we conclude that the ACC clause should be read as follows:

                              SECTION I - EXCLUSIONS

       1. We do not insure for loss caused directly or indirectly by [water damage].
       Such loss [from water damage] is excluded regardless of any other cause or
       event [wind damage] contributing concurrently or in any sequence to the loss
       [from water damage].

(Emphasis added.) See also Dickinson v. Nationwide Mut. Fire Ins. Co., 2008 WL

1913957, at *3-4 (S.D. Miss. 2008).

¶43.   In assessing the applicability, vel non, of the ACC clause, we reiterate that different

perils from a hurricane generally, but not without exception, result in separate damage and

loss. The policy establishes a duty to indemnify for covered “direct physical losses” under

Coverages A, B, and C. The ACC clause applies only if and when covered and excluded

perils contemporaneously converge, operating in conjunction, to cause damage resulting in

loss to the insured property. If the insured property is separately damaged by a covered or

excluded peril, the ACC clause is inapplicable. If damage is caused by a covered peril, the

insured is entitled to indemnification for the covered loss, as the insured’s right to recover

for the loss has vested. See Bland, 629 So. 2d at 589; Pitts, 931 F.2d at 358. Conversely,

if the damage is caused by an excluded peril, the insured is not entitled to indemnification

for that uncovered loss.



                                             22
¶44.   Based on the evidence thus far presented, the same loss with multiple causes is not at

issue here. Thus, a finder of fact must determine what losses, if any, were caused by wind,

and what losses, if any, were caused by flood. If the property suffered damage from wind,

and separately was damaged by flood, the insured is entitled to be compensated for those

losses caused by wind. Any loss caused by “[flood] damage” is excluded. If the property

first suffers damage from wind, resulting in a loss, whether additional “[flood] damage”

occurs is of no consequence, as the insured has suffered a compensable wind-damage loss.

Conversely, if the property first suffers damage from flood, resulting in a loss, and then wind

damage occurs, the insured can only recover for losses attributable to wind.

¶45.   In Dickinson, the federal district court astutely found that “any loss in which the

excluded peril of flooding plays no part is outside ‘the loss’ to which the ACC applies.”

Dickinson, 2008 WL 1913957, at *2. This Court finds the analysis of the federal district

court in Dickinson to be salient:

       the damage done by wind and wind-driven debris during Hurricane Katrina is
       a loss that is covered by the Nationwide homeowners policy, and any
       additional damage done by the rising waters incident to the storm is not a
       covered loss. In this situation, the anti-concurrent cause provision is not
       applicable and does not come into play because each force causes its own
       separate damage independent of the damage caused by the other even when the
       same item of property is damaged by both forces acting separately and
       sequentially. Wind and water are separate and not concurrent causes of the
       damage to the insured property.

Dickinson, 2008 WL 941783, at *6 (emphasis added).

¶46.   We conclude that the ACC clause has no application for losses caused by wind peril.

An insurer may not abrogate its duty to indemnify for such loss by the occurrence of a

subsequent, excluded cause or event, a position advanced by amicus Nationwide. According

                                              23
to Nationwide, the loss occurred in the same event, which they contend was the hurricane.

Nationwide unconvincingly posits that loss is not determined until the hurricane is over.22

Nationwide contends that any loss which the “storm surge” would have caused anyway is

excluded. Such an interpretation fails to consider the common understanding of “loss,” and

would avoid payment for covered “losses,” an unreasonable result. Such an interpretation

is contradicted by the principle that all “[e]xclusions and limitations on coverage are . . .

construed in favor of the insured.” Martin, 998 So. 2d at 963.

¶47.   The parties to this action agree that the ACC clause has no application to different

losses caused by different perils. This Court finds that within the context of this case, under

Coverages A, B, and C, any loss caused by damages resulting from wind is a covered loss,

while any loss caused by damages resulting from the “storm surge” is an excluded loss.

