               IN THE SUPREME COURT OF TEXAS
                                       ════════════
                                         NO. 13-0711
                                       ════════════

                          JAW THE POINTE, L.L.C., PETITIONER,
                                                 v.


                    LEXINGTON INSURANCE COMPANY, RESPONDENT
          ════════════════════════════════════════════
                        ON PETITION FOR REVIEW FROM THE
              COURT OF APPEALS FOR THE FOURTEENTH DISTRICT OF TEXAS
          ════════════════════════════════════════════

                                    Argued January 13, 2015

       JUSTICE BOYD delivered the opinion of the Court.

       This insurance dispute involves losses the insured incurred as a result of city ordinances

triggered by damage to an apartment complex during Hurricane Ike. The insurance policy covers

the costs of complying with city ordinances, but only if the policy covers the property damage that

triggers the enforcement of the ordinances. Here, the property damage that triggered the ordinances

resulted from both wind, which the policy covers, and flooding, which the policy expressly

excludes. The policy’s anti-concurrent-causation clause excludes coverage “for loss or damage

caused directly or indirectly by” flooding, “regardless of any other cause or event that contributes

concurrently or in any sequence to the loss.” Because the evidence conclusively establishes that

flood damage triggered the enforcement of the city ordinances and thus “directly or indirectly”

caused the insured’s losses, we conclude the policy excludes coverage for such losses regardless

of the fact that wind damage “contribute[d] concurrently or in any sequence to the loss.” We agree

with the court of appeals that the policy did not cover the insured’s losses and thus the insured
cannot recover for the insurer’s bad faith failure to effectuate a prompt and fair settlement of the

claim. We affirm.

                                               I.
                                           Background

       In July 2007, JAW The Pointe, L.L.C. purchased an apartment complex in Galveston,

Texas for approximately $5.7 million. Fourteen months later, Hurricane Ike struck the Island and

caused substantial damage to The Pointe apartments. JAW had obtained insurance to cover the

property through Nations Asset Management L.P., which managed the insurance needs of 300

otherwise unrelated apartment complexes worth a total of approximately $2.5 billion. Nations

purchased several policies providing multiple layers of coverage for all of the complexes

collectively, with a total limit of $100 million per occurrence. Lexington Insurance Company

provided the primary coverage layer, limited to $25 million per occurrence. Hurricane Ike

damaged about 135 other complexes also covered by Lexington’s policy.

       Shortly after the hurricane struck, JAW submitted a sworn proof of loss to Lexington

requesting an advance of $300,000 to help cover its ongoing business income losses. JAW initially

planned to repair The Pointe apartments, but its plans changed when one of its partners, Emery

Jakab, attended a meeting at which a City of Galveston official explained that city ordinances

required that all apartment complexes that were “substantially damaged”—meaning they sustained

damage equal to or exceeding 50% of their market value—must be brought into compliance with

current code requirements, which included raising the structures to a base flood elevation. JAW

concluded that it could not raise The Pointe without demolishing and rebuilding the complex. After

the meeting, JAW sent an email to the city’s planning office, explaining that JAW intended to

                                                 2
apply for a permit to repair The Pointe apartments but the damage estimates were “far in excess”

of 50% of the complex’s market value. JAW requested that the city confirm whether it would deny

the permit for repairs and instead require JAW to elevate the apartments.

          Two months after the hurricane, JAW submitted a permit application to the city and

included a third-party consultant’s estimate that it would cost $6,256,887 to repair all of the

damage The Pointe had sustained. The estimate made no effort to distinguish between damage

caused by wind and damage caused by flooding. The following day, Lexington’s claims examiner

noted in JAW’s claim file that JAW’s losses could reach The Pointe’s total insured value of $8

million if the city required JAW to demolish and rebuild the apartments. The day after that,

Lexington paid JAW the $300,000 JAW had requested as an advance against its business income

losses.

          In December 2008, Lexington’s adjuster, Cunningham Lindsey, provided Lexington with

a report confirming the magnitude of the damage at The Pointe and indicated that JAW would

have to demolish and rebuild the complex to elevate the structure. That same month, the city sent

a letter to JAW stating that the city had conducted a “substantial damage” determination1 and

concluded that the total damage “equals or exceeds 50 percent of the market value” of $2,247,924,

which the city calculated by using the most recent appraised value and adding five percent.

