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The Prytania Park Hotel, Ltd. v. General Star Indemnity Co.
179 F.3d 169 (5th Cir. 1999)
Wierner, Circuit Judge:
At the core of this appeal are insurance claims for property damage and
business interruption loss attributable to a fire at the Prytania Park Hotel ("the
Hotel") in New Orleans, owned by Plaintiffs-Appellees ("the Halperns").
The insurer of the Hotel, Defendant-Appellant General Star Indemnity Company
("General Star"), appeals the district court's denial of its motion for a
judgment as a matter of law ("JML") or, alternatively, a new trial.
General Star grounds its appeal in numerous assignments of error that it claims
adversely affected the jury trial, the resulting verdict, and ultimately the judgment in
this case.
A principal bone of contention is the district court's pre-trial grant
of a partial summary judgment in favor of
the Halperns. The court held that fire-damaged, custom-made furniture, which was attached
by screws or bolts to the walls of guest rooms in the Hotel ("the Furniture" n1), were "permanently installed:
fixtures...," a category of movable property that is listed in the COVERAGE provision
of General Star's policy ("the Policy") among those that are components of the
"Building." The Policy differentiates between loss to the Building and loss to
the insureds' "Business Personal Property." By treating the Furniture as
permanently installed fixtures, the court eschewed the possibility that it could be
"furniture and fixtures" which, in the COVERAGE provision, are listed among the
types of movables that are components of the insureds' Business Personal Property. The
practical effect of this holding, when incorporated by the trial court into its jury
instructions, was to cause the Furniture to be valued at its full replacement cost rather
than at its actual cash value as used hotel furniture on the second-hand furniture market.
Consistent with this ruling, the jury was instructed to include the Furniture under the
Policy's coverage for loss or damage to the Building ("the building claim") --
and to use the new, replacement value of the Furniture in calculating any award of damages
for its loss -- rather than under the Policy's coverage for loss or damage to the
insureds' Business Personal Property, i.e., the contents of the Hotel ("the contents
claim"), at actual cash value.
We conclude that in granting this partial summary judgment the district
court erred as a matter of law in several respects: first, when it implicitly rejected
General Star's legal contention that the Furniture was not "fixtures" for
purposes of the Policy; second, when it explicitly ruled that the question whether removal
would cause substantial damage to the Furniture or to the Hotel was not material; and
third, when it granted the partial summary judgment holding that, for purposes of the
insurance coverage provided by the Policy, the Furniture was permanently installed
fixtures, not furniture and fixtures, and thus compensable under the building claim
at replacement value. Our de novo review leads
us to the opposite result, which we reach in alternative holdings: (1) The Furniture was
not "fixtures" for purposes of the building claim; but (2) if we assume arguendo
that the Furniture is "fixtures," it was not "permanently installed"
and therefore not includable in the building claim. Either way, then, the Furniture is
covered by the Policy only as "furniture and fixtures," an element of the
Halperns' Business Personal Property, compensable at market value under the contents
claim. We therefore reverse the partial summary judgment which, when translated into a
jury instruction, produced an excessive jury award and thereby constitutes reversible
error. Unfortunately, given the generality of the jury's non-itemized, global
damages awards on both the building claim and the contents claim, neither we nor the
district court on remand is able to remedy the effects of this error by rendering a
modified judgment as to the building and contents claims. We are thus left no choice but
to vacate the judgment of the district court on the building and contents claims and
remand this case for a new trial, consistent with this opinion, on the entirety of those
claims. Finding no reversible error in connection with the jury's business interruption
award, however, we affirm that aspect of the district court's judgment.
I.
FACTS AND PROCEEDINGS
The Hotel sustained a fire that caused extensive damage to one of its
several buildings and to contents and component parts of that building. The fire
interrupted the Hotel's business operations as well. The Hotel was insured under the
Policy, which provided coverage for (1) loss or damage to the Building, defined as
including, inter alia, "permanently installed: fixtures; machinery; and
equipment," compensable at replacement value; (2) loss or damage to the insureds'
Business Personal Property, defined as including, inter alia, "furniture and
fixtures," compensable at actual cash value; and (3) loss of "business
income" resulting from business interruption from the time of the fire until the
insureds should "as quickly as possible" resume operations.