Applying the “ordinary and popular meaning[,]” Noxubee County, 883 So. 2d at 1165, of

the terms “loss,” “concurrently,” and “in any sequence,” the ACC clause is inapplicable. We

are in accord with the district judge in Dickinson, who stated:

       [i]t is clear to me that storm surge flooding cannot be a cause (directly or
       indirectly) of damage that occurs before the storm surge flooding reaches the
       insured property, i.e. before the excluded peril of flooding occurs. . . .

       Wind damage that precedes the arrival of the storm surge and damage that
       happens after the storm surge arrives are separate losses from separate
       causes, and not concurrent causes or sequential causes of the same loss[.] . .
       .




       22
         The fallacy of the “hurricane-as-covered-event” position lies both in the absence of
the term “hurricane” within the subject policy and the fact that the duration of the hurricane
often extends over several days.

                                              24
       Wind damage that precedes flood damage happens in a sequence of events, but
       the wind damage is not caused, directly or indirectly, by storm surge flooding,
       and the damage done by the wind is therefore not a part of “the loss” the ACC
       refers to. Since the ACC does not apply to this separate wind damage, the
       wind damage is a covered loss. The insurance benefits that apply to this
       covered loss vest in the insured at the time the loss occurs. See [Pitts, 931 F.
       2d at 351; Bland, 629 So. 2d at 582]. Wind and flood were separate and not
       concurrent causes of damage to the insured property, and the wind damage that
       precedes the storm surge does not contribute, sequentially or concurrently, to
       “the [excluded] loss” caused by storm surge flooding and referred to by the
       ACC.

Dickinson, 2008 WL 1913957, at *2-4 (emphasis added).

¶48.   After a thorough examination of Mississippi caselaw, the evidence presented to date

in this case, the briefs of the parties and amici, and the USAA policy at issue, this Court

declares the ACC clause inapplicable. We respectfully reject the proposition that, under the

subject ACC clause, “indivisible[23 ] damage caused by both excluded perils and covered

perils or other causes is not covered.”24 Tuepker, 507 F.3d at 354 (emphasis added). We

neither agree nor find support for an analysis focusing on “damage” rather than “loss,” or

the premise that “storm surge” flooding which inundates the same area that the wind, acting

independently, previously damaged constitutes “indivisible damage” or “the same damage

. . . .” See Tuepker, 507 F.3d at 354; Leonard, 499 F.3d at 431. Only when facts in a given

       23
            The term “indivisible” is found nowhere in the subject homeowner’s policy.
       24
         We can agree, but not without clarification, that “if wind and water synergistically
caused the same damage, such damage is excluded.” Leonard, 499 F.3d at 430 (emphasis
added). However, this Court is troubled by the conflation of the terms “damage” and “loss,”
and the use of the term “synergistically.” “Synergism” is defined as “[t]he action of two or
more substances, organs, or organisms to achieve an effect of which each is individually
incapable.” Webster’s II New College Dictionary at 1118. The policy does not require the
insurer to establish synergistic damage, only concurrent loss. “Synergism,” like
“indivisible,” is found nowhere in the policy, and may be ill-suited for the wind/flood
disputes of hurricane claims, generally, and the ACC clause at issue, specifically.

                                              25
case establish a truly “concurrent” cause, i.e., wind and flood simultaneously converging and

operating in conjunction to damage the property, would we find, under Mississippi law, that

there is an “indivisible” loss which would trigger application of the ACC clause. Neither the

parties nor amici in the case sub judice have offered a factual basis to support a “concurrent”

cause here.

¶49.   We conclude that the circuit judge correctly interpreted the ACC clause, but then erred

in applying the Fifth Circuit’s “Erie-guess” regarding its application. The ACC clause is

inapplicable here. All “direct physical losses” under Coverages A, B, and C which are

caused by wind are covered. All “direct physical losses” under Coverages A, B, and C which

are caused by “[flood] damage” are excluded. Any “[flood] damage” losses to which a

covered peril (in this case, wind) “contribut[ed] concurrently” are excluded. As this presents

issues of fact for jury determination, we next consider the applicable burden of proof.