According to the city, because JAW’s permit application accurately indicated that The Pointe was



          1
           The city issued a public notice explaining that it would review permit applications to determine if they
represented “appropriate values consistent with standard repair costs in our area.” If the city determined that “the
permits for a property exceed 50 percent of the building’s appraised value, the property must be brought into
conformance with the city’s current floodplain requirements,” which included raising the structure to a “minimum
base flood elevation.”

                                                         3
“substantially damaged,” city ordinances required JAW to elevate the apartments three additional

feet. In concluding that The Pointe was “substantially damaged,” the city did not segregate the

wind damage from the flood damage.

       JAW informed Cunningham Lindsey of the city’s determination, and Lexington’s

examiner received a copy of the city’s letter in January 2009. Confirming that it was impossible to

elevate the existing structures, JAW hired an architect and a contractor and began the demolition

process. In February 2009, JAW submitted a formal claim to Cunningham Lindsey, requesting

coverage for all demolition costs, construction costs, architectural and permitting fees, and other

expenses that JAW had incurred and would incur to demolish and rebuild the apartments.

       In April 2009, Lexington’s building consultant, Unified Building Sciences, submitted a

report to Lexington estimating that The Pointe had sustained wind damage totaling approximately

$1,278,000 and flood damage of approximately $3.5 million. On May 5, 2009, after JAW’s

adjuster agreed with these estimates, JAW submitted a sworn proof of loss to Lexington,

requesting payment of $817,940.94, which represented the $1,278,000 in wind damage less an

applicable deductible. Lexington promptly paid this claim, but did not pay the additional amounts

JAW had claimed as costs incurred to demolish and rebuild The Pointe pursuant to the city’s

ordinances. According to JAW, Lexington never formally denied JAW’s claims for these

ordinance-compliance losses. Instead, in July 2009, Cunningham Lindsey informed JAW’s

adjuster by telephone that Lexington had determined the policy did not cover the losses JAW

incurred to comply with the city ordinances because “all the damages were caused by flood.”

       JAW sued Lexington, Cunningham Lindsey, and others on July 19, 2009, asserting claims

for breach of the insurance contract and violations of the Texas Insurance Code and the Texas
                                                4
Deceptive Trade Practices Act (DTPA). Despite the lawsuit, Lexington and Cunningham Lindsey

continued working on JAW’s claim. In September 2009, Lexington notified JAW by letter that it

would not pay JAW for flood damage or for its costs to comply with the city ordinances.

Meanwhile, Lexington continued paying claims associated with the other apartment complexes

that its policy covered, and in January 2010 it notified JAW that the policy’s $25 million per-

occurrence limit had been exhausted.

         After settling and dismissing all of its claims against Cunningham Lindsey, the excess

insurance carriers, and others,2 JAW continued to pursue its claims against Lexington. In March

2011, Lexington filed two motions for partial summary judgment, one seeking dismissal of JAW’s

breach of contract claim on the ground that Lexington had exhausted the policy limits, and the

other seeking dismissal of any claims based on flood damage on the ground that the policy

expressly excluded coverage for such damage. JAW did not oppose these motions, and the trial

court granted them, leaving only JAW’s statutory claims for trial. On those claims, the jury

returned a verdict in JAW’s favor, finding that Lexington had engaged in “unfair or deceptive acts

or practices in the business of insurance” by failing to (a) “attempt in good faith to effectuate a

prompt, fair, and equitable settlement of a claim when the insurer’s liability had become

reasonably clear”; (b) provide a reasonable explanation for its coverage denial; and (c) affirm or



         2
          The record reflects that, by the time of trial, JAW had received about $5.7 million from these settlements,
plus a combined total of $4.8 million in insurance proceeds from Lexington ($1.1 million), one of the excess insurers
($500,000), and its flood insurance carrier ($3.2 million). Lexington has argued that the total of over $10 million that
JAW has already received for The Pointe’s damages greatly exceeds both The Pointe’s value and all of JAW’s
damages claims. In light of our holding that the policy does not cover JAW’s ordinance-compliance losses, we need
not address the effect of these settlement payments.


                                                           5
deny coverage within a reasonable time,3 and that Lexington had engaged in this conduct

“knowingly.” The jury found that Lexington’s conduct caused JAW to incur actual damages and

expenses of $1,230,000 and awarded additional statutory damages of $2.5 million. Based on the

jury’s verdict, the trial court entered a judgment awarding these damages plus $170,000 in

attorney’s fees.

