ACCEPTED
14-14-00755-CV
FOURTEENTH COURT OF APPEALS
HOUSTON, TEXAS
4/3/2015 10:49:47 PM
CHRISTOPHER PRINE
CLERK
In The
Court of Appeals FILED IN
14th COURT OF APPEALS
For The HOUSTON, TEXAS
4/3/2015 10:49:47 PM
Fourteenth District of Texas CHRISTOPHER A. PRINE
_____________________________ Clerk
14-14-00755-CV
__________________________
KELLEY STREET ASSOCIATES, LLC
Appellant,
V.
UNITED FIRE AND CASUALTY COMPANY
Appellee.
_______________________________________________________
On Appeal from the 295th District Court, Harris County, Texas
Cause No 2013-36796-A
Honorable Caroline E. Baker
_______________________________________________________
BRIEF FOR APPELLEE
George W. Vie III
gvie@millsshirley.com
Mills Shirley L.L.P.
2228 Mechanic Street, Suite 400
Galveston, Texas 77550
(713) 571-4232
Fax (713) 893-6095
Attorneys for Appellee
APPELLEE REQUESTS ORAL ARGUMENT
CORRECTED IDENTITY OF PARTIES AND COUNSEL
APPELLANT:
Kelley Street Associates, LLC
APPELLANT’S ATTORNEY:
H. Miles Cohn
Michelle V. Frier
Crain, Caton & James, P.C.
1401 McKinney St., 17th Floor
Houston, Texas 77010
Telephone (713) 752-8668
Facsimile (713) 685-1921
mcohn@craincaton.com
APPELLEE:
United Fire and Casualty Company
APPELLEE’S APPELLATE ATTORNEYS:
George W. Vie III
Susan L. Price
Mills Shirley L.L.P.
2228 Mechanic Street, Suite 400
Galveston, Texas 77550
Telephone (713) 571-4232
Facsimile (713) 893-6095
gvie@millsshirley.com
sprice@millsshirley.com
APPELLEES’ TRIAL ATTORNEYS:
Charles Dunkel
Mills Shirley L.L.P.
3 Riverway, Suite 100
Houston, Texas 77056
Telephone (713) 225-0547
Facsimile (713) 225-0844
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TABLE OF CONTENTS
Corrected Identity of Parties and Counsel ................................................................ i
Table of Contents ................................................................................................... iii
Table of Authorities ................................................................................................. v
Reply Issue Presented .............................................................................................. 1
Statement of Facts ................................................................................................... 1
Summary of the Argument ....................................................................................... 5
Argument and Authorities ....................................................................................... 7
1. The Standard and Scope of Review Applicable to the Competing Motions. .... 7
2. Kelley Street Associates Did Not Have Coverage Under the Policy’s Water
Exclusion Endorsement. ...................................................................................... 8
A. Kelley Street Associates did not carry its burden as an insured and
as a summary judgment movant. .................................................................... 8
B. The Water Exclusion Endorsement is interpreted like any other
contract provision. ......................................................................................... 9
C. The Water Exclusion Endorsement is not ambiguous............................. 10
3. The Application of the Water Exclusion Endorsement is Required by the
Policy’s Plain and Unambiguous Terms. ............................................................ 11
A. The words of the Water Exclusion Endorsement support summary
judgment for United Fire. ............................................................................ 12
4. The Application of the Water Exclusion Endorsement is not Changed by
Reference to Case Law. ...................................................................................... 18
Conclusion and Prayer ........................................................................................... 23
Certificate of Compliance ...................................................................................... 24
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Certificate of Service.............................................................................................. 25
Appendix
Tab 1 Order denying summary judgment to Kelley Street Associates
Tab 2 Order granting summary judgment to United Fire
Tab 3 Order granting motion to sever Kelley Street Associates’ claims
against United Fire
Tab 4 Insurance Policy Coverage and Declarations
Tab 5 Insurance Policy – Causes of Loss – Special Form
Tab 6 Insurance Policy - the Water Exclusion Endorsement
Tab 7 Affidavit of Duane Kamins
Tab 8 Affidavit of John Moore
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TABLE OF AUTHORITIES
Cases
Am. Mfrs. Mut. Ins. Co. v. Schaefer,
124 S.W.3d 154 (Tex. 2003) ......................................................................... 9, 10, 14
Balandran v. Safeco Ins. Co. of Am.,
972 S.W.2d 738 (Tex. 1998) ...................................................................................17
Comsys Info. Tech. Servs., Inc. v. Twin City Fire Ins. Co.,
130 S.W.3d 181 (Tex. App.—Houston [14th Dist.] 2003, pet. denied) ................... 8
Ferguson v. Bldg. Materials Corp. of Am.,
295 S.W.3d 642 (Tex. 2009) ................................................................................... 7
Fiess v. State Farm,
202 S.W.3d 744 (Tex. 2005) ................................................................................. 10
Fleming & Associates, L.L.P. v. Barton,
425 S.W.3d 560 (Tex. App.—Houston [14th Dist.] 2014, pet. requested) ............. 7
For Kids Only Dev. Ctr., Inc. v. Philadelphia Indem. Ins. Co.,
260 S.W.3d 652 (Tex. App.—Dallas 2008, pet. denied) ....................................... 18
Gilbert Texas Const., L.P. v. Underwriters at Lloyd’s London,
327 S.W.3d 118 (Tex. 2010) .................................................................................... 8
Goebel v. Brandley,
174 S.W.3d 359 (Tex. App.—Houston [14th Dist.] 2005, pet. denied)................... 7
Haines v. United Sec. Ins. Co.,
602 P.2d 901 (Colo. App. 1979)............................................................................. 20
-v-
In re Deepwater Horizon,
No. 13-0670, 2015 WL 674744 (Tex. Feb. 13, 2015) ............................................... 9
Jackson v. Am. Mut. Fire Ins. Co.,
299 F. Supp. 151 (M.D.N.C. 1968) aff’d, 410 F.2d 395 (4th Cir. 1969)................. 21
Lundstrom v. United Servs. Auto. Ass’n-CIC,
192 S.W.3d 78 (Tex. App.—Houston [14th. Dist.] 2006, pet. denied) ..................17
Old Dominion Ins. Co. v. Elysee, Inc.,
601 So.2d 1243 (Fla. Dist. Ct. App. 1992) ............................................................. 22
Pichel v. Dryden Mut. Ins. Co.,
117 A.D.3d 1267, 986 N.Y.S.2d 268 (2014) ........................................................... 22