       3.     Which party bears the burden of proof.

¶50.   The parties agree that the subject policy provides “all-risk” coverage as to “Coverage

A - Dwelling” and “Coverage B - Other Structures.” “The purpose of an ‘All-Risk’ policy

is to insure losses when the cause of the loss is unknown or the specific risk was not

explicitly contemplated by either party.” Lee R. Russ & Thomas F. Segalla, 7 Couch on

Insurance § 101:7 (3d ed. 2007). Under such coverage, “the insured has the initial burden

to prove that the loss occurred.” Id. Thereafter, the burden shifts to the insurer, as “[i]n an

all-risk . . . policy where an exclusion is specifically pleaded as an affirmative defense the

burden of proving such affirmative defense is upon the insurer . . . .” Lunday v. Lititz Mut.

Ins. Co., 276 So. 2d 696, 698 (Miss. 1973). See also Morrison Grain Co. v. Utica Mut. Ins.

                                              26
Co., 632 F.2d 424, 430 (5th Cir. 1980) (“[i]t would seem to be inconsistent with the broad

protective purposes of ‘all risks’ insurance to impose on the insured . . . the burden of

proving the precise cause of the loss or damage.”). USAA offers that:

       as to the “all risk” dwelling and other structures coverage, once the Corbans
       demonstrate a direct, physical loss to their property, USAA bears the burden
       to prove by a preponderance of the evidence that any part of the damage it
       excluded from coverage was caused or contributed to by storm surge flooding.

USAA further acknowledged that it does not contest the existence of such “direct, physical

loss” under “Coverage A - Dwelling” and “Coverage B - Other Structures.” Finally, with

respect to “indeterminable” loss under the “all-risk” coverage of “Coverage A - Dwelling”

and “Coverage B - Other Structures,” USAA also concedes coverage.

¶51.   This Court finds that with respect to the “all-risk” coverage of “Coverage A -

Dwelling” and “Coverage B - Other Structures,” the Corbans are required to prove a “direct,

physical loss to property described.” Thereafter, USAA assumes the burden to prove, by a

preponderance of the evidence, that the causes of the losses are excluded by the policy, in

this case, “[flood] damage.” USAA is obliged to indemnify the Corbans for all losses under

“Coverage A - Dwelling” and “Coverage B - Other Structures” which USAA cannot

establish, by a preponderance of the evidence, to have been caused or concurrently

contributed to by “[flood] damage.” “Contributed to” comes into play only when “[flood]

damage” is a cause or event contributing concurrently to the loss. Pursuant to the policy

language, only if proof of a “concurrent” cause is presented to a jury for consideration would

the jury receive an instruction including the policy phrase “contributing concurrently.”

Likewise, striking the proper balance, under “Coverage C - Personal Property,” discussed


                                             27
in ¶¶ 52-53 infra, the plaintiff must prove that the loss was caused by a peril insured against,

not “caused or contributed to.” Upon proper instruction, these determinations are for a jury.

See Grace v. Lititz Mut. Ins. Co., 257 So. 2d 217, 224 (Miss. 1972).

¶52.   The parties likewise agree that the subject policy separately provides “named perils”

coverage as to “Coverage C - Personal Property.” Under “named perils” coverage, the

burden of proof rests with the insured “to prove that the damages sustained were covered by

the peril insured against . . . .” Lunday, 276 So. 2d at 699. See also Appleman on Insurance

at § 192.09 (under “named peril” coverage, “the insured has the burden of proving that any

losses were caused by a peril covered by the policy – indemnity is not available unless the

loss falls under one of the specifically enumerated coverages.”); Russ & Segalla, 7 Couch

on Insurance at § 101:7 (“‘[n]amed perils’ . . . policies provide coverage only for the specific

risks enumerated in the policy and excludes all other risks.”).