The Halperns submitted (1) the building claim for $276,687.96, covering
the damaged hotel building, including in it all the Furniture as "permanently
installed: fixtures" at full replacement value; (2) the contents claim for
$85,888.10, covering business personal property, but not including any of the Furniture in
it; and (3) the business interruption claim for $75,000.00, covering loss of income
resulting from interrupted occupancy and operations. Following completion of the adjusting
process, General Star paid $186,448.47 on the building claim, which payment did not
include anything for the Furniture; $68,273.93 on the contents claim, which included the
Furniture at market value under the "furniture and fixtures" element of the
Halperns' Business Personal Property, and $34,988.00 on the business interruption claim.
As these payments totaled less than the aggregate amount sought, the Halperns filed this
declaratory judgment and breach of contract action seeking to recover those portions of
their claims that remained unpaid.
During the course of the proceedings prior to trial, the Halperns and
General Star filed cross-motions for summary judgment on several issues, including the
proper classification of the Furniture. The district court granted the Halperns' partial
summary judgment, as described above, and ultimately instructed the jury accordingly.
As fate would have it, this particular issue was addressed, seriatim,
by three different judges of the Eastern District of Louisiana, the first of whom died
after granting the partial summary judgment, and the remaining two of whom, in turn,
declined to amend or revise it. All three judges concluded that the Furniture should be
categorized as "permanently installed: fixtures," thus bringing it under the
building claim and making it compensable by General Star at full replacement value.
. . .
II.
Analysis
. . .
B. The Furniture: "Furniture and Fixtures" or "Permanently Installed
Fixtures"?
1. District Court's Grant of Partial Summary Judgment
The first of the three district judges to address the central issue of
this diversity case started correctly by turning to Louisiana law. Rather than beginning
with the Civil Code, though, the court quoted the Louisiana Supreme Court's opinion in
Pareti v. Sentry Indemnity Co. for the general truisms that an insurance policy is a
contract like all others, is the law between the parties, is enforceable as written, and
is to be construed as a whole without interpreting one portion alone while disregarding
another. The district court nevertheless failed to construe two key provisions of the
Policy in pari materia or in the context of
either the Policy as a whole or its entire COVERAGE provision. Instead, the court
proceeded next to center its attention on another Louisiana Supreme Court pronouncement
that "words and phrases used in insurance policies are to be construed in their
plain, ordinary and popular sense." This appears to have led the court to disregard
entirely the phrase "furniture and fixtures" in the COVERAGE provision's
Business Personal Property section, and to focus solely on the phrase "permanently
installed: fixtures" in the COVERAGE provision's Building section, where these items
are specified components of the Building. Significantly, the court never even indicated an
awareness that (1) the word "fixtures" appears in both sections, but (2) the
word "furniture" appears in only one, the Business Personal Property section.
Continuing down this path, the court then proceeded to look to nothing
other than the dictionary definitions of the three words that comprise the phrase
"permanently installed fixtures" -- and to do so wholly out of context. n7 Additionally, this first district judge placed substantial
emphasis on the uncontested fact that the Furniture was "'custom-built' for each room
of the hotel...," even though that isolated fact is not material to the central issue
under consideration. n8
Despite observing that there was "disagreement as to whether
removal of the furniture would damage the hotel rooms and/or the extent of such
damage," the court nevertheless held that "that dispute is immaterial to the
Court's decision." As will be shown, however, the issue of removal damage is not just
material to our alternative reasons for concluding that the partial summary judgment was
not providently granted; it is the nub of the question. The genuineness of this dispute is
another matter: Its absence will loom large in our alternative reasoning, and ultimately
alleviate the need to remand the case for additional factual findings regarding the extent
of removal damage, requiring us instead to reverse the district court's grant of the
Halperns' motion for summary judgment and to grant General Star's cross motion that, as a
matter of law, the Furniture was not permanently attached to the Hotel.