Progressive Cnty. Mut. Ins. Co. v. Kelley,
284 S.W.3d 805 (Tex. 2009) (per curiam) ............................................................ 10
Sec. Mut. Cas. Co. v. Johnson,
584 S.W.2d 703 (Tex. 1979) .................................................................................. 14
Shafaii Children’s Trust & Party & Reception Ctr., Inc. v. W. Am. Ins. Co.,
417 S.W.3d 614 (Tex. App.—Houston [14th Dist.] 2013, pet. denied) ................... 9
Silow v. State Farm Ins. Co.,
No. CIV.A. 94-2956, 1994 WL 709362 (E.D. Pa. Dec. 20, 1994) ...........................17
State Farm Fire & Cas. Co. v. Vaughan,
968 S.W.2d 931 (Tex. 1998) ................................................................................... 11
State Farm Life Ins. Co. v. Beaston,
907 S.W.2d 430 (Tex. 1995) .................................................................................. 10
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State Farm Lloyds v. Page,
315 S.W.3d 525 (Tex. 2010) ......................................................................... 9, 10, 11
Ulico Cas. Co. v. Allied Pilots Ass’n,
262 S.W.3d 773 (Tex. 2008) ................................................................................... 8
Western Reserve Life Ins. Co. v. Meadows,
261 S.W.2d 554 (Tex. 1953) ...................................................................................13
WesternGeco, L.L.C. v. Input/Output, Inc.,
246 S.W.3d 776 (Tex. App.—Houston [14th Dist.] 2008, no pet.) ......................... 8
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TO THE HONORABLE FOURTEENTH COURT OF APPEALS:
Appellee United Fire and Casualty Company requests the Court affirm the
summary judgment in its favor and deny Kelley Street Associates’ competing
request to render summary judgment in its favor.
REPLY ISSUE PRESENTED
The trial court correctly granted summary judgment to United Fire
and denied the cross-motion for summary judgment of its insured
because Kelley Street Associates’ loss was excluded under the Water
Exclusion Endorsement (responsive to Appellant’s Issue No. 1).
STATEMENT OF FACTS
This is an insurance-coverage dispute for property loss benefits, resolved by
the district court on competing motions for summary judgment. CR 17 (Kelley
Street Associates’ motion); CR 128 (United Fire’s motion).
Appellant Kelley Street Associates, LLC sued United Fire and Casualty
Company and the City of Houston. CR 5. Kelley Street Associates complained the
City of Houston and its public works department had caused property damage to
the plumbing system of a commercial building owned by Kelley Street Associates.
CR 6. Kelley Street Associates also claimed that the property damage was a
covered loss under a commercial general liability insurance policy issued by United
Fire. CR 7-8. United Fire determined that the policy excluded the loss caused by
water that backs up or overflows from a sewer, drain, or sump. CR 7. The insurer
did make a payment under the policy’s specific endorsement for sewer backup
coverage, CR 7-8, but Kelley Street Associates claimed its damages exceeded the
limits of that endorsement. United Fire answered the suit and asserted, among
other defenses, that it had paid everything Kelley Street Associates was entitled to
under the policy. CR 10-11.
Kelley Street Associates thereafter moved for partial summary judgment
against United Fire. CR 17-24. Specifically, Kelley Street Associates sought
summary judgment on the coverage question, reserving for later recovery its
damages, attorney’s fees, and its claim for extra-contractual damages under the
Insurance Code. CR 17. Its summary judgment proof included two affidavits and
deposition excerpts, along with the United Fire insurance policy. CR 18. In its
factual statement supporting the motion for summary judgment, Kelley Street
Associates acknowledged that City of Houston’s work on a meter and valves has
caused holding tanks in a septic system to fill, resulting in water backing up through
the Kelley Street Associates’ building and floor drains, with resulting damage. CR
18-19. As in its petition, Kelley Street Associates conceded that United Fire had
denied a claim for damages from the incident because of a policy exclusion for
losses caused by “water that backs up or overflows from a sewer, drain, sump,
sump pump, or related equipment.” CR 19. Kelley Street Associates argued that
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the City had caused damage to the plumbing system, which in turn had caused the
damage to the building from water running into the storm sewer system, and
therefore the loss was not from a “mere backup or overflow of water from a sewer,
drain or sump.” CR 19. Kelley Street Associates also acknowledged that United
Fire had paid a loss under the endorsement for “sewer backup” coverage that was
part of the policy placed into effect after the loss.1 CR 20. Kelley Street Associates
argued that the exclusion did not apply, but did not assert the exclusion was
ambiguous. CR 20.
United Fire amended its answer to more specifically plead the exclusions of
the policy for loss or damage caused by water. CR 124-26.2 It then responded to the
motion for summary judgment of Kelley Street Associates, and filed its cross-
motion for summary judgment. CR 128-41. United Fire noted in its response and
cross-motion that the rules of construction advanced by Kelley Street Associates
1
Following the loss, Kelley Street Associates and United Fire agreed to amend the policy
and add a special endorsement that provided sewer backup coverage, limited to the Per
Policy Property Damage Limit ($50,000), where the water loss or damage did not result
from the intentional or negligent act of the insured. CR 154, 196 (CP 70 34 12 01). The
special endorsement was made effective as of the original policy incept date. CR 147.
Kelley Street Associates and United Fire also agreed that the payment under the special
endorsement did not waive Kelley Street Associates’ right to seek additional coverage
under the original Water Exclusion Endorsement, or United Fire’s coverage defenses to
the applicability of that endorsement. CR 26 (affidavit); CR 98 (email).
2
It was later amended a second time. CR 258-61.
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applied only when the policy provision at issue was ambiguous, while the United
Fire policy at issue was not ambiguous.CR 134. United Fire also argued that the
undisputed summary judgment record showed that water had filled from a
commercial property’s septic tank and then overflowed into the property’s floor
drains, causing damage, satisfying the plain meaning of the exclusion. CR 131.