¶53.   We find that with respect to the “named perils” coverage of “Coverage C - Personal

Property,” the Corbans are required to prove, by a preponderance of the evidence, that the

“direct physical loss” to the property described in Coverage C was caused by wind. This is

likewise a question of fact for the jury. See Grace, 257 So. 2d at 224.

                                       CONCLUSION

¶54.   Accordingly, the circuit court did not err in ruling that “storm surge” is included in

the “water damage” exclusion. However, the circuit court erred in holding that the ACC

clause is applicable in the case sub judice. Therefore, the “Order Granting Partial Summary

Judgment to [USAA] and Denying Partial Summary Judgment to [the Corbans] Regarding

Anticoncurrent Causation Clause and Storm Surge Issues (With Findings of Fact and

                                              28
Conclusions of Law)” is affirmed in part and reversed in part, and this case is remanded for

further proceedings consistent with this opinion. Moreover, as there are questions of fact for

jury resolution, we set forth the burden of proof borne by each party under Coverages A, B,

and C.

¶55.     AFFIRMED IN PART; REVERSED IN PART; REMANDED.

    WALLER, C.J., CARLSON AND GRAVES, P.JJ., DICKINSON, LAMAR,
KITCHENS, CHANDLER AND PIERCE, JJ., CONCUR.




                                             29
Appendix

                   HOMEOWNERS POLICY PACKET [p. 1]

     ...

                            IMPORTANT MESSAGES

     ...

     3) PLEASE NOTE: This policy DOES NOT cover the peril of Flood. The
     Federal Government has requested we notify you that coverage for Flood is
     available from the National Flood Insurance Program through USAA Flood
     Operations. If you do not already have a Flood Policy and would like
     information, call Flood Operations at 1-800-531-8444.

     ...

     Coverages and Limits of Liability

     Section I.   A. Dwelling                                $750,000
                  C. Personal Property                       $562,500
                  D. Loss of Use (Up to 12 Months)           $150,000

     ...

     Deductibles (Section I Only)

           We cover only that part of the loss over the deductible stated.

                  Wind and Hail        $7,500        (1%)
                  All Other Perils     $1,000

     ...

DD   HO-48        (04-93)       Increased Limits for Other Structures    $180.00
DD   HO-506       (04-93)       Special Coverage - Jewelry, Furs, Silver $32.00
DD   HO-728       (06-97)       Replacement Cost Coverage                $792.33

     ...

            INCREASED LIMITS ON OTHER STRUCTURES [p. 7]



                                         30
   For an additional premium, we cover the following structures described below
   on the residence premises for the additional limit of liability shown. This is
   additional insurance for these structures.

   ...

   Description of Structure    Additional Limit of Liability        Premium
   Gar, Pool House, Toilet Fax $60,000                              $180.00

   ...

SPECIAL COVERAGE ON JEWELRY, WATCHES, FURS AND SILVERWARE
                          [p. 8]

   For an additional premium, we insure against risks of direct loss to property
   listed below only if that loss is a physical loss to the property. We do not
   insure losses excluded in Exclusions below.

   ...

   Limit of Liability           $4,000

   ...

   Loss Settlement. The value of the covered property is not agreed upon but
   will be set at the time of loss or damage.

   ...

   1. It is our option to:

   ...

   b. pay you the cost to repair or restore the property to the condition it was in
   just before the loss.

   If you do not wish to have the property replaced, repaired or restored, we will
   pay you the smaller of:

   ...

   d. The cost to repair or restore the property to the condition it was in just
   before the loss.

                                         31
...

REPLACEMENT COST COVERAGE - PERSONAL PROPERTY [p. 9]

...

Replacement Cost Coverage Defined

Replacement Cost means the cost, at the time of loss, of a new item identical
to the one damaged, destroyed or stolen.

...