The second of the three district judges to consider categorization of
the Furniture did so in the context of a Motion to Amend the Partial Summary Judgment, and
the third did so in the context of a Motion to Amend Order. Like Sisyphus rolling his stone up
the mountainside, General Star's repeated efforts to get the district court to
consider the importance of the juxtaposed phrases "furniture and fixtures" and
"permanently installed fixtures," in the context of the Policy's COVERAGE
provision, never made it to the top. Neither was General Star able to get the court to
consider the permanence of the Furniture's attachment to the walls of the Hotel -- more
precisely, the extent of the damage that removal would cause -- in the court's
deliberations on whether the Furniture should be covered under the building claim or the
contents claim.
2. De Novo Review of Partial Summary Judgment
Our de novo review convinces us that the district court missed the mark
all three times. First, the court erred when it rejected General Star's insistence that
the meaning of "fixtures" should be considered in the context of the Policy as a
whole, particularly the entirety of the COVERAGE provision where that word is used twice
under distinguishable circumstances, once in connection with the building and once in
connection with the contents. Second, the court erred when it deemed the physical nature
of the Furniture's installation immaterial, particularly the issue of the extent of damage
that removal would cause to the Furniture and the walls to which it was attached.
Third, the court incorrectly concentrated on (1) the Halperns' subjective intent to have
the Furniture placed indefinitely or permanently in a particular location within
particular hotel rooms, and (2) the "custom-made" nature of the Furniture.
Erroneously assigning probative value to these two factors appears to have led the court
improvidently to grant, and twice sustain, the partial summary judgment erroneously
classifying the Furniture as "permanently installed: fixtures" and thus as items
covered under the building claim.
a. Interpretation of the Policy
. . . When the analysis calls for interpreting a contract,
the Louisiana Civil Code is the starting point. In it, the methodology for contractual
interpretation is set forth in Chapter 13 of Title IV, Book III, consisting of articles
2045 through 2057 [editorial note: analagous to Cal. Civ. Code 1635-54]. Although the
initial article of Chapter 13 defines "interpretation of a contract" as
"the determination of the common intent of the parties," the official 1984
Revision Comment makes clear that such intent is objective in nature, i.e., "what the
parties must have intended, given the manner in which they expressed themselves in their
contract," not what one or the other might say that he intended. The Code is
quick to add, in the next succeeding article, that "when the words of a contract are
clear and explicit and lead to no absurd consequences, no further interpretation may be
made in search of the parties' intent." Clearly, that was the situation faced by the
district court in this case and faced now by us.
The second district judge to consider the central issue of
contract interpretation made mention of article 2047's directive that "the words of a
contract must be given their generally prevailing meaning." He stopped prematurely,
however, when he failed to consider article 2050's mandate that "each provision in a
contract must be interpreted in light of the other provisions so that each is given the
meaning suggested by the contract as a whole." This rule of interpretation, coupled
with the corollary that "[a] doubtful provision must be interpreted in light of the
nature of the contract...," lucidly establishes the framework for construing the
Policy.
Using the methodology of the Civil Code, we must analyze the COVERAGE
provision of the Policy to determine whether its clear and explicit words, when
interpreted in light of all its provisions so as to give each the meaning suggested by the
contract as a whole and in light of the nature of the contract (commercial insurance),
reveal the objective purpose of the agreement and produce no absurd consequences. To do
so, we turn to the plain meaning of the language in the Policy's COVERAGE subsections --
a. The Building, and b. Your Business Personal Property -- to ascertain whether the
Furniture is a component of the Building, entitling the Halperns to full replacement cost,
or an element of the Halperns' Business Personal Property, entitling them to actual cash
value only.
b. Furniture Qua "Furniture"
Despite General Star's repeated entreaties, the district court never
got past the out-of-context dictionary definitions of the words "fixtures,"
"permanently," and "installed," to interpret the Policy in general and
its COVERAGE provision in particular. Although the three defined words are neither
technical terms nor words of art, and thus must be given their generally prevailing
meanings, the Civil Code commands that words be given those meanings in the context of the
contract as a whole -- not in isolation or in a vacuum. This contract is one of commercial
insurance involving the Halperns' hotel property and business; it is not, for example, a
residential policy issued by a sophisticated insurance company to an inexperienced lay
homeowner. Thus, the combination of an
insurance contract covering a hotel property essentially places these commercially
sophisticated parties in legal equipoise, General Star possessing expertise in matters of
insurance and the Halperns possessing expertise in matters of hotel ownership and
operation.