United Fire also noted that the policy exclusion excluded loss “indirectly” caused
by water and regardless of other events or causes that contributed to the loss
concurrently or in any sequence. CR 134. Thus, Kelley Street Associates’ focus on
the City of Houston events that preceded the water backing up from a sewer or
drain did not alter the analysis. CR 134. Finally, United Fire argued that Kelley
Street Associates’ interpretation of the exclusion was not reasonable and not
supported by the case law on which it relied in its partial motion for summary
judgment. CR 136-40.
Kelley Street Associates filed a reply in support of its motion and a response
to United Fire’s cross-motion. CR 244-54. United Fire responded. CR 262-74.
The district court thereafter denied Kelley Street Associates’ motion for
partial summary judgment, CR 276, and granted United Fire’s cross-motion. CR
277. After granting severance from the claims against the City of Houston, CR 285-
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87, Kelley Street Associates moved for reconsideration and new trial. CR 288-90.
No such relief was granted, and this appeal followed. CR 294-95.
SUMMARY OF THE ARGUMENT
The parties agree that any coverage under the policy in excess of the
payment by United Fire rests on the applicability of the Water Exclusion
Endorsement. A policy is unambiguous, as a matter of law, if the Court can give it a
definite legal meaning. Here, the policy and the Water Exclusion Endorsement are
not ambiguous, and therefore the Court will not favor Kelley Street Associates’
interpretations of the policy and the Water Exclusion Endorsement. To the
contrary, the unambiguous provisions were correctly construed by the district
court, which rejected summary judgment for Kelley Street Associates and rendered
judgment for United Fire. That result should be affirmed.
Kelley Street Associates focuses on origin of its loss; that is, it claims that the
damages were caused not by “mere back-up or overflow of water from the City
main” but backup or overflow caused by the City of Houston damaging Kelley
Street Associates’ plumbing system. But the extra facts about why the water
entered the building do not change the coverage analysis. The United Fire policy
excluded losses or damage “caused directly or indirectly” by water, and “[s]uch
loss or damage is excluded regardless of any other cause or event that contributes
-5-
concurrently or in any sequence to the loss.” The impact of the Water Exclusion
Endorsement is substantially expanded by the language extending it to losses
caused “indirectly” by water that backups or overflows from a sewer or drain.
Further, the summary judgment record is uncontroverted that water
overflowed or backed up into Kelley Street Associates’ premises or was otherwise
discharged from a sewer, drain, sump, sump pump or related equipment. The
sequence of how these events occurred –from City work, to failed valve, to filled
septic system, to water that came up through the drains throughout the building –
is not controlling since loss or damage is excluded “regardless of any other cause or
event that contributes concurrently or in any sequence to the loss.”
Finally, Kelley Street Associates argues interpretations of the Water
Exclusion Endorsement that rest on words or concepts absent from the policy
itself. Whether these interpretations arise from factual distinctions or
distinguishable case law, the Court would have to rewrite the policy or add to its
language to accept Kelley Street Associates’ position. In contrast, a plain reading of
the policy and the Water Exclusion Endorsement are all that is necessary to affirm
the judgment.
The Court need not look to case law to determine what the Water Exclusion
Endorsement means, because the question will be answered when the Court looks
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first to the policy itself. The policy and the Water Exclusion Endorsement were
properly construed by the district court. That ruling should be affirmed.
ARGUMENT AND AUTHORITIES
1. The Standard and Scope of Review Applicable to the Competing Motions.
In its brief, Kelley Street Associates prays for rendition of judgment that its
loss is covered, and a remand for determination of damages. See Appellant’s brief
at 14. Instead, the Court should overrule the issues presented on appeal and affirm
the summary judgment granted to United Fire.
This Court reviews the trial court’s decision to grant summary judgment to
United Fire de novo. Fleming & Associates, L.L.P. v. Barton, 425 S.W.3d 560, 567
(Tex. App.—Houston [14th Dist.] 2014, pet. requested) citing Ferguson v. Bldg.
Materials Corp. of Am., 295 S.W.3d 642, 644 (Tex. 2009). Typically, when
reviewing cross-motions for summary judgment the Court considers both motions
and renders the judgment that the trial court should have rendered. Each party
must carry its own summary judgment burden and neither can prevail due to the
other’s failure to meet that burden. Goebel v. Brandley, 174 S.W.3d 359, 362 (Tex.
App.—Houston [14th Dist.] 2005, pet. denied). Because both Kelley Street
Associates and United Fire were movants, the burden for each was the same: to
establish entitlement to a summary judgment by conclusively proving all of the
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elements of the claim or defense as a matter of law. WesternGeco, L.L.C. v.
Input/Output, Inc., 246 S.W.3d 776, 781 (Tex. App.—Houston [14th Dist.] 2008,
no pet.).
2. Kelley Street Associates Did Not Have Coverage Under the Policy’s Water
Exclusion Endorsement.
A. Kelley Street Associates did not carry its burden as an insured
and as a summary judgment movant.
Initially, Kelley Street Associates has the burden to establish coverage under
a commercial general liability policy. Gilbert Texas Const., L.P. v. Underwriters at
Lloyd’s London, 327 S.W.3d 118, 124 (Tex. 2010). Further, an insured is not
entitled to recover under an insurance policy unless it proves its damages are
covered by the policy.
If the insured proves coverage, then United Fire must prove the loss is
within an exclusion of the policy. Gilbert, 327 S.W.3d at 124 citing Ulico Cas. Co. v.
Allied Pilots Ass’n, 262 S.W.3d 773, 782 (Tex. 2008). If the insurer proves that an
exclusion applies, the burden shifts back to the insured to show that an exception to
the exclusion brings the claim back within coverage. Gilbert, 327 S.W.3d at 124
citing Comsys Info. Tech. Servs., Inc. v. Twin City Fire Ins. Co., 130 S.W.3d 181, 193
(Tex. App.—Houston [14th Dist.] 2003, pet. denied). Kelley Street Associates did
not carry that burden, while United Fire proved the loss was excluded by the Water
-8-
Exclusion Endorsement. More specifically, Kelley Street Associates did not raise
any genuine issue of fact to prove that the loss was not attributable to the pleaded
excluded water hazard.
B. The Water Exclusion Endorsement is interpreted like any other
contract provision.