         The court of appeals reversed and rendered a take-nothing judgment against JAW,

concluding that the policy excluded coverage for JAW’s code-compliance losses and therefore

Lexington could not be liable for Insurance Code and DTPA violations. Relying on the policy’s

anti-concurrent-causation clause, the court of appeals held that the policy excluded coverage of

JAW’s costs to comply with the city’s ordinances because the necessity of compliance resulted at

least in part from flooding, coverage for which the policy expressly excluded.

                                                       II.
                                                    Coverage

         As we have mentioned, the trial court granted summary judgment for Lexington on JAW’s

breach of contract claim but awarded JAW both its actual ordinance-compliance damages and

additional statutory damages based on Lexington’s “bad faith” statutory violations. We have held

that, “[a]s a general rule there can be no claim for bad faith when an insurer has promptly denied

a claim that is in fact not covered.” Republic Ins. Co. v. Stoker, 903 S.W.2d 338, 341 (Tex. 1995).4


         3
            The jury also found that Lexington did not refuse to pay claims without conducting a reasonable
investigation and did not compel JAW to file suit to recover “amounts due under their policy by offering substantially
less than” the amounts owed. JAW did not contest these findings in Lexington’s favor.

         4
           See also Chrysler Ins. Co. v. Greenspoint Dodge of Houst., Inc., 297 S.W.3d 248, 253–54 (Tex. 2009) (per
curiam) (holding that, because the insurer “did not breach the insurance contract, no basis supports” awards for
punitive and extra-contractual damages); Progressive Cnty. Mut. Ins. Co. v. Boyd, 177 S.W.3d 919, 922 (Tex. 2005)

                                                          6
Although “[w]e have left open the possibility that an insurer’s denial of a claim it was not obliged

to pay might nevertheless be in bad faith if its conduct was extreme and produced damages

unrelated to and independent of the policy claim,” Boyd, 177 S.W.3d at 922, JAW does not allege

such extreme conduct or seek such independent damages in this case. Instead, JAW contends that

the policy covered its ordinance-compliance costs and Lexington should have paid those costs

before it made other payments that exhausted the policy limits. We must decide whether the policy

in fact provided coverage for those costs.

A.      Rules of Construction

        In determining a question of insurance coverage, we look first to “the language of the policy

because we presume parties intend what the words of their contract say.” Gilbert Tex. Constr., L.P.

v. Underwriters at Lloyd’s London, 327 S.W.3d 118, 126 (Tex. 2010). We give the policy’s terms

“their ordinary and generally-accepted meaning unless the policy shows the words were meant in

a technical or different sense.” Id. Since insurance policies are contracts, we construe them

“according to general rules of contract construction to ascertain the parties’ intent.” Id. “We

examine the entire agreement and seek to harmonize and give effect to all provisions so that none

will be meaningless.” Id.5



(per curiam) (“There can be no liability under article 21.55 if the insurance claim is not covered by the policy.”);
Liberty Nat. Fire Ins. Co. v. Akin, 927 S.W.2d 627, 629 (Tex. 1996) (“[I]n most circumstances, an insured may not
prevail on a bad faith claim without first showing that the insurer breached the contract.”).

        5
           The policy at issue here is a standard form policy developed by ISO Commercial Risk Services, Inc. We
strive to construe standard policies in a manner that is consistent with other states’ constructions, to promote
uniformity and predictability so that these policies’ meaning will “be the same in Texas as in other states.” Lamar
Homes, Inc. v. Mid-Continent Cas. Co., 242 S.W.3d 1, 5 (Tex. 2007). However, except for one of the federal cases
discussing anti-concurrent-causation clauses, the parties have not cited and we have not found any cases from other
jurisdictions addressing the specific issues presented here.

                                                         7
       “Terms in insurance policies that are subject to more than one reasonable construction are

interpreted in favor of coverage.” Id. at 133; see also State Farm Life Ins. Co. v. Beaston, 907

S.W.2d 430, 433 (Tex. 1995) (“Only if an insurance policy remains ambiguous despite these

canons of interpretation should courts construe its language against the insurer in a manner that

favors coverage.”). “But an ambiguity does not exist simply because the parties interpret a policy

differently.” Gilbert, 327 S.W.3d at 133 (citing Am. Mfrs. Mut. Ins. Co. v. Schaefer, 124 S.W.3d

154, 157 (Tex. 2003)). “If a contract as written can be given a clear and definite legal meaning,

then it is not ambiguous as a matter of law.” Id. (citing Progressive Cnty. Mut. Ins. Co. v. Sink,

107 S.W.3d 547, 551 (Tex. 2003)).

B.     Burdens of Proof

       “Initially, the insured has the burden of establishing coverage under the terms of the

policy.” Id. at 124 (citing Ulico Cas. Co. v. Allied Pilots Ass’n, 262 S.W.3d 773, 782 (Tex. 2008)).