When we conduct such a contextual analysis, we discern a contractual
dichotomy between the Policy's building coverage and its contents coverage: Permanently
installed fixtures covered under the building and all other fixtures covered under the
contents. From our reading of the COVERAGE provision as a whole, a clear scheme emerges:
The first subcategory of movable property included in the definition of Business Personal
Property is "Furniture and fixtures"; the second subcategory of movable property
included in the definition of the Building is "Permanently installed: (a) Fixtures;
(b) Machinery; and (c) Equipment." Thus, under the words of the Policy, the answer to
the question, which "fixtures" are includable in the building claim and which
are includable in the contents claim, turns entirely on the permanence of their
installation -- anything but an immaterial question of fact.
In marked contrast to this dual role of "fixtures" in the
Policy's COVERAGE provision is the singular role of "furniture" in that
provision. Like fixtures, furniture is a specified element of Business Personal Property;
but, unlike fixtures, furniture is not a specified element or component of the Building.
Indeed, the word "furniture" is nowhere to be found in the lengthy but clearly
exclusive list of the kinds of movables that can be components of the Building. The
structure of the Policy, juxtaposing fixtures and furniture, leads to the following
conclusions:
(1) The conjunctive phrase "Furniture and fixtures" in the
COVERAGE provision's Business Personal Property section demonstrates that
"furniture" and "fixtures" are two different categories of corporeal
movable (personal) property, each of which is an element of Business Personal Property and
thus is includable in the contents claim;
(2) When "permanently installed" in the insured immovable
(building), however, "fixtures" is a category of corporeal movables that is an
element of the Building; but "furniture," whether or not permanently installed,
is a category of corporeal movables that is neither expressly nor implicitly includable in
the definition of the Building;
(3) Therefore, given the inclusion of "permanently installed
fixtures" in the definition of the Building and the exclusion of
"furniture" from that definition, a building claim can never include
"furniture." Inclusio unius est exclusio
alterius.
This construction of the Policy produces a result that is anything but
absurd. The armoires, night stands, entertainment centers/chests of drawers, desks, wall
mirrors, and hanging luggage racks that comprise the Furniture are quintessential articles
of furniture. Indeed, they are never referred to by the Halperns, General Star, or the
district court as anything but "furniture." Indisputably, then, each such item
is, in common parlance, an article of furniture.
In contrast, fixtures in commercial establishments are movables that
are attached to the premises, either temporarily or permanently, such as (1) "store
fixtures" (display cases, shelving, check-out stands, etc.); (2) "bathroom
fixtures" (sinks, toilets, tubs, showers, faucets, towel racks, etc.); (3)
"kitchen fixtures" (ranges, ovens, icemakers, dishwashers, disposals, sinks,
faucets, etc.); (4) "lighting fixtures" (ceiling lights, wall lights, track
lights, etc.), to name but a few. In and of itself, the single act of attaching an article
of furniture to the wall (or floor or ceiling) of a hotel room cannot mystically convert
such an article into a fixture, especially not in the context of the COVERAGE provision's
dichotomy.
Our plenary review of the summary
judgment evidence, the pertinent provisions of the Policy, and applicable pronouncements
of Louisiana law satisfies us that the Policy (1) differentiates between
"furniture" and "fixtures"; (2) includes both furniture and fixtures
as categories of corporeal movables that are Business Personal Property; and (3) makes an
exception for fixtures -- but not for furniture -- that are permanently installed in the
insured commercial (hotel) building by shifting coverage of such articles from Business
Personal Property to the Building. Consequently, the custom-made articles that together
comprise the Furniture are "furniture," as distinguished from
"fixtures," and as such remain Business Personal Property of the Halperns,
regardless of their attachment to the walls of the Hotel, whether temporary or permanent.