Contracts of insurance are reviewed by this Court just like any other
contract. Shafaii Children’s Trust & Party & Reception Ctr., Inc. v. W. Am. Ins. Co.,
417 S.W.3d 614, 618-19 (Tex. App.—Houston [14th Dist.] 2013, pet. denied). The
Court begins its analysis with the policy language. Id., citing Gilbert, 327 S.W.3d
118, 126 (Tex. 2010). The courts’ primary objective is to ascertain and give effect
to the parties’ intent as expressed by the words they chose to effectuate their
agreement. In re Deepwater Horizon, No. 13-0670, 2015 WL 674744, at *9 (Tex.
Feb. 13, 2015). “To that end, we give the words in the policy their ordinary and
generally accepted meaning unless the policy indicates that the parties intended the
language to impart a technical or different meaning.” Id., citing Am. Mfrs. Mut. Ins.
Co. v. Schaefer, 124 S.W.3d 154, 158 (Tex. 2003). Courts will examine the policy as
a whole, seeking to harmonize all provisions and render none meaningless. Gilbert,
327 S.W.3d at 126. If an insurance contract uses unambiguous language, courts will
construe it as a matter of law and enforce it as written. In re Deepwater Horizon,
citing State Farm Lloyds v. Page, 315 S.W.3d 525, 527–28 (Tex. 2010). Whether a
-9-
contract is ambiguous is a question of law for the court to decide by looking at the
policy as a whole in light of the circumstances present when the contract was
entered. In re Deepwater Horizon. Disagreement about a policy’s meaning does not
create an ambiguity if there is only one reasonable interpretation. Id. “Parties’
conflicting interpretations alone do not establish ambiguity.” Shafaii, 417 S.W.3d
at 619, citing State Farm Lloyds v. Page, 315 S.W.3d 525, 527 (Tex. 2010); see also
Am. Mfrs. Mut. Ins. Co. v. Schaefer, 124 S.W.3d 154, 157 (Tex. 2003). And extrinsic
evidence is not admissible for the purpose of creating an ambiguity in an insurance
policy. Progressive Cnty. Mut. Ins. Co. v. Kelley, 284 S.W.3d 805, 807 (Tex. 2009)
(per curiam). Any ambiguity must be evident from the language of the policy itself.
Fiess v. State Farm, 202 S.W.3d 744, 747 (Tex. 2005).
C. The Water Exclusion Endorsement is not ambiguous.
In section I of its argument, and its Summary of the Argument, Kelley Street
Associates claims that it only needs to show that the construction of the policy it
offers is “reasonable.” Appellant’s brief at 7. That claim requires, however, that
there be some ambiguity in the insurance contract. See State Farm Life Ins. Co. v.
Beaston, 907 S.W.2d 430, 433 (Tex. 1995) (explaining that only if insurance policy
remains ambiguous after courts apply canons of interpretation should policy
language be construed against the insurer in a manner that favors coverage). Thus,
- 10 -
the first question for this Court is whether the United Fire policy is ambiguous, not
whether Kelley Street Associates’ construction is reasonable. This first issue is a
question of law, State Farm Lloyds v. Page, 315 S.W.3d 525, 527 (Tex. 2010), and
thus suitable for summary judgment and this Court’s de novo review. The contra-
insurer rule of construction is not applicable to this case, see State Farm Fire & Cas.
Co. v. Vaughan, 968 S.W.2d 931, 933 (Tex. 1998), and Kelley Street Associates is
not to be favored in the Court’s construction of the insurance policy. Compare with
appellant’s brief at 5.
3. The Application of the Water Exclusion Endorsement is Required by the
Policy’s Plain and Unambiguous Terms.
Kelley Street Associates was the insured under a policy for building and
personal property coverage, form CP 00 10 06 07. The United Fire policy has a
cause of loss special form (CP 10 30 06 07) that sets out the covered causes of loss.
CR 60. Risks of direct physical loss are covered causes of loss unless they are
excluded in the special form, or limited. Id. Among the excluded losses are losses or
damage “caused directly or indirectly” by water. CR 60-61. “Such loss or damage
is excluded regardless of any other cause or event that contributes concurrently or
in any sequence to the loss.” CR 60. The exclusion for loss or damage caused
directly or indirectly by water included
o Water that backs up or overflows from a sewer, drain, or sump;
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CR 61.
The Water Exclusion Endorsement (CP 10 32 08 08) replaced the special
form provision and excluded loss or damage directly or indirectly caused by
o Water that backs up or overflows or is otherwise discharged
from a sewer, drain, sump, sump pump or related equipment;
CR 70, 244. Notably, the exclusion applies regardless of whether the “water” “is
caused by an act of nature or is otherwise caused.” Appellant’s brief at 7; CR 70,
247.
The district court correctly granted summary judgment to United Fire
because Kelley Street Associates losses are excluded as “caused directly or
indirectly” by water that backed up, overflowed or was otherwise discharged from
a sewer, drain, sump, sump pump or related equipment. There was no summary
judgment evidence that a covered loss caused the alleged damages to Kelley Street
Associates’ building.
A. The words of the Water Exclusion Endorsement support
summary judgment for United Fire.
This case does not require the Court to make distinctions between “surface
water,” “high water,” “tidal water,” “flood water” or other such terms. Rather,
the Water Exclusion Endorsement excluded coverage for all risk of loss or damage
caused directly or indirectly by “water,” whatever its nature or source – whether
- 12 -
caused by an act of nature or otherwise. When a term is not defined in an insurance
policy, it must be given its plain, ordinary, and generally accepted meaning, unless
the policy indicates the term was used in a technical or different sense. Western
Reserve Life Ins. Co. v. Meadows, 261 S.W.2d 554, 557 (Tex. 1953). “Water” is an
unambiguous term with a plain, ordinary meaning. There is no dispute in this case
about the water substance that was involved here – it was “water.”
The Water Exclusion Endorsement also broadly excludes water that backs
up or overflows or is otherwise discharged. To “back up” includes water that
accumulates, just as the water did here. As summary judgment evidence, Kelley
Street Associates offered the affidavit of its President, who stated that on the date
of Kelley Street Associates’ loss “water began to flow through a series of floor
drains in the building . . . .”CR 25. Kelley Street Associates’ plumbing contractor
stated the septic system was unable to keep up with the volume of water into the
sanitary sewer system. CR 170. More specifically, the contractor testified that flush
valves in the building were damaged and malfunctioning. Due to that malfunction,
water had been continually flowing into the sanitary sewer septic
system in the building. The septic system could not keep up with the
volume of water being introduced to the system; after the septic
system filled, water came up through the drains throughout the
building, resulting in the flooding of the building.
