Opinion
CIVIL ACTION NO. H-19-1184
2021-03-26
Robert SALCETTI and DeNise Salcetti, Plaintiffs, v. AIG PROPERTY CASUALTY COMPANY, Defendant.
Jesus Garcia, Jr., Kherkher Garcia, LLP, Houston, TX, Stephen Edward Walraven, Langley Banack Inc., San Antonio, TX, for Plaintiffs. John Michael Raborn, Raymond L. Gregory, II, Eggleston Briscoe LLP, Houston, TX, for Defendant.
Jesus Garcia, Jr., Kherkher Garcia, LLP, Houston, TX, Stephen Edward Walraven, Langley Banack Inc., San Antonio, TX, for Plaintiffs.
John Michael Raborn, Raymond L. Gregory, II, Eggleston Briscoe LLP, Houston, TX, for Defendant.
OPINION AND ORDER
Gregg Costa, United States Circuit Judge
Sitting by designation
Like many Houstonians, Plaintiffs Robert and DeNise Salcetti suffered significant water damage to their home during Hurricane Harvey. Unlike a number of Harvey victims, the Salcettis had flood insurance. They recovered $1 million on their flood insurance. In this lawsuit, they seek to also recover under their homeowners policy, which, as is typically the case, excludes flood damage. The insurer, AIG, has moved for summary judgment on the ground that the flood exclusion applies. The Court agrees and GRANTS the motion.
I. BACKGROUND
In late August 2017, Hurricane Harvey stalled over the Houston metro area, inundating the city with record-breaking amounts of rainfall. In re Upstream Addicks & Barker (Texas) Flood-Control Reservoirs , 146 Fed. Cl. 219, 240 (2019). As the water began to rise—and with more rain predicted—the Army Corps of Engineers initiated emergency flood control operations. Id. Shortly after midnight on August 28, the Corps began releasing water impounded in Houston's Addicks and Barker Reservoirs to protect areas of downstream Buffalo Bayou from additional flooding. Id. at 241. Although the releases may have prevented billions in projected property damage, they also caused flooding of more than 150,000 homes. Id.
The Salcettis’ home, located in west Houston, is adjacent to Buffalo Bayou. As Harvey stalled over the city, waters rose around the property. Docket Entry No. 48 at 2-3. Early in the storm, around August 26 or the following morning, the Salcettis’ basement began to flood. Docket Entry No. 36 at 6-7; Docket Entry No. 36-4 at 33:9-11. Sometime between the night of August 27 and August 30, as the reservoir releases occurred upstream, the home's primary level also flooded. Docket Entry No. 48 at 4-5; Docket Entry No. 36 at 7. The damage to the main level is the subject of this lawsuit.
The Salcettis’ home is insured by AIG, subject to an exclusion for damage caused by flood or overflow of a body of water. Docket Entry No. 36-6 at APP 136, 173. The Salcettis allege that but for the reservoir releases, water from Buffalo Bayou would not have reached the main floor of their home. Docket Entry No. 48 at 5-8. They argue that the impounded water from the reservoirs is of a different character than floodwater excluded under AIG's policy, and so the policy should cover the damage to their main floor. Id. at 11, 14-17. AIG disagrees and has denied their insurance claim. Docket Entry No. 50 at 3.
The Salcettis sued AIG in Texas state court. AIG then removed the case to federal court under diversity jurisdiction. Docket Entry No. 1 at 1. Before discovery, AIG sought summary judgment on the ground that the policy excludes flood coverage. Docket Entry No. 11 at 13. The Court denied that motion without prejudice as premature, concluding that the case needed factual development. Docket Entry No. 19 at 7-8. After discovery, AIG filed a second motion for summary judgment, again asserting the flood exclusion. Docket Entry No. 36.
AIG also argues that the Salcettis lack coverage because of the policy's exclusion for government destruction, confiscation, or seizure, but because the Court finds that the flood exclusion applies, there is no need to consider this provision. Docket Entry No. 36 at 23-24.
II. STANDARD OF REVIEW
Summary judgment is appropriate "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." FED. R. CIV. P. 56(a). Although "disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment," any "[f]actual disputes that are irrelevant or unnecessary will not be counted." Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The Court resolves all reasonable doubts on questions of fact in favor of the party opposing summary judgment. See Evans v. City of Houston , 246 F.3d 344, 348 (5th Cir. 2001) (citation omitted).
III. ANALYSIS
The parties contest a number of often technical factual issues, including the timing of the main floor's flooding and the original source of the floodwater. The answers to those questions—if they can in fact be resolved—turn on things like the origin of water flowing through government stream gauges, the capacity of local ditches, and whether water breached the Salcettis’ main floor minutes before or days after the start of the reservoir releases. Docket Entry No. 57 at 3-4; Docket Entry No. 56 at 2-3; Docket Entry No. 36 at 7. The parties get so much into the weeds of these issues that they filed a total of five summary-judgment briefs (including a surreply and response to the surreply).
But one undisputed fact resolves the case: everyone agrees that water—whatever its source—overflowed Buffalo Bayou and flooded both levels of the Salcetti home. Docket Entry No. 48 at 16; Docket Entry No. 36 at 14.
The Salcettis’ AIG homeowners policy unambiguously excludes coverage from this overflow of a body of water. It states: "We do not cover any loss caused by ... [f]lood, surface water, ... [or] overflow of a body of water" and defines "flood" as the "inundation of normally dry land area from ... [o]verflow of inland or tidal waters." Docket Entry No. 36-6 at APP 136, 173. The water in the Salcetti home came from the overflow of Buffalo Bayou, a body of water, so the resulting loss is excluded. See U.S. Fid. & Guar. Co. v. Goudeau , 272 S.W.3d 603, 607 (Tex. 2008) ("Under Texas law, we are required to construe insurance policies according to their plain language.").
The parties also dispute whether the water that entered the home was "surface water" and what counts as a "flood" under the AIG policy, but the Court concludes that the most straightforward resolution of this case lies in the policy's exclusion for "overflow of a body of water." Docket Entry No. 36-6 at APP 136. That said, because the policy defines "flood" so as to include essentially the same overflow language, whether the Court relies on the "flood" or "overflow" aspects of exclusion, the result would not change.
The plaintiffs try to get around this plain reading by focusing on the source of the bayou water that caused the flooding. See Docket Entry No. 48 at 16-17. They agree they do not have coverage for the bayou overflow that resulted from rain falling directly into the bayou (or from the normal draining of groundwater into the bayou). But they argue that water released into the bayou from the reservoirs is somehow a "distinct category of water" not excluded by the policy—impounded water. Their primary support for this theory is a forty-year-old Fifth Circuit case that was about strict liability for dam operation, not insurance. See Ford Motor Co. v. Dallas Power & Light Co. , 499 F.2d 400 (5th Cir. 1974).
And even in that case, the court never suggested that water impounded in a dam was anything but "flood waters." Ford Motor Co. , 499 F.2d at 413 (describing the dam operation as "impound[ing] the flood waters").
The Salcettis have not cited any case saying that when a policy excludes damage resulting from the overflow of a body of water, a court must look to the origin of the overflowing water to assess insurance coverage. The notion of tracing water in an oversaturated bayou back to its original source to determine the applicability of an insurance provision has no foundation in the policy language, caselaw, or common sense (it would be difficult, if not impossible, to apply such a rule).
Nothing in the policy says the exclusion depends on the underlying cause of the overflow of a body of water. Damage resulting from waters overflowing the bayou is thus excluded whether that water fell directly from the sky into the bayou, was first held in a reservoir that was later released into the bayou, or came from some other source, like the break of a water main that caused water to flow into the bayou. As a result, the AIG policy excludes water damage from the overflow of Buffalo Bayou, regardless of the role the reservoir releases played in that overflow.
The Court recognizes that there is extensive litigation against the Army Corps of Engineers alleging that the reservoir releases constituted a Fifth Amendment taking, but this case only concerns a private insurance dispute. See In re Downstream Addicks , 147 Fed. Cl. 566 (2020) ; In re Upstream Addicks & Barker , 146 Fed. Cl. at 219.
The lack of any support in the policy language for the Salcettis’ theory should end this case. But the Court also notes that the caselaw the parties debate buttresses the plain meaning of the exclusion. Courts have recognized that once water, whatever its source, finds its way into a natural watercourse like a bayou, that water becomes part of the bayou. For example, in Bonin v. Sabine River Authority of Texas , the court held that water released from upstream spillway gates into the Sabine River "lost its identity" as soon as it was released "and became part of the Sabine River," later turning into "floodwaters" when the river overflowed. 2019 WL 1246259, at *6-7 (E.D. Tex. Mar. 1, 2019), aff'd , 961 F.3d 381 (5th Cir. 2020). And in a case concerning the same events at issue here—the release of water from the Houston reservoirs during Harvey—the U.S. Court of Federal Claims determined that the Army Corps of Engineers’ opening and closing of reservoir gates to control the flood did nothing to change the character of the water; it remained "flood water[ ]" from a natural disaster. In re Downstream Addicks , 147 Fed. Cl. 566, 582-83 (2020) ; see also In re Katrina Canal Breaches Litig. , 495 F.3d 191, 218 (5th Cir. 2007) ("Any time a flooded watercourse encounters a ... levee, a non-natural component is injected into the flood, but that does not cause the floodwaters to cease being floodwaters.").
Even when water moves through artificial structures after it overflows from a natural body, the character of the water does not change. In one insurance case, overflow from Buffalo Bayou during Tropical Storm Allison became trapped in downtown Houston's underground tunnels, forcing the closure of an office building. Valley Forge Ins. Co. v. Hicks Thomas & Lilienstern, L.L.P. , 174 S.W.3d 254 (Tex. App.—Houston [1st Dist.] 2004, pet. denied). Like the Salcettis’ policy, the firm's policy excluded coverage if the loss resulted from "flood, surface water, ... [or] overflow of any body of water." Id. at 257. The court held that the water from the bayou did not "mutate[ ]" from floodwater into something else as it entered artificial structures; it was still floodwater mixed with rainfall, excluded by the policy. Id. at 258-59.
The fact that the water in the Salcettis’ home may have spent time impounded in the Houston reservoirs did not forever mark that water as something other than bayou overflow. The Corps released the water into the bayou, the water became part of the bayou, and the bayou containing that water overflowed, flooding the Salcettis’ home. The flood exclusion applies.
AIG thus did not breach the insurance policy. The lack of coverage also means the Salcettis’ extracontractual claims fail. See USAA Tex. Lloyds Co. v. Menchaca , 545 S.W.3d 479, 489 (Tex. 2018) ("[A]n insured cannot recover any damages based on an insurer's statutory violation if the insured had no right to receive benefits under the policy and sustained no injury independent of a right to benefits.").
IV. CONCLUSION
Because the AIG homeowners insurance policy unambiguously excludes damage from the overflow of a body of water, the motion for summary judgment (Docket Entry No. 36) is GRANTED . A separate final judgment will issue.