                SPECIAL FORM - HOMEOWNERS POLICY
                     **Read Your Policy Carefully**

This policy is a legal contract between you, the policyholder, and us, the
insurer. . . . This contract consists of the Declarations page, the policy, and
any applicable endorsements.

...

The policy itself sets forth, in detail, the rights and obligations of both you and
your insurance company.

IT IS THEREFORE IMPORTANT THAT YOU READ YOUR POLICY.[25 ]

...

                             AGREEMENT [p. 1]

In return for payment of premium and subject to all terms of this policy, we
will provide the insurance described.

                                DEFINITIONS
...

4. “Insured location” means:
a. the residence premises;




25
     Dr. Corban testified that he had read the homeowners policy.

                                        32
       b. the part of other premises, other structures and grounds used by you as a
       residence;

       ...

       6. “[P]roperty damage” means physical damage to, or destruction of tangible
       property, including loss of use of this property.

       ...

                    SECTION I - PROPERTY COVERAGES [p. 2]

       COVERAGE A - Dwelling

       We cover:

       1. the dwelling on the residence premises shown in the Declarations, including
       structures attached to the dwelling . . . .

       ...

       COVERAGE B - Other Structures

       We cover other structures on the residence premises set apart from the
       dwelling by clear space. This includes structures connected to the dwelling by
       only a fence, utility line, or similar connection.

       ...

       The limit of liability for this coverage will not be more than 10% of the limit
       of liability that applies to Coverage A.[26 ]

       ...

       COVERAGE C - Personal Property

       ...




       26
        In this instance, ten percent of $750,000 is $75,000. As the Corbans also purchased
an “Increased Limits for Other Structures” endorsement for an “additional limit of liability”
of $60,000, the coverage for “Coverage B - Other Structures” totals $135,000.

                                             33
COVERAGE D - Loss of Use

...

1. Additional Living Expenses. If a loss covered under Section - I makes
that part of the residence premises where you reside not fit to live in, we cover
the necessary increase in living expenses incurred by you so that your
household can maintain its normal standard of living.

...

           SECTION I - PERILS INSURED AGAINST [p. 6]

COVERAGE A - Dwelling and
COVERAGE B - Other Structures

We insure against risks of direct, physical loss to property described in
Coverages A and B; however, we do not insure against loss:

...

4. excluded under SECTION I - EXCLUSIONS.

...

COVERAGE C - Personal Property
We insure for direct physical loss to the property described in Coverage C
caused by peril listed below unless the loss is excluded in SECTION I -
EXCLUSIONS.

1. Fire or lightning.

2. Windstorm or hail.

This peril does not include loss to the property contained in a building caused
by rain, snow, sleet, sand or dust unless the direct force of wind or hail
damages the building causing an opening in a roof or wall and the rain, snow,
sleet, sand or dust enters through this opening.

...

                    SECTION I - EXCLUSIONS [p. 8]



                                       34
1. We do not insure for loss caused directly or indirectly by any of the
following. Such loss is excluded regardless of any other cause or event
contributing concurrently or in any sequence to the loss.

...

c. Water damage, meaning:

(1) flood, surface water, waves, tidal water, overflow of a body of water, or
spray from any of these, whether or not driven by wind . . . .

...

2. We do not insure against loss consisting of any of the following. Nor do we
insure for loss that results when one or more of the following combines with
other causes, events or conditions that are also excluded or excepted in this
policy. However, any loss that ensues from the following, that is not
otherwise excluded or excepted is covered:

...

                       SECTION I - CONDITIONS [p. 9]

1. Insurable Interest and Limit of Liability. . . . [W]e will not be liable in
any one loss:

a. to the insured for more than the amount of the insured’s interest at the time
of loss . . . .

...

3. Loss Settlement. Covered property losses are settled as follows:

...

It is our option to:

       (a) pay you the actual cash value; or

...

       (c) pay you the cost to repair or restore the property to the condition
       it was in just before the loss.


                                      35
(Emphasis added.)




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