FIFTH CIRCUIT COURT OF APPEALS REVERSES AND RENDERS JUDGMENT FOR INSURER THAT NAMED PERILS COVERAGE ONLY COVERS NAMED PERILS IN HURRICANE HARVEY CLAIM

February 17, 2022

In Landmark American Insurance Company v. SCD Memorial Place II, L.L.C., No. 20-20389, 2022 WL 320316, (5th Cir., Feb. 3, 2022), the Court reviewed whether an insurance policy covered flood-related damage sustained by a building during Hurricane Harvey. The trial court determined that the policy provided coverage and granted summary judgment in favor of the insured. After consideration. The appellate court reversed and rendered judgment in favor of the insurer.

In 2016, Landmark issued an insurance policy to SCD that covered several properties and was effective from August 31, 2016, to September 7, 2017.  The Landmark policy was a “deductible buy back policy.” The deductible buy back policy may cover all or a portion of the deductible required by the primary policy, reducing the insured's out-of-pocket costs.

SCD's primary insurance policy was a “all risks” policy that covered “all risks of direct physical loss or damage including flood, earth movement, and equipment breakdown.” The policy had a high deductible and thus, the insured purchased the separate Landmark policy to help cover the cost of that deductible.  The “Insuring Clause” of the Landmark policy outlines the type of damage for which it would cover the deductible of the primary insurance policy. Specifically, Landmark agreed to indemnify the insured for damage “caused by any of such perils as are set forth in item 3 of the schedule, and which are also covered by ... the ‘Primary Insurer(s).’ ”In August 2017, Hurricane Harvey made landfall. The parties agreed that Hurricane Harvey was a “Named Storm,” as defined under the policies and also that it caused damage to one of SCD's insured properties.

Landmark argued that the policy covers the specified perils of “Windstorm or Hail” that are “associated with a Named Storm [here, Hurricane Harvey]” but not all perils associated with a Named Storm. In other words, it is a “named perils” rather than “all risks” policy, meaning it covers only the perils specified in the policy. SCD cited Pan Am Equities, Inc. v. Lexington Insurance Company for the proposition that Hurricane Harvey was a “Windstorm” and therefore the policy covers all perils associated it.

The Court agreed with Landmark because its interpretation aligned with “the plain meaning of the text of the policy.”  The Court noted that although “Windstorm” in another policy could include flood and hail damage, in the specific context of the Landmark policy, it is a specific peril “associated with a Named Storm.” “Windstorm” did not expand the Landmark policy to include all the perils associated with Hurricane Harvey.  The Court concluded that under its plain language, the Landmark policy does not apply to the type of damage that the SCD property sustained in connection with Hurricane Harvey. The Court reversed and rendered in favor of Landmark.