To avoid liability, the insurer then has the burden to plead and prove that the loss falls within an

exclusion to the policy’s coverage. Id.; see also TEX. INS. CODE § 554.002 (“In a suit to recover

under an insurance . . . contract, the insurer . . . has the burden of proof as to any avoidance or

affirmative defense that the Texas Rules of Civil Procedure require to be affirmatively pleaded.

Language of exclusion in the contract . . . constitutes an avoidance or an affirmative defense.”);

TEX. R. CIV P. 94 (“Where the suit is on an insurance contract which insures against certain general

hazards, but contains other provisions limiting such general liability, the party suing on such

contract shall never be required to allege that the loss was not due to a risk or cause coming within

any of the exceptions specified in the contract, nor shall the insurer be allowed to raise such issue

unless it shall specifically allege that the loss was due to a risk or cause coming within a particular
                                                    8
exception to the general liability . . . .”). “If the insurer proves that an exclusion applies, the burden

shifts back to the insured to show that an exception to the exclusion brings the claim back within

coverage.” Gilbert, 327 S.W.3d at 124.

C.       The Policy’s Provisions

         Several provisions of Lexington’s policy are relevant to the coverage question in this case.

In the policy’s Building and Personal Property Coverage Form, Lexington agreed to “pay for direct

physical loss of or damage to Covered Property at the premises described in the Declarations

caused by or resulting from any Covered Cause of Loss.” The form’s section that addresses

“Covered Causes of Loss” refers to the “applicable Causes of Loss Form as shown in the

Declarations.” Section A of the attached “Causes of Loss – Special Form,” which addresses

“covered causes of loss,” provides as follows:

         A. COVERED CAUSES OF LOSS

             When Special is shown in the Declarations, Covered Causes of Loss means
             RISKS OF DIRECT PHYSICAL LOSS unless the loss is:

             1. Excluded in Section B., Exclusions; or

             2. Limited in Section C., Limitations; that follow. 6

         The parties agree that, under this language, the policy is an “all-risks” policy, meaning it

generally covers any “physical loss or damage to Covered Property at the premises,” no matter



         6
           JAW argues that this Causes of Loss – Special Form is not a part of the Lexington policy because it is not
specifically listed and therefore “shown in the Declarations.” The Declarations page, however, refers to all “Forms
Attached: See attached forms schedule,” and the attached forms schedule includes the “Causes of Loss – Special
Form.” We agree with the court of appeals that the Causes of Loss – Special Form is part of the policy and defines the
“covered causes of loss” and “exclusions,” even though the Declarations section of the policy does not include the
word “Special.”

                                                          9
what causes that loss or damage, unless the policy specifically excludes or limits coverage for

losses resulting from a specific cause. See, e.g., SMI Realty Mgmt. Corp. v. Underwriters at

Lloyd’s, London, 179 S.W.3d 619, 627 n.3 (Tex. App.—Houston [1st Dist.] 2005, pet. denied)

(“As a general rule, an all-risks policy creates a special type of coverage in which the insurer

undertakes the risk for all losses of a fortuitous nature that, in the absence of the insured’s fraud or

other intentional misconduct, is not expressly excluded in the agreement.”). The Building and

Personal Property Coverage Form’s section that addresses “Exclusions” also refers to the

“applicable Causes of Loss Form as shown in the Declarations.” Section B of the Causes of Loss

– Special Form, in turn, lists the policy’s exclusions:

       B. EXCLUSIONS

            1. We will not pay for loss or damage caused directly or indirectly by any of
               the following. Such loss or damage is excluded regardless of any other cause
               or event that contributes concurrently or in any sequence to the loss.

                a. Ordinance or Law

                    The enforcement of any ordinance or law:

                    1) Regulating the construction, use or repair of any property; or

                    2) Requiring the tearing down of any property, including the cost of
                       removing its debris.

                ***

                g. Water

                     1) Flood . . . .

       This list of exclusions contains several provisions that are relevant to JAW’s claim in this

case. First, section B.1 expressly excludes coverage for any “loss or damage caused directly or

                                                  10
indirectly by any of the” listed causes, “regardless of any other cause or event that contributes

concurrently or in any sequence to the loss.” This is the anti-concurrent-causation clause at the

center of the parties’ dispute. Second, section B.1.g(1) specifically lists “Flood” as an excluded

cause, and the parties agree that the policy does not cover losses caused by flooding. And third,

section B.1.a. specifically lists “Ordinance or Law” as an excluded cause, meaning the policy

expressly excludes coverage for any losses that result “directly or indirectly” from “[t]he

enforcement of any ordinance or law.”

         As to the exclusion of “ordinance or law” losses, however, the policy also includes two

endorsements that the parties agree provide coverage for such losses, despite the exclusion.7 First,

the policy includes an “Ordinance or Law Coverage” endorsement (O&L endorsement), which

provides:

                                   ORDINANCE OR LAW COVERAGE

         This endorsement modifies insurance provided under the following:

             BUILDING AND PERSONAL PROPERTY COVERAGE FORM

         A. If a Covered Cause of Loss occurs to covered Building property, we will pay:

             1. For loss or damage caused by enforcement of any ordinance or law that:

                  a. Requires the demolition of parts of the same property not damaged by a
                     Covered Cause of Loss;

                  b. Regulates the construction or repair of buildings, or establishes zoning
                     or land use requirements at the described premises; and

         7
           Generally, an endorsement or rider that provides specific coverage trumps an exclusion contained within
the policy’s primary forms. See Drane v. Jefferson Standard Life Ins. Co., 161 S.W.2d 1057, 1062 (Tex. 1942) (“If
there be a conflict between the policy and the rider, the latter controls, especially since its provisions are the more
specific.”). Lexington does not dispute that its policy’s endorsements provide coverage for certain ordinance or law
losses despite the exclusion expressed in the Causes of Loss – Special Form.

                                                         11
              c. Is in force at the time of loss.

           2. The increased cost to repair, rebuild or construct the property caused by
              enforcement of building, zoning or land use ordinance or law. If the
              property is repaired or rebuilt, it must be intended for similar occupancy as
              the current property, unless otherwise required by zoning or land use
              ordinance law.

           3. The cost to demolish and clear the site of undamaged parts of the property
              caused by enforcement of the building, zoning or land use ordinance or law.

       Second, the policy includes a “Demolition and Increased Cost of Construction”

endorsement (DICC endorsement), which provides:

               DEMOLITION AND INCREASED COST OF CONSTRUCTION

       If at the time of any physical loss or damage insured against by this Policy there is
       in force any law or ordinance regulating the construction, repair, replacement or
       use of buildings or structures then this Policy shall cover as a result of enforcement
       of such law or ordinance as a direct result of such loss or damage:

              a) the additional loss sustained in demolishing any physically undamaged
                 portion of the buildings or structures;

              b) the cost incurred in actually rebuilding both the physically damaged and
                 demolished portions of such buildings or structures with materials and
                 in a manner to satisfy such law or ordinance.

       We must consider and harmonize all of these provisions to determine whether the policy

covers the costs that JAW incurred to demolish and rebuild The Pointe.

D.     The Anti-Concurrent-Causation Clause

       The court of appeals concluded that Lexington’s policy does not cover JAW’s ordinance-

compliance costs because the property damage that caused the ordinances resulted at least in part

from flooding, which is an excluded cause of loss. JAW contends that the court of appeals erred

in this conclusion because: (1) JAW met its evidentiary burden by showing that the wind damage
                                               12
was sufficient to be a “separate and independent” cause of its ordinance-compliance losses; (2) the

court of appeals improperly shifted the burden of proof by requiring JAW to prove that the city

segregated between wind damage and flood damage when it decided that The Pointe was

“substantially damaged”; and (3) the anti-concurrent-causation clause does not apply when a

covered peril (wind) is a “separate and independent cause” of the loss. Lexington responds that the

O&L and DICC endorsements provide coverage for the costs of complying with city ordinances

only when the policy covers the damage that triggers the ordinances’ requirements. Because the

damage that the city considered when it determined that The Pointe was “substantially damaged”

included both covered wind damage and excluded flood damage, Lexington contends that the

policy’s anti-concurrent-causation clause excludes coverage for such damage and thus the O&L

and DICC endorsements do not apply.

