Opinion
Case Number CIV-02-923-C
September 30, 2003
ORDER
Before the Court is Defendant's Motion for Summary Judgment. Plaintiffs filed a Response and Cross-Motion for Summary Judgment. Defendant filed a Response to the Cross-Motion to which Plaintiffs filed a Reply. These matters are now at issue.
I. BACKGROUND
Plaintiffs filed this action alleging breach of contract and bad faith following Defendant's denial of a claim for insurance coverage. Following the terrorist attacks of September 11, 2001, Plaintiffs filed a claim under a Business Income policy issued by Defendant. In their claim, Plaintiffs asserted they had lost significant business when the Federal Aviation Administration ("FAA") suspended flights due to the attacks. Plaintiffs claim the policy provides coverage for this loss. Defendant denied Plaintiffs' claim asserting the policy provisions do not provide coverage for Plaintiffs' loss. Following the denial Plaintiffs brought the present action alleging Defendant breached the contract of insurance and acted in bad faith in the denial.
The parties filed the present motions asserting the issue is one of construction of the contract and therefore a matter for determination by the Court.
II. STANDARD OF REVIEW
Summary judgment is appropriate if the pleadings and affidavits show there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). "[A] motion for summary judgment should be granted only when the moving party has established the absence of any genuine issue as to a material fact."Mustang Fuel Corp. v. Youngstown Sheet Tube Co., 561 F.2d 202, 204 (10th Cir. 1977). The movant bears the initial burden of demonstrating the absence of material fact requiring judgment as a matter of law.Celotex Corp. v. Catrett. 477 U.S. 317, 322-23 (1986). A fact is material if it is essential to the proper disposition of the claim. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). If the movant carries this initial burden, the nonmovant must then set forth "specific facts" outside the pleadings and admissible into evidence which would convince a rational trier of fact to find for the nonmovant. Fed.R.Civ.P. 56(e). These specific facts may be shown "by any of the kinds of evidentiary materials listed in Rule 56(c) except the pleadings themselves."Celotex. 477 U.S. at 324. Such evidentiary materials include affidavits, deposition transcripts, or specific exhibits. Thomas v. Wichita Coca-Cola Bottling Co., 968 F.2d 1022, 1024 (10th Cir. 1992) "The burden is not an onerous one for the nonmoving party in each case, but does not at any point shift from the nonmovant to the district court."Adler v. Wal-Mart Stores, Inc., 144 F.3d 664, 672 (10th Cir. 1998).
The question of whether policy language is ambiguous is a matter of law, and therefore appropriate for summary judgment determination. MIC Property and Cas. Ins. Corp. v. International Ins. Co., 990 F.2d 573, 576 (10th Cir. 1993). "The interpretation of an insurance contract and whether it is ambiguous is a matter of law for the Court to determine and resolve accordingly." Dodson v. St. Paul Ins. Co., 1991 OK 24, 812 P.2d 372, 376; see also Harjo Gravel Co. v. Luke-Dick Co., 1944 OK 268, 153 P.2d 112.
The parties are in agreement that resolution of this issue is governed by Oklahoma law.
III. DISCUSSION
Plaintiffs claim that their loss is covered based on the language of either of two provisions of the policy — Civil Authority or Business Income from Dependent Properties. The Civil Authority provision states:
We will pay for the actual loss of Business Income you sustain and Necessary Extra Expense caused by action of civil authority that prohibits access to the described premises due to direct physical loss of or damage to property other than at the described premises, caused by or resulting from any Covered Cause of Loss. This coverage will apply for a period of up to two consecutive weeks from the date of that action.Plaintiffs' Exhibit 1, no. 1-1098.
The parties' disagreement hinges on the term "prohibit" in this paragraph. Plaintiffs argue that the closing of the airports by the FAA was an action by a civil authority that hindered access to their hotels and therefore falls within the clause. Defendant rejects that interpretation and argues the FAA's action did not bar access to Plaintiffs' hotels and that they remained open for business. The Court's consideration whether "prohibit" is ambiguous in this clause is guided by the teachings of the Oklahoma Supreme Court:
The Court is mindful that Defendant argues the airports remained open and the FAA's order simply grounded flights. For purposes of the Court's determination of this motion, this distinction is meaningless.
Oklahoma's extant jurisprudence demarcates guidelines for ascribing meaning to an insurance policy's terms. Basically, an insurance policy is a contract. When its terms are unambiguous and clear, the employed language is accorded its ordinary, plain meaning and enforced so as to carry out the parties' intentions. In this process we are mindful that an insured and insurer are free to contract for that quantum of coverage which one is willing to extend and the other is willing to purchase. The parties are bound by the terms of their agreement and the Court will not undertake to rewrite the same nor to make for either party a better contract than the one which was executed.Bituminous Cas. Corp. v. Cowen Constr., Inc., 2002 OK 34, ¶ 9, 55 P.3d 1030, 1033 (emphasis in original) (footnotes omitted). See also IDG, Inc. v. Continental Cas. Co., 275 F.3d 916, 921 n. 2 (10th Cir. 2001), cert. denied, 536 U.S. 940 (2002). "[T]he test to be applied in determining whether a word [or phrase] is ambiguous is whether the word [or phrase] `is susceptible to two interpretations' on its face."Cranfill v. Aetna Life Ins. Co., 2002 OK 26, ¶ 7, 49 P.3d 703, 706, quoting Littlefield v. State Farm Fire and Cas. Co., 1993 OK 102, ¶ 7, 857 P.2d 65, 69. The test "is applied from the standpoint of a reasonably prudent lay person, not from that of a lawyer." Id. at ¶ 8, (citing Couch on Insurance 3d § 21:14 (1995)).
Plaintiffs argue there are different meanings of the word "prohibit" and offer various dictionary excerpts as evidence. Plaintiffs also offer the opinion of an expert on the proper method of using dictionary definitions. Plaintiffs offer the following words as definitions of "prohibit": hinder, hold back, interdict, prevent, hamper, or impede. Plaintiffs argue that under at least some of these definitions coverage would be available and therefore the term is ambiguous. Consistent with Oklahoma law, the Court has construed the contract as a whole in determining the meaning of the term "prohibit." See 15 Okla. Stat. § 157[ 15-157], ("The whole of a contract is to be taken together, so as to give effect to every part, if reasonably practicable, each clause helping to interpret the others."). When read as a whole, it is clear that the policy is intended to cover losses from some event which directly affects the hotels. Here, the FAA Order did not have a direct effect on Plaintiffs' hotels; rather, the Order's effect was tangential. While the FAA Order may have had an impact on Plaintiffs' business, it did not prevent people from getting to the hotels, it merely limited the means of travel available to patrons of Plaintiffs' hotels. The policy requires a civil order which bars access to the property on which Plaintiffs' hotels sit. No such order exists in this case. Substitution of "prohibit" with any of the words suggested by Plaintiffs does not change the result as it does not alter the meaning of the policy. For example, if "hinder" is used, the order must still hinder access to Plaintiffs' property. Under the facts of this case, that requirement was not met. In short, the Court finds the clause is not ambiguous and because the actions of the FAA did not bar or prevent access to Plaintiffs' hotels, there is no coverage under the policy.
In their response to Defendant's listing of undisputed facts, Plaintiffs assert a dispute with those facts regarding the Dependent Coverage provision. However, Plaintiffs' dispute is limited to controverting the accuracy of Defendant's quotation of the policy. Nowhere in their briefs do Plaintiffs attempt to explain how, under the facts of this case, the Dependent Coverage provision provides coverage for their losses.
The Dependant Coverage portion of the policy reads as follows:
We will pay for the actual loss of Business Income you sustain due to the necessary suspension of your "operations" during the "period of restoration." The suspension must be caused by direct physical loss or damage to "dependent property" at a premises described in the Schedule caused by or resulting from any Covered Cause of Loss.
"Dependent Property" is defined as:
1. "Dependent Property" means property operated by others whom you depend on to:
a. Deliver materials or services to you, or to others for your account (Contributing Locations). With respect to Contributing Locations, services does not mean water, communication or power supply services;
b. Accept your products or Services (Recipient Locations);
c. Manufacture products for delivery to your customers under contract of sale (Manufacturing Locations); or
d. Attract customers to your business (Leader Locations).
"Period of Restoration" is defined as:
2. "Period of Restoration" with respect to "dependent property," means the period of time that:
a. Begins 72 hours after the time of direct physical loss or damage caused by or resulting from any Covered Cause of Loss at the premises of the "dependent property"; and
b. Ends on the date when the property at the premises of the "dependent property" should be repaired, replaced with reasonable speed and similar quality.Plaintiffs' Exhibit 1, no. 1-025-06. The extent of Plaintiffs' opposition is to controvert Defendant's assertion that coverage under this provision requires damage to a property identified in the schedule attached to the policy. However, Defendant also argues there is no proof of physical loss or damage to a "dependent property." Plaintiffs have failed to offer any facts to controvert Defendant's second proposition. In the absence of evidence of direct physical loss or damage to "dependent property" there can be no coverage under this portion of the policy.
Plaintiffs have also filed a claim for bad faith breach, asserting Defendant's position renders it liable in tort. Defendant argues it has the right to resolve a legitimate dispute through litigation. According to Defendant, whether the policy provision is ambiguous is just such a dispute.
Plaintiffs' bad faith claim is without merit. Oklahoma and the Tenth Circuit have consistently recognized an insurer's right to deny a claim provided that denial is premised on a legitimate dispute. As the Circuit has stated:
As numerous cases since Christian have made clear, "[t]he insurer does not breach the duty of good faith by refusing to pay a claim or by litigating a dispute with its insured if there is a `legitimate dispute' as to coverage or amount of the claim, and the insurer's position is `reasonable and legitimate.'"Oulds v. Principal Mut. Life Ins. Co., 6 F.3d 1431, 1436 (10th Cir. 1993) (quoting Thompson v. Shelter Mut. Ins., 875 F.2d 1460, 1462 (10th Cir. 1989); quoting Manis v. Hartford Fire Ins. Co., 1984 OK 25, 681 P.2d 760, 762) (citing Christian v. American Home Assurance Co., 1977 OK 141, 577 P.2d 899).
IV. CONCLUSION
The Court finds as a matter of law that the language of the Civil Authority provision is not ambiguous. Further, Plaintiffs have failed to controvert Defendant's proof that no coverage is provided by the Dependant Properties provision of the policy. Finally, because Defendant's position on the coverage issue was legitimate, Plaintiffs' bad faith claim fails as a matter of law. Accordingly, Defendant's Motion for Summary Judgment is GRANTED. Plaintiffs' Cross-Motion for Summary Judgment is DENIED. A separate judgment will issue.
IT IS SO ORDERED