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CR 99 (emphasis added). This summary judgment evidence demonstrates water
backed up or overflowed from a sewer or drain, in a direction opposite (“up”) the
intended and usual flow, resulting in an excluded loss.
The terms “sewer,” “drain,” “sump,” and “sump pump” are also
unambiguous and have no special, technical meaning. They should be given their
ordinary and generally accepted meaning. Am. Mfrs. Mut. Ins. Co. v. Schaefer, 124
S.W.3d 154, 158 (Tex. 2003) citing Sec. Mut. Cas. Co. v. Johnson, 584 S.W.2d 703,
704 (Tex. 1979). As United Fire explained in the district court, the noun “drain” is
primarily defined by the Merriam-Webster dictionary as “something (such as a
pipe) that is used for removing a liquid from a place or container.” CR 135.
“Sewer” is primarily defined as “an artificial usually subterranean conduit to carry
off sewage and sometimes surface water (as from rainfall).”
Kelley Street Associates claims that a different provision of the contract
providing “additional water coverage” and a definition of “water damage,” both at
CR 69, mean that the Water Exclusion Endorsement only applies to events outside
the property and losses within the plumbing system of the building will be covered.
See appellant’s brief at 8. To be sure, all of the policy terms should be read
together; but the “additional water coverage” provision (referencing loss or
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damage from “covered water”) 3 does not modify the language of the Water
Exclusion Endorsement. And the definition of “water damage” to mean leakage of
water or steam as the direct result of breaking apart or cracking of a system located
on the premises and containing water or steam does not aid in construing the Water
Exclusion Endorsement. Further, the “water damage” definition excludes a
“sump system, including its related equipment and parts” which is plainly part of
the Water Exclusion Endorsement.
Moreover, there is simply no policy language that qualifies the terms
“sewer,” “drain,” “sump,” and “sump pump” by dividing them into parts or
with reference to building locations, or to the inside or outside of the insured
premises. Even considering the “water damage” definition at CR 69, it provides no
additional language that would permit the Court to construe the Water Exclusion
Endorsement as Kelley Street Associates desires. Rather, the Court would have to
assert additional language into the policy, which it should refuse to do. Gilbert, 327
S.W.3d at 126 (cautioning that courts will honor the parties’ agreement and must
not remake the contact by reading additional provision into the insurance policy).
3
CR 69 (Water Damage, Other Liquids, Powder Or Molten Material Damage).
- 15 -
Kelley Street Associates also attempts to reframe the issue here as an
internal “failure of the plumbing system.” CR 25. In a similar fashion, Kelley
Street Associates argues that an overflow of water originating inside the building
would be covered. See appellant’s brief at 9. A failure of the plumbing system may
not be explicitly excluded, but among the excluded losses are losses or damage
“caused directly or indirectly” by water. CR 60-61. “Such loss or damage is
excluded regardless of any other cause or event that contributes concurrently or in
any sequence to the loss.” CR 60. Thus the policy language broadly covers damage
by water that backs up or overflows or is otherwise discharged from a drain
regardless of other events or causes that contributed to the event. With this
language, Kelley Street Associates’ proposed internal/external distinction lacks
any support in the insuring language of the policy.
Intent to make such distinctions could be easily reflected in the language of
an exclusion, as this example shows:
This peril does not include loss
c. caused by or resulting from water from outside the plumbing system
that enters through sewers or drains or water which enters into and
overflows from within a sump pump, sump pump well or other type
system designed to remove subsurface water which is drained from the
foundation area . . . .
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Silow v. State Farm Ins. Co., No. CIV.A. 94-2956, 1994 WL 709362, at *1 (E.D. Pa.
Dec. 20, 1994) (emphasis supplied). Such language is absent here.
Kelley Street Associates also deviates from a common understanding in its
proposed definition of “drain.” See appellant’s brief at 9. It is undisputed in the
summary judgment record that water in the Kelley Street Associates building
backed up or overflowed from a floor drain because
“damaged flush valves caused the holding tanks in the septic system
to fill rapidly. As a result of the Building’s tanks filling, water came up
through the floor drains located throughout the Building, flooding it.”
CR 18 (Kelley Street Associates’ motion for summary judgment, at “The Facts”
section); CR 23. See also CR 25 (affidavit of D. Kamins stating “water began to
flow through a series of floor drains in the building.”); CR 96 (“According to
[Kelley Street Associates] employees, . . . [w]hen the water was turn back on, they
noticed water coming from the drains in all bathrooms and the wet bar drain in Mr.
Kamins[‘] office.”). In construing this policy, the Court’s inquiry is, first, an effort
to determine the ordinary lay meaning of the words to the general public. See
Lundstrom v. United Servs. Auto. Ass’n-CIC, 192 S.W.3d 78, 91 (Tex. App.—
Houston [14th. Dist.] 2006, pet. denied) citing Balandran v. Safeco Ins. Co. of Am.,
972 S.W.2d 738, 740–41 (Tex. 1998). The general meaning of “drain” as a pipe
that carries off water would include a floor drain.
- 17 -
Kelley Street Associates also criticizes United Fire for equating “sewer”
with “septic system” or “septic tank.” See appellant’s brief at 10. But again, the
subtle distinctions that Kelley Street Associates proposes are beyond the ordinary
lay meaning of these words to the general public. 4 Further, these fine distinctions
are not consistent with the policy language excluding losses from “water that backs
up or overflows from a sewer, drain, sump, sump pump, or related equipment”
(emphasis added).
For all of these reasons, based on the policy language, summary judgment for
United Fire should be affirmed.
4. The Application of the Water Exclusion Endorsement is not Changed by
Reference to Case Law.
In section III of its brief, Kelley Street Associates argues that case law
supports its interpretation of the policy, primarily relying on a case from the Dallas
Court of Appeals. See appellant’s brief at 10, citing For Kids Only Dev. Ctr., Inc. v.
Philadelphia Indem. Ins. Co., 260 S.W.3d 652 (Tex. App.—Dallas 2008, pet.
denied). The case arose from a day care center that was flooded with sewage
4
A septic tank or system is part of a sewer system. Kelley Street Associates’ attempt to
distinguish between sewer as public system and septic as private system, see appellant’s
brief at 10, is another construction requiring words to be read into the policy in the guise
of interpretation.
- 18 -
flowing from floor drains in the building. A witness said that water had also flowed
from a manhole in the street outside, and a city official had testified that the
overflow was caused by stoppage in the city sewer main.
The policy at issue provided covered causes of loss, representing direct
physical losses subject to a long list of exclusions. 260 S.W.3d at 653. The exclusion
at issue excluded from coverage such damage caused directly or indirectly by
“water that backs up or overflows from a sewer, drain or sump.” There was also an
endorsement that provided limited recovery for sewer and drain backups, including
loss or damage resulting from flood damage or water that backs up from a sewer,
drain or sump. The insured claimed that the sewage overflow was an overflow from
its plumbing system that did not trigger the sewer and drain backup exclusion and
its more limited coverage. Id. at 654.
The court of appeals held that the policy plainly excluded coverage for water
that backed up from a sewer drain or sump. The court held that reading the
exclusion so as to eliminate instances where water had traveled through the
insured’s plumbing system “would read the exclusion out of the policy.” Id. at 655.
The court of appeals thus concluded the policy unambiguously excluded from
coverage the type of drain and sewer backup that the insured had experienced.
- 19 -
Thus, the claimant in the For Kids Only suit made a similar argument to
Kelley Street Associates here: once water enters a building’s plumbing system, its
status changes and any damage it causes becomes a non-excluded occurrence. Yet
the Dallas Court of Appeals rejected that argument. Kelley Street Associates states
that notwithstanding the Dallas court’s analysis, what matters is that the court
focused “on the source of the overflow.” See appellant’s brief at 11. Thus, explains
Kelley Street Associates, here the overflow was caused by damaged valves that
were part of its plumbing system and the overflow thus “came” from Kelley Street
Associates’ system. In this case, regardless of what the overflow source was, when
water “backs up or overflows or is otherwise discharged from a sewer, drain, sump,
sump pump or related equipment,” resulting damage is excluded from coverage.
Compare with Haines v. United Sec. Ins. Co., 602 P.2d 901, 902 (Colo. App. 1979)
(policy provided coverage for accidental discharge or “overflow from within a
plumbing system” but not “water that backs up through sewers or drains,” thus
requiring the court to determine whether cause of accidental discharge was inside
or outside a plumbing system). In short, For Kids Only Dev. Ctr., Inc. v. Philadelphia
Indem. Ins. Co. presents no reason to reverse the summary judgment for United
Fire, and actually supports the result in this case.
- 20 -
Kelley Street Associates notes that the Dallas court in For Kids Only cited
Jackson v. Am. Mut. Fire Ins. Co., 299 F. Supp. 151, 152 (M.D.N.C. 1968) aff’d, 410
F.2d 395 (4th Cir. 1969). See appellant’s brief at 11. Jackson, however, is quickly
distinguished because it contained specific policy language that provided coverage
for leaks or failure of the internal plumbing system, and thus the court concluded
the “sewers or drains” in the exclusion must have referred to fixtures outside the
internal plumbing system. Jackson, 299 F. Supp. at 155-56. Thus, the policy terms
set up the “internal/external” analysis –although the court ultimately concluded
“it would appear that the parties intended to exclude loss caused by the backing up
of water through sewers or drains even though this water overflows from within the
plumbing system in the plaintiff’s home.” Jackson, 299 F. Supp. at 157.
Kelley Street Associates also cites a New York case, see appellant’s brief at
13, for the on premises/off premises analysis.5 In that case, the court was faced with
a water damage exclusion that applied to loss caused by “water which backs up
through sewers or drains.” Another exclusion stated there was no coverage “for
5
Kelley Street Associates cites Pichel v. Dryden Mut. Ins. Co., 965 N.Y.S.2d 342, 343 (Sup.
Ct. 2013) which is the trial court decision. The appellate decision is Pichel v. Dryden Mut.
Ins. Co., 117 A.D.3d 1267, 1267-68, 986 N.Y.S.2d 268, 270 (2014).
- 21 -
loss caused by repeated or continuous discharge, or leakage of liquids or steam from
within a plumbing . . . system.” But that exclusion also stated the insurer would
“pay for loss caused by the accidental leakage, overflow or discharge of liquids or
steam from a plumbing . . . system.” And, the court noted, a “plumbing system”
could include drains. The court reconciled these provisions so that the exclusion
applied to a backup that originates off an insured’s property, while the coverage
provision applies to an occurrence originating within the insured’s property and
within the “plumbing system.” As the Court can see, the New York case
incorporated the “plumbing system” concept because the policy language did too.
Pichel v. Dryden Mut. Ins. Co., 117 A.D.3d 1267, 1267-68, 986 N.Y.S.2d 268, 270
(2014). Unlike the New York case, here there are no competing exclusion and
coverage provisions.
Kelley Street Associates also cites Old Dominion Ins. Co. v. Elysee, Inc., 601
So.2d 1243 (Fla. Dist. Ct. App. 1992). See appellant’s brief at 13. In that case, a
blockage formed in the main sewer line located outside the insured’s retail store at
a mall. When other stores which were connected to the main sewer line used their
toilets or sinks, the water was discharged onto the insured’s premises. The
insurance policy at issue excluded damage caused by water that “backs up from a
sewer or drain.” While the trial court had heard testimony about the relevant sewer
- 22 -
system and where the mall owner and store owner divided responsibility, 601 So.2d
at 1244, the court of appeals found that the water that discharged from the sewer
and into the retail store was plainly water that had backed up from a sewer or drain.
Id. at 1245. Contrary to Kelley Street Associates’ suggestion, the Old Dominion
case does not set a bright-line rule that sewer systems always end at property lines,
or cannot be part of an insured’s premises.
The other cases cited by Kelley Street Associates at appellant’s brief 13-14
likewise do not demonstrate that the district court’s summary judgment ruling as to
this insurance contract was in error, or that Kelley Street Associates is entitled to
rendition on its cross-motion. The cases also do not raise a genuine issue of fact
precluding summary judgment for United Fire. At best, the case law reminds
reviewing courts that each policy must be interpreted based on its own specific
contract language. Here, Kelley Street Associates has failed to demonstrate that the
district court incorrectly interpreted the Water Exclusion Endorsement and the
CGL policy as a matter of law, or of fact.