       We look first to the language of the endorsements, which operate as coverage provisions

in the policy. Lamar Homes, 242 S.W.3d at 14 (“[C]overage . . . depends, as it always has, on the

policy’s language, and thus is subject to change when the terms of the policy change.”). The O&L

and DICC endorsements modify the coverage provided under the policy’s Building and Personal

Property Coverage Form, which in turn covers any “direct physical loss of or damage to Covered

Property . . . caused by or resulting from any Covered Cause of Loss.” A covered cause of loss is

any “risk[ ] of direct physical loss,” unless an exclusion applies. The court of appeals held that

“[w]hen read together,” the endorsements and Covered Cause of Loss form “provide that

Lexington will pay for demolition and increased rebuilding costs that were caused by ordinance

enforcement resulting from any ‘Covered Cause of Loss.’” In other words, the court construed the


                                                13
endorsements to apply (and thus provide coverage for ordinance-compliance costs) only if the

enforcement of the ordinances was “based on damage caused by wind—a Covered Cause of Loss.”

         The parties agree that the O&L and DICC endorsements apply only if a covered loss causes

the enforcement of the law or ordinance.8 JAW contends, however, that because this is an all-risks

policy, it merely had to show, and it in fact did show, that damage to the covered property caused

the enforcement of the ordinances, and then the burden shifted to Lexington to show the damage

that caused the enforcement of the ordinances was damage that the policy excluded. Here, JAW

contends that the only evidence of what caused the city to enforce the ordinances against The

Pointe is the permit application that JAW submitted to the city, estimating the total damages at

$6,256,887, and the city’s subsequent letter finding that The Pointe was “substantially damaged.”

Because neither of these communications establishes that the flood damage (for which the policy

excluded coverage) caused the city to enforce the ordinances, JAW asserts that Lexington failed




         8
            We note that, although the parties and the court of appeals treat the O&L and DICC endorsements the same
in this respect, the endorsements’ causation-related language is not in fact identical. The DICC endorsement provides
coverage for losses incurred in demolishing and rebuilding performed “as a result of enforcement of [a] law or
ordinance as a direct result of [a] loss or damage” that is “insured against by this Policy.” (Emphasis added.) This
endorsement thus requires that a covered loss cause the enforcement of the ordinance. The O&L endorsement,
however, contains no similar language, and instead merely states that the policy covers demolition and construction
costs “caused by” an ordinance “[i]f a Covered Cause of Loss occurs to covered Building property.” It could thus be
argued that the O&L endorsement requires that the enforcement of the ordinance cause the additional losses but does
not require that covered losses cause the enforcement of the ordinance. See, e.g., Regents of Mercersburg Coll. V.
Republic Franklin Ins. Co., 458 F.3d 159, 168 n.11 (3d Cir. 2006) (rejecting a similar argument); Medical Plaza, LLC
v. U.S. Fid. & Guar. Co., Civ No. 1:07cv98–LTS–RHW, 2008 WL 4335572, at *3, *6 (S.D. Miss. Sept. 17, 2008)
(accepting a similar argument); City of Elmira v. Selective Ins. Co. of N.Y., 83 A.D.3d 1262, 1264–65 (N.Y. App. Div.
2011) (“As the language makes clear, the only requirement necessary to trigger the Ordinance or Law provision is the
occurrence of a ‘Covered Cause of Loss’ . . . . If defendant wished to limit its coverage to only those situations where
the enforcement of an ordinance or law is caused by a covered loss, it could have easily done so through the language
of the contract.”). JAW does not make this argument, and instead agrees with Lexington that both the O&L
endorsement and the DICC endorsement apply only if a covered loss causes the enforcement of the ordinance or law.
We thus accept that construction of the endorsements for purposes of this case.

                                                          14
to meet its burden to show that the policy excluded coverage for JAW’s resulting ordinance-

compliance costs.

        As explained below, however, the evidence conclusively established that the damage The

Pointe sustained included both wind damage and flood damage, and that the city based its decision

to enforce the ordinances on the combined total of the two. In light of this, Lexington contends

that the policy’s anti-concurrent-causation clause expressly excluded coverage for JAW’s

ordinance-compliance costs. The anti-concurrent-causation clause, which appears as an

introduction to the policy’s list of exclusions, provides that Lexington will not pay for any “loss

or damage caused directly or indirectly by any” excluded cause or event, “regardless of any other

cause or event that contributes concurrently or in any sequence to the loss.” (Emphasis added.)

Lexington contends that, because the loss for which JAW seeks coverage (its costs for complying

with the city ordinances) resulted “directly or indirectly” from an excluded peril (flood), the policy

excludes coverage even if a covered peril (wind) “contribute[d] concurrently or in any sequence

to [that] loss.”

        We have not previously addressed an anti-concurrent-causation clause, but federal courts

and lower courts of appeals have interpreted and upheld the applicability of virtually identical

clauses under Texas law and other states’ laws. See, e.g., ARM Props. Mgmt. Group v. RSUI Indem.

Co., 400 F. App’x 938, 941 (5th Cir. 2010); Leonard v. Nationwide Mut. Ins. Co., 499 F.3d 419,

429–31 (5th Cir. 2007) (interpreting Mississippi law); Lexington Ins. Co. v. Unity/Waterford-Fair

Oaks, Ltd., No. CIV.A. 399CV1623D, 2002 WL 356756, at *4 (N.D. Tex. Mar. 5, 2002); Wong

v. Monticello Ins. Co., No. 04–02–00142–CV, 2003 WL 1522938, at *1 (Tex. App.—San Antonio

Mar. 26, 2003, pet. denied). The Fifth Circuit in particular has had the opportunity to develop case
                                                 15
law on anti-concurrent-causation clauses in situations involving combinations of covered wind

damage and excluded flood damage, and has concluded that “[t]he only species covered under [a

policy with an anti-concurrent-causation clause] is damage caused exclusively by wind. But [when]

wind and water synergistically cause[ ] the same damage, such damage is excluded.” Leonard, 499

F.3d at 430; see also ARM Props., 400 F. App’x at 941 (quoting same language).9 We agree with

the Fifth Circuit that, under Texas law, the anti-concurrent-causation clause and the exclusion for

losses caused by flood, “read together, exclude from coverage any damage caused by a

combination of wind and water.” Id.

        JAW contends that applying the anti-concurrent-causation clause in this manner conflicts

with the common-law concurrent-causation doctrine that we have recognized under Texas law.

Under this doctrine, we have held that, when “excluded and covered events combine to cause” a

loss and “the two causes cannot be separated,” concurrent causation exists and “the exclusion is

triggered” such that the insurer has no duty to provide the requested coverage. Utica Nat. Ins. Co.

of Tex. v. Am. Indem. Co., 141 S.W.3d 198, 204 (Tex. 2004). But when a covered event and an

excluded event “each independently cause” the loss, “separate and independent causation” exists,

“and the insurer must provide coverage despite the exclusion.” Id. (citing Guar. Nat’l Ins. Co. v.

North River Ins. Co., 909 F.2d 133, 137 (5th Cir. 1990); Warrilow v. Norrell, 791 S.W.2d 515,

526 (Tex. App.—Corpus Christi 1989, writ denied); Cagle v. Commercial Standard Ins. Co., 427

S.W.2d 939, 943–44 (Tex. Civ. App.—Austin 1968, no writ)). JAW contends that the evidence



        9
          We find no relevant, substantive difference between the anti-concurrent-causation clauses at issue in ARM
Properties and Leonard and the one at issue here.

                                                        16
establishes that the covered wind damage to The Pointe was itself sufficient to constitute

“substantial damage” under the city’s standards and thus trigger enforcement of the ordinances, so

the wind damage was a “separate and independent” cause that results in coverage.

       However, we must evaluate JAW’s claim in this case in light of the policy’s anti-

concurrent-causation clause, not the common-law concurrent-causation doctrine that we addressed

in cases involving policies that did not include a similar clause. To determine coverage under the

policy, we look first to “the language of the policy because we presume parties intend what the

words of their contract say.” Gilbert, 327 S.W.3d at 126. The clause included in Lexington’s policy

provides that Lexington will not pay for any loss resulting “directly or indirectly” from an excluded

peril, regardless of whether a covered peril contributes “concurrently or in any sequence” to the

loss. See Leonard, 499 F.3d at 430; ARM Props., 400 F. App’x at 941. Under this language, if the

covered wind damage and the excluded flood damage contributed to cause the enforcement of the

city ordinances, then the policy excludes coverage.

       JAW contends that, because the evidence includes estimates calculating the total of all

wind damage to be greater than 50% of The Pointe’s market value, the wind damage itself was

sufficient to trigger the ordinances and require JAW to demolish and rebuild The Pointe. Under

these facts, and the contractual anti-concurrent-causation clause, however, the relevant inquiry is

what in fact triggered enforcement of the ordinances, not what in theory was sufficient to do so.

Here, JAW does not seek to recover losses caused by wind damage—Lexington has already paid

JAW for those losses—or losses caused by flood damage—JAW concedes that the policy excludes

coverage for those losses. Instead, JAW seeks to recover losses caused by the city’s enforcement


                                                 17
of the ordinances against The Pointe. The question, therefore, is what caused the city to enforce

the ordinances.

       We conclude that the evidence conclusively establishes that Hurricane Ike caused both

wind damage and flood damage, in a sequence of events, which combined to cause the city to

enforce the ordinances against The Pointe. Indeed, the evidence here established that:

       (1) in October 2008, one month after Hurricane Ike struck, JAW sent an email to the city’s
           planning office, stating that the damage estimates were “far in excess” of 50% of The
           Pointe’s market value, and requesting that the city confirm whether it would require
           JAW to elevate the complex;

       (2) in November 2008, two months after the hurricane, JAW submitted a permit
           application to the city with a repairs estimate of $6,256,887, which made no effort to
           distinguish between damage caused by wind and damage caused by flooding; and

       (3) in December 2008, three months after the hurricane, the city notified JAW that the city
           had determined The Pointe was “substantially damaged” (in excess of fifty percent of
           the city-designated market value of $2,247,924) and that city ordinances required JAW
           to bring the complex into compliance with current building codes; like JAW’s permit
           application estimate, this notice made no effort to segregate the damage that resulted
           from wind from the damage that resulted from flooding.

       JAW’s November 2008 permit application is critical here because the record shows that

the city relied on information provided with permit applications to determine whether to enforce

its ordinances against a particular property. Indeed, the city explained in a public notice that it

would review permit applications to determine if they represented “appropriate values consistent

with standard repair costs in our area.” And if the city determined the permit application

established that the damage exceeded 50% of the property’s market value, the city would then

enforce its ordinances against that property. Thus, JAW’s permit application, which did not

distinguish between the amount of wind damage and flood damage, but which nevertheless

included a number that was far in excess of all wind damage estimates, meaning it must have
                                             18
included flood damage, was the touchstone for the city’s enforcement of the ordinances against

The Pointe. The city’s December 2008 notice simply advised JAW that it had determined that The

Pointe was “substantially damaged,” and made no distinction between the amounts of wind

damage and flood damage that led the city to that conclusion. But because the city’s procedures

dictated that its determination would be based on JAW’s permit application, the notice actually

confirms that the city relied on the combined total of wind damage and flood damage in its decision

to enforce the ordinances.

         JAW notes that, in April 2009, Lexington’s building consultant estimated that The Pointe

had sustained wind damage totaling approximately $1,278,000, and that amount exceeded 50% of

The Pointe’s city-designated market value. JAW thus contends that the evidence supports the

conclusion that the covered wind damage was independently sufficient to cause the enforcement

of the city ordinances. But that estimate, made four months after the city had already decided to

enforce the ordinances, is no evidence of what led to the city’s determination. The only evidence

of that fact is JAW’s original email, JAW’s permit application, and the city’s notice letter, and that

evidence conclusively establishes that the wind damage and the flood damage combined to cause

the city to enforce the ordinances against The Pointe. We thus conclude that Lexington sustained

its burden to prove that the policy’s anti-concurrent-causation clause excluded coverage for the

losses JAW incurred in complying with the city’s ordinances.10




         10
           Lexington asserted five alternative grounds for affirming the court of appeals’ judgment. Like the court of
appeals, we need not address those grounds in light of our decision that the policy does not cover JAW’s losses.

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                                              III.
                                           Conclusion

       The parties agree in this case that Lexington’s policy endorsements only covered losses

that JAW incurred to comply with the city’s ordinances if a covered loss caused the enforcement

of those ordinances. Because the covered wind losses and excluded flood losses combined to cause

the enforcement of the ordinances concurrently or in a sequence, we agree with the court of appeals

that the policy’s anti-concurrent-causation clause excluded coverage for JAW’s losses, and JAW

therefore cannot recover against Lexington on its statutory bad faith claims. We affirm the court

of appeals’ judgment.

                                                     __________________________________
                                                     Jeffrey S. Boyd
                                                     Justice

Opinion delivered: April 24, 2015




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