Under the obvious scheme of the COVERAGE provision and its building/business personal
property dichotomy, the Furniture is includable only in the contents claim, not in the
building claim.
c. Furniture Qua "Permanently Installed: Fixtures"
(i) Permanence of Attachment
Notwithstanding the foregoing demonstration of how the Policy
distinguishes between "furniture" and "fixtures" as separate
categories of corporeal movables, if we assume arguendo
that attachment to the walls of the Hotel could somehow convert furniture to fixtures, the
Furniture still could not be included in the building claim for one indisputable reason:
Its attachment to the building was not "permanent." The summary judgment
evidence confirms that there is no genuine dispute of fact about the permanence of the
Furniture's attachment, the Halperns' subjective intent to the contrary notwithstanding.
No one disputes that the Furniture was custom designed, custom
fabricated, custom assembled as free standing units, and installed at particular locations
in particular guest rooms within the Hotel; it was not, however, "built-in."
Neither is it disputed that, at the time of design, the Halperns intended each piece to
remain in its specific location within each guest room. Neither the Halperns' preconceived
notions of the particular locations where each item of furniture was to be installed,
however, nor the custom-made nature of the Furniture, is material to the question of the
permanence of the attachment of such furniture. The district court's focus on the
custom-made nature of the Furniture and on the Halperns' subjective intentions regarding
its location and permanence, led the court astray. For, even if we were to assume arguendo
that the Furniture constitutes "fixtures," its includability in the building
claim would turn not on whether the Halperns subjectively intended it to be installed
"permanently," or on the fact that it was custom-made, but on whether its
"installation" was "permanent." n18
To answer this question, we construe the terms of the Policy the way we
are instructed by the Civil Code to interpret any contract in Louisiana -- by considering
the plain meaning of the language in the context of the contract as whole, and using the
generally accepted meanings of the words that are not technical terms or words of art.
Applying these provisions of the Civil Code, we attempt to ascertain the objective intent
of the parties as reflected by the words they have employed in their agreement. We begin
with [Louisiana Civil Code] Book II, Things and the Different Modifications of Ownership,
specifically Title I: Chapter 1: Section 2, IMMOVABLES and Section 3, MOVABLES. In these
sections, we find that immovables comprise (1) tracts of land, (2) buildings and standing
timber, (3) movable things incorporated into immovables, and (4) component parts of
buildings or other constructions. To complete the property continuum, we note that
movables include (1) things that can be moved from one place or another and (2) materials
until they are incorporated into a building. Somewhere along the continuum, between land
and buildings on one end and free-standing, fully peripatetic corporeal movables on the
other, lie movables that are either fully incorporated into the structure or permanently
attached to it. Both of these categories of movables become "component parts" of
the immovable, one by virtue of "incorporation," and the other by virtue of
permanent attachment, i.e., "immobilization."
If the Furniture had been "built-in," i.e., had been
constructed in the Hotel by sufficiently incorporating into the structure itself building
materials that lose their separate identities and become integral parts of the building
pursuant to article 465, the Furniture would have been a component part of the Hotel and
thus includable in the building claim. There is no dispute, however, that such was not the
case. Therefore, if the Furniture is to be accorded "fixture" status and, by
virtue of permanent installation, to be included in the building claim, it must do so
within the confines of article 466:
Things permanently attached to a building or other construction, such as plumbing, heating, cooling, electrical or other installations, are its component parts. Things are considered permanently attached if they cannot be removed without substantial damage to themselves or to the immovable to which they are attached.
To test the Furniture under article 466 for possible inclusion in
the building claim, we consider first the article's initial paragraph and its
illustrative, ejusdem generis list of the kinds of
movable things that Louisiana recognizes as being susceptible of component part status by
virtue of permanent attachment. As the Furniture is not plumbing, heating, cooling, or
electrical, it must qualify as "other installations" or be ineligible for
component part status under article 466. And, not every "other" installation
qualifies: An installation must be sufficiently similar to the four identified by name in
article 466's illustrative list (plumbing, heating, cooling, or electrical) to come within
the purview of the article by virtue of the ejusdem generis maxim.
This presents the Halperns' first hurdle. Each named type of
installation is some kind of actively functioning machinery or equipment. In contrast, the
items that comprise the Furniture are passive, non-functioning articles. We need not,
however, and therefore do not, resolve the issue whether the Furniture can qualify as an
article 466 "other installation." Instead, we further assume arguendo that
article 466's illustrative list can be read that broadly and proceed to address the
permanence of the Furniture's attachment. We do so because "things that are not
permanently attached to a building or other construction remain movables."
A straightforward reading of article 466 requires that the permanence
of any movable's installation in "a building or other construction" meet the
definition of "permanently attached" in the article's second paragraph.
Under that definition, the Furniture can only qualify as "permanently installed:
fixtures" if its removal would cause "substantial damage" to itself or to
the Hotel. In the partial summary judgment proceedings addressing the Furniture's
classification, neither party contended that removal would substantially damage the
Furniture itself; however, the Halperns did attempt to dispute General Star's contention
that removal of the Furniture would not cause substantial damage to the walls of the
Hotel. Our de novo examination of the summary judgment record convinces us that (1) the
issue of "substantial damage" under article 466's permanent attachment test is
material, but (2) as a matter of law, any dispute about the extent of removal damage is
not genuine. As such, the district court should have granted General Star's motion for
partial summary judgment on this point.
In his affidavit, Edward M. Halpern, General Manager of the Hotel,
averred only conclusionally and without specific factual support, that removal would cause
substantial damage to the walls of the Hotel. His bald assertion is unsupported by any
details or factual underpinnings. In contrast, the affidavit of William A. Moulton, an
adjuster retained by General Star, is specific and supported by discrete facts produced
from his personal observations. He explained that the Furniture "could easily be
removed from the hotel by detaching the bolts, and that removing the furniture in this way
would not substantially damage either the furniture or the building." He confirms his
firsthand observation, made during an inspection following the fire and after removal of
the Furniture, which revealed the presence of no noticeable damage to the Hotel from
removal of the Furniture.
On summary judgment, we do not, of course, weigh the evidence or make
credibility calls. We do, however, examine the evidence to determine whether factual
disputes exist and, if so, whether they are genuine. Here, the Halperns supported their
motion for partial summary judgment with nothing more than the single, conclusional and
unsupported statement of Mr. Edward Halpern, speculating that reversing the screws that
held the Furniture in place would cause substantial damage to the walls. Alone, this bare
declaration is both counterintuitive and insufficient to create a genuine fact issue,
particularly when compared to the adjuster's uncontradicted, firsthand account of his own
inspection following the fire, which revealed, at most, superficial -- insubstantial --
wall damage had occurred when the Furniture was actually unbolted from the walls and
removed.
We are satisfied that the summary judgment record reflects no genuine
dispute on the material fact issue of substantial damage by removal: None would be
expected and none in fact occurred. Thus, even if the Furniture could be considered to be
"fixtures" under the Policy and an "other installation" for purposes
of art. 466, it was neither permanently attached within the contemplation of that code
article nor permanently installed within the contemplation of the COVERAGE section of the
Policy. It follows that, even as "fixtures," the Furniture is not includable in
the building claim.
. . .
III.
Conclusion
The district court's denial of General Star's motion for partial
summary judgment and grant of the Halperns' motion for such a judgment, classifying the
Furniture as permanently installed fixtures and instructing the jury to include them in
the building claim, constitutes reversible error for the reasons set forth above. Given
the non-itemized nature of the jury's awards on the building claim and the contents claim,
any ability we might otherwise have had to correct these errors by rendering a modified
judgment is stymied. We therefore vacate the judgment of the district court to the extent
it awards damages under the building claim and the contents claim, and remand this case
for a new trial on those claims, with instructions that the jury be charged that, as a
matter of law, the Furniture is Business Personal Property of the Halperns and thus is
compensable as used furniture, at its fair market value, as of the date of the fire. All
other aspects of the building claim and the contents claim shall be accorded fresh-start
treatment in the new trial. The district court's original judgment is affirmed, however,
to the extent of its award to the Halperns for losses covered under the business
interruption provisions of the Policy.
AFFIRMED in part; REVERSED and RENDERED in part, VACATED and REMANDED
in part, for a new trial.