CONCLUSION AND PRAYER
For the reasons stated in this brief, appellee United Fire and Casualty
Company requests the Court affirm the judgment. The costs of appeal should be
- 23 -
taxed against appellant Kelley Street Associates, LLC. Appellee also requests any
other proper relief.
Respectfully submitted,
MILLS SHIRLEY L.L.P.
By: /s/ George W. Vie III
George W. Vie III
State Bar No. 20579310
2228 Mechanic Street, Suite 400
Galveston, Texas 77550
(713) 571-4232
Fax (713) 893-6095
gvie@millsshirley.com
ATTORNEYS FOR APPELLEE
CERTIFICATE OF COMPLIANCE
The undersigned hereby certifies that this computer-generated document
contains (in full) 6002 words according to the word count provided by Microsoft
Word 2010 (version 14.0.6129.5000 (32-bit)).
/s/ George W. Vie III
- 24 -
CERTIFICATE OF SERVICE
The undersigned hereby certifies that a true and accurate copy of the
foregoing was served via e-service to the following counsel of record on April 3,
2015:
APPELLANT’S ATTORNEY:
H. Miles Cohn
Michelle V. Frier
Crain, Caton & James, P.C.
1401 McKinney St., 17th Floor
Houston, Texas 77010
mcohn@craincaton.com
/s/ George W. Vie III
George W. Vie III
- 25 -
Appendix Tab 1
CAUSE NO. 2013-36796
KELLEY STREET APARTMENTS § IN THE DISTRICT COURT OF
§
vs. § HARRIS COUNTY, TEXAS
§
CITY OF HOUSTON and UNITED §
AND CASUALTY COMPANY § 295 1h JUDICIAL DISTRICT
ORDER
Came on to be heard Plaintiff Kelley Street Apartments' Motion for Partial Summary
Judgment. Upon consideration, the Court DENIES Plaintiff Kelley Street Apartments' Motion
for Partial Summary Judgment.
Signed this 9th day of May, 2014
c~~6~
Judge Presiding
FILED
· Chris Oanlel
District Clerk
MAY -9 201't
nme·---~~~=---:;:::::-~
Harri• County, Texas
276
Appendix Tab 2
(? l
CAUSE NO. 2013-36796 7A
KELLEY STREET APARTMENTS § IN THE DISTRICT COURT OF /JCA
§
vs. § HARRIS COUNTY, TEXAS
§
CITY OF HOUSTON and UNITED §
AND CASUALTY COMPANY § 295th JUDICIAL DISTRICT
ORDER
Came on to be heard Defendant United Fire and Casualty Company's Counter-Motion for
Final Summary Judgment Upon consideration, the Court GRANTS Defendant United Fire and
Casualty Company's Counter-Motion for Final Summary Judgment.
Signed this 9th day of May, 2014.
tv\_~6~
Judge Presiding
FILED
Chrfa Danlal
Dlatrlct Clerk'
MAY - 9 201~
Timo:_•-,:r.:;:ir:-,r,~~~--
Aarrl1 dounl;, foaa
BY.------~a~.p~u~~:-------
277
Appendix Tab 3
6/6/2014 • 20 47 PM
Chns Daniel • D1s1nc1 Clerk Hams Coun1y
Envelope No 1473586
By GILBERT LIRA
..
....
CAUSE NO. 2013-36796 A
0
§ IN THE DISTRICT COURT
'"'"' KELLEY STREET ASSOCIATES, LLC,
§
'"'
IO
Plaintiff, §
..
..~
§
V. § OF HARRIS COUNTY, TEXAS
H §
H
CITY OF HOUSTON and UNITED FIRE §
"'
Cl
Al'o'D CASUAL TY COMPANY, §
~
H
§
"'u~ Defendants. § 295TH JUDICIAL DISTRICT
ORDER GRANTING MOTION TO SEVER PLAINTIFF'S CLAIMS AGAINST
DEFENDANT UNITED FIRE A.i'ID CASUALTY COMPANY & FOR ENTRY OF FINAL
.nJOGMENT REGARDING DEF!i:NDANT UNITED FIRE AND CASUALTY COMPANY
On this day came on to .be considered Defendant,. United Fire and Casualty Company's
Motion to Sever and for Entry of Final Judgment regarding Plaintiffs claims against Defendant
United Fire and Casualty Company. After considering said Motion and the pleadings on file, the
Court is of the opinion and finds that said Motion is well taken. It is therefore,
ORDERED that United Fire and Casually Company's Motion to Sever and for Entry of
Fianl Judgment is GRANTED. It is further ORDERED that Plaintiffs claims against United Fire
and Casualty Company arc hereby severed from Plaintiffs remaining claims against City of
Houston. The Clerk of the Court shall assign the severed case the separate cause number of
2013-36796-A; and file copies of the following pleadings with new Cause Nu. 2013-36796-i\:
1. 06/2112013 Plaintiffs Original Petition
2. 07/12/2013 Citation filed with the Court pertaining to service on Defendant United
Fire and Casualty Company
3. 0712612013 Defendant United Fire and Casualty Company's Original Answer
4. 08/05/2013 Notice of (Plaintiffs) Counsel's Change of Law Firm and Address
r~g.o 17
285
,.
5. 08/06/2013 Designation of Lead Counsel (Defendant United Fire's counsel)
6. 01108/2014 Plaintiffs Motion for Partial Summary Judgment against Defendant
United Fire and Casualty Company, including exhibits and proposed
order
7. 01110/2014 Notice of Oral Hearing (on Plaintiff's Motion for Partial Summary
Judgment Against United Fire and Casualty Company)
8. 01/09/2014 Docket Control Order
9. 01/31/2014 Defendant's First Amended Answer
I 0. 01/31 /2014 Defendant, United Fire and Casualty Company's Response to Plaintiffs
Motion for Partial Sununary Judgment & Counter-Motion for Final
Summary Judgment Against Plaintiff & Request for Resetting of Oral
Hearing. Including all exhibits and Proposed Orders
11. 02/05/2014 Defendant United Fire and Casualty~ Company's Unopposed Motion for
Leave to File Exhibit Attachment to its MSJ Response, Exhibit and
proposed Order
12. 02/06/2014 Amended Notice of Oral Hearing (on Plaintiff's Motion for Partial
Summary Judgment Against United Fire and Casualty Company)
13. 02/06/2014 Notice of Hearing (For United Fire and Casualty Company's Counter·
Motion for Final Summary Judgment Against Plaintiff)
14. 02/21/2014 Amended Notice of Hearing (for Defendant, United Fire and Casualty
Company's Counter-Motion for Final Summary Judgment Against
Plaintiff)
15. 02/24/2014 Second Amended Notice of Oral Hearing (for Plaintiffs Motion for
Partial Sununary Judgment Against United Fire and Casualty Company)
16. 03/12/2014 Plaintiffs Combined (I) Reply In Support of Motion for Partial Summary
Judgment and (II) Response to Defendant United Fire's Counter-Motion
for Swnmary Judgment, including proposed Partial Summary Judgment
Against United Fire and Casualty Company
17. 03/21/2014 Defendant's Second Amended Answer
·,::, 18. 03/24/2014 Defendant, United Fire and Casualty Company's Combined (1) Reply to
Plaintiffs Response to United Fire's Motion for Final Summary
Pa g l: I 8
'~
286
. ' '
Judgment & (2) Sur-Reply to Plaintiff's Motion for Partial Summary
Judgment
19. 03/31 /2014 Order Granting Defendant's Motion for Leave to File Exhibit Attaclunent
to Its MSJ Response
20. 0413012014 Agreed Motion for Cominuance, and proposed Order
21. 05/09/2014 Order (Denying Plaintiff's Motion for Partial Summary Judgment)
22. 0510912014 Order (Granting Defendant United Fire and Casualty Company's
Counter-Motion for Final Summary Judgment)
23. This Motion To Sever and for Entry of Final Judgment regarding
Plaintiffs claims against Defendant United Fire and Casualty Company
24. This Order Granting Motion to Sever and for Entry of Final Judgment;
and
25. Fjnal J~dgment Regardi11g Plaintiffs Claims Against Defendant United
Fire and Casualty Company
SIGNED this ~ayof ~ ,2014.
~rO~
JUDGE PRESIDfNG
,.,
c
,.,
Sl.P/tr.ibn63909/000120 446
z
f' a g <: i 9
287
Appendix Tab 4
IL 70 28 UF 01 08
ll) UNITED FIRE GROUP®
UNITED FIRE & CASUAL TY COMPANY
118 Second Avenue SE
P.O. Box 73909
Cedar Rapids, IA 52407-3909
Secretary
A STOCK INSURANCE COMPANY
IL 70 28 UF 01 08 EXHIBIT
I iA-1- UFGKelley_ 00386
27
0106
UNITED FIRE & CASUALTV COMPANY
PO BOX 73909, CEDAR RAPIDS IA 52407 IPOLICY NUMBER: 85315789
ACCOUNT NUMBER:3000193367 (2) COMMERCIAL PROPERTY
DIRECT BILL - 150 COMMERCIAL PROPERTY COVERAGE PART
ISSUE DATE l 0 -1 Q - 2 Q 12 MD3 REPLACEMENT OF 0 1 0 6 85315789 DECLARATIONS AMENDED 06/20/2012
NAMED KELLEY STREET ASSOCIATES LLC AGENCY & CODE 830117
INSURED HOUSTON TRANSPORTATION SERVICE GEM INSURANCE AGENCIES LP
AND ATTN DWANE KAMI NS PO BOX 27469
MAILING 5825 KELLEY ST
ADDRESS HOUSTON TX 77026-1901 HOUSTON TX 77227
POLICY
12:01 A.M. Standard time FROM: 01-01-2012 TO: 01-01-2013
PERIOD: And ror successive policy poriods as staled below.
We will provide the insurance described in this policy in return tor the premium and compliance with all applicable policy provisions. If
we elect to continue this insurance, we will renew this policy if you pay the required renewal premium for each successive policy
period. subject to our premiums. rules and forms then In effect. You must pay us prior to the end of the current policy period or else
this policy will terminate after anv statutorilv reouired notices are malled to you. An insufficient funds check Is not considered payment.
PREM/ LIMITOF
BLDG DESCRIBED PREMISES AND COVERAGES INSURANCE RATE PREMIUM
E:QUIPMENT BREAKDOWN 226
SEWER BACKUP 50,000 330
01 01 5825 KELLEY ST
!HOUSTON TX 77026-1901
!FRAME
bFFICES
!BUILDING 1,083,508 .297 3,219
Special Causes Of Loss 2,500 Ded
Windstorm or Hail Deductible
Percentage: 2%
Replacement cost 80% Coins
Automatic Valuation Adjustment
rt OUR BUSINESS PERSONAL PROPERTY 546,000 .349 1,906
Special causes Of Loss 2,500 Ded
Windstorm or Hail Deductible
Percentage: 2%
Replacement cost 80% Coins
4% Inflation Guard
11.DDITIONAL INTEREST Loss Payable -
PITNEY BOWES GLOBAL FINANCIAL
SERVICES LLC
CONTINUED ON CP7002
ABBREVIATIONS: BLDG=BUILDING COINS=CO!NSURANCE DED=OEDUCTtBLE INCL=INCLUOED PREM=PREMISES
Premium Charge Forms Advance Premium Premium Charge Forms Advance Premium
SEE UW7002
Other Forms SEE UW7002
~---
AMEND REASON: ADDING SEWER BACKUP COVERAGE EFFECTIVE 01/01/2012
PREMIUM FOR THIS COVERAGE PART $ 6,452
Endorsement Adjustment Premium $ 187 ADDITIONAL
This Declarations Page supersedes and replaces any preceding x
declarations page bearing the same policy number ror 1hls polled period. (COUNTERSIGNED BY AUTHORIZED REPRESENTATIVE)
CP 70 0112 92
UFGKelley_00387
28
0106 06-20-2012
I POLICY NUMBER: 85315789
COMMERCIAL PROPERTY SUPPLEMENTAL DECLARATIONS
PREMf LIMIT OF
BLDG DESCRIBED PREMISES AND COVERAGES INSