                                                                 United States Court of Appeals
                                                                          Fifth Circuit
                                                                         F I L E D
                                 In the                                   June 21, 2004
            United States Court of Appeals                            Charles R. Fulbruge III
                       for the Fifth Circuit                                  Clerk
                           _______________

                             m 03-41067
                           _______________




                BAYOIL SUPPLY & TRADING LIMITED,

                                                Plaintiff-Appellee,

                                VERSUS

                GULF INSURANCE COMPANY, ET AL.,

                                                Defendants,

                    GULF INSURANCE COMPANY;
CERTAIN UNDERWRITERS AT LLOYDS SUBSCRIBING TO CERTIFICATE 41557;
                  LLOYDS OF LONDON SYNDICATES
        #2724, 0079, 1221, 0002, 1183, 0488, 2488, AND 0079;
           TERRA NOVA INSURANCE COMPANY, LIMITED;
               CGU INTERNATIONAL INSURANCE PLC,

                                                Defendants-Appellants.



                     _________________________

               Appeal from the United States District Court
                   for the Southern District of Texas
                            m G-02-CV-313
                    _________________________
Before GARWOOD, HIGGINBOTHAM and                           than that stated in the initial calculation and bill
  SMITH, Circuit Judges.                                   of lading. When Bayoil informed Iraq that it
                                                           had paid for that many barrels that it had not
JERRY E. SMITH, Circuit Judge:*                            received, Iraq refused to return Bayoil’s
                                                           money, approximately $1.5 million. Bayoil
   The appealing defendants challenge a sum-               claims this is a loss covered by its “all risks”
mary judgment for plaintiff on its insurance               insurance policy. The defendant underwriters
coverage claim.2 Concluding that the district              denied coverage.3
court erred as a matter of law in interpreting
the contract, we reverse and render judgment                  Bayoil brought a declaratory judgment ac-
for appellants.                                            tion, alleging that the 48,312 barrels consti-
                                                           tuted a “shortage” and was therefore covered
                       I.                                  under its policy. The district judge personally
   In 2000, Bayoil Supply and Trading Lim-                 attempted to mediate, then granted Bayoil’s
ited (“Bayoil”) purchased oil from Iraq under              motion for summary judgment, then ordered
the United Nations’s “Oil for Food” program.               the parties to further mediation. When this
The oil was loaded onto Bayoil’s ship, the                 second mediation failed to resolve the dispute,
M/T ESSEX. At the time of loading, the Unit-               the court entered final judgment for Bayoil.
ed Nations-appointed inspectors (Saybolt
International), members of the ESSEX’s crew,                  In the district court, Bayoil claimed that
and Bayoil’s representative (Oil Inspections)              coverage should be based on the erroneous bill
measured the oil in the ship’s tanks and                   of lading pursuant to which Bayoil had paid
calculated the amount based on the tank                    Iraq. Underwriters maintained that no covered
tables. This calculation was used on the bill of           loss had occurred and that any loss should be
lading, on the basis of which Bayoil paid Iraq             measured with reference to the corrected sur-
with an irrevocable letter of credit.                      vey. The court based its summary judgment
                                                           on the heading at section I.2 of the Shortage,
    Only after leaving port did the Oil Inspec-            Leakage and Contamination Endorsement,4
tions surveyor realize that although the initial
measurement had been correct, the amount of
oil in one tank had been miscalculated by using               3
                                                                A comparison of the corrected survey with the
the tables for another, larger tank; the actual            survey at the destination showed a shortage in
quantity of oil was some 48,312 barrels less               addition to the 48,312 barrels claimed here. De-
                                                           fendants have paid Bayoil’s claim for that short-
                                                           age, which is not disputed here.
   *                                                          4
     Pursuant to 5TH CIR. R. 47.5, the court has                  This provision reads in relevant part:
determined that this opinion should not be pub-
lished and is not precedent except under the limited          2. At time of, and during, loading SS War-
circumstances set forth in 5TH CIR. R. 47.5.4.                ranted that careful measurements as to
                                                              gauge, weight and temperature of the sep-
   2
     The district court granted summary judgment              arable components of th shipment be made
for the defendants on Bayoil’s non-contract claims,           and certified to by a Surveyor, who shall al-
but Bayoil does not appeal that judgment, which is            so supervise loading and repeat (and certify
not before us.                                                                                     (continued...)

                                                       2
which the court interpreted to specify that any         the entire contract to determine whether Bay-
measurements and corrections must take place            oil’s claimed loss falls under the policy’s
at the time of loading, and that the correction         coverage.
made after the loading had been completed
could not be used to determine whether a                                        A.
shortage had occurred. The court held alter-                Under Texas law, the holder of an all-risk
nately that if the contract was ambiguous, it           policy has the burden to establish that a
was to be construed against the insurer.                covered loss occurred. See Dow Chem. Co. v.
                                                        Royal Indem. Co., 635 F.2d 379, 386 (5th Cir.
                        II.                             Unit A Jan. 1981); Employers Cas. Co. v.
   We review a summary judgment de novo,                Block, 744 S.W.2d 940 (Tex. 1988), overruled
using the same standards as did the district            on other grounds, State Farm Fire & Cas. v.
court. BP Oil Int’l Ltd. v. Empressa Estatal            Gandy, 925 S.W.2d 696 (Tex.1996). The dis-
Petoleos de Ecuador, 332 F.3d 333, 336 (5th             trict court erred in allowing Bayoil to recover
Cir. 2003); Mayo v. Hartford Life Ins. Co.,             under its policy when Bayoil had not dem-
354 F.3d 400 (5th Cir. 2004). Summary judg-             onstrated that it had suffered a physical loss as
ment is proper where “there is no genuine is-           the policy requires.
sue as to any material fact and the moving
party is entitled to a judgment as a matter of              It is undisputed that Bayoil did not
law.” FED. R. CIV. P. 56(c). Because there              physically lose oil but did lose a significant
are no issues of fact, the resolution of the case       amount of money. Appellants argue that the
turns on an interpretation of the insurance con-        policy covers only physical loss and that
tract as a matter of law.                               Bayoil’s monetary loss therefore does not fall
                                                        under its coverage. Bayoil, for its part,
                      III.                              appears to rely on its characterization of the
    The insurance contract is to be interpreted         policy as an “all risk” policy and contends that
in accordance with Texas law. TEX INS. CODE             it has suffered a loss that must be covered.
art. 21.42 (1951). “In construing a written
contract, the primary concern of the court is to           The title “all risk” is not itself conclusive;
ascertain the true intentions of the parties as         rather, we must look to the terms of the policy
expressed in the instrument.” Coker v. Coker,           to determine what risks and losses are
650 S.W.2d 391, 393 (Tex. 1983). “To                    covered. The endorsement purports to cover
achieve this object the courts will examine and         a “loss” resulting from “shortage,” and so
consider the entire writing, seeking as best            forth, but does not define what constitutes a
they can to harmonize and to give effect to all         shortage or specify whether the “loss” can be
the provisions of the contract so that none will        economic or must be physical.5 Because,
be rendered meaningless.” Universal C. I. T.
Credit Corp. v. Daniel, 243 S.W.2d 154, 158
(Tex. 1951). With this in mind, we examine                 5
                                                               The endorsement reads in relevant part:

                                                                 SHORTAGE, LEAKAGE AND
   4
   (...continued)                                              CONTAMINATION ENDORSEMENT
   to) such measurements as frequently as he
   deems necessary and desirable . . . .                                                       (continued...)

                                                    3
however, we read the contract as a whole, the           court’s finding was based solely on the
endorsement must be construed in conjunction            heading at section I.2 of the endorsement,
with the average terms and conditions of the            however, we note that individual headings are
policy.                                                 not to be considered in isolation from the
                                                        contract as a whole. Rather, the court must
    The body of the contract provides: “This            examine the entire document to determine the
insurance covers against all risks of physical          parties’ intent. Coker v. Coker, 650 S.W.2d
loss or of damage to the subject matter insured         391, 393 (Tex. 1983).
from any external cause but specifically
excluding unexplained shortage and/or                       This provision, read in the context of an en-
unexplained loss in weight (or volume).”                dorsement to a policy that provides coverage
Thus, the contract provides that the required           for physical loss evidenced o nly by an un-
physical loss from an external cause may not            explained shortage, can be better interpreted to
consist of or be established merely by an               indicate that the parties intend for an initial
“unexplained shortage.” The endorsement                 survey to provide an accurate account of the
provides for an extension of coverage by                amount of oil actually loaded onto a ship, and
allowing physical loss to be established by an          the parties have made provision to correct in-
unexplained shortage under the stated                   accuracies in that initial reading. Thus, where
circumstances. Here, however, the shortage is           the insured admits that no physical loss
not unexplained, but is conclusively explained          occurred, the intent of the parties is best
as being not a physical loss at all, but only a         fulfilled by using an accurate measurement of
calculation error.                                      the amount of oil it possessed at the time of
                                                        and during loading.
   To show coverage, therefore, Bayoil must
prove a physical loss. Because there is no gen-            Using the accurate, corrected measurement
uine issue of fact as to whether Bayoil actually        of the oil loaded onto the ESSEX
suffered a physical loss of oil, appellants, not        demonstrates that Bayoil has been com-
Bayoil, are entitled to summary judgment.               pensated for the shortage t hat actually oc-
                                                        curred between the loading and unloading, and
                     B.                                 that it is not entitled to coverage for the oil
   Because Bayoil cannot demonstrate a cov-             that was never loaded. Thus, it was error for
ered loss, we need not address whether the              the district court to grant summary judgment
district court erred in finding that the                for Bayoil on that basis.
magnitude of Bayoil’s loss was to be
determined on the basis of the initial, incorrect          For the foregoing reasons, the summary
survey calculations. Inasmuch as the district           judgment is REVERSED, and judgment is
                                                        RENDERED for appellants.

   5
   (...continued)
   THIS INSURANCE ALSO COVERS:

   Loss due to shortage and/or leakage and/or
   contamination and/or loss in weight (or vol-
   ume) howsoever arising . . . .

                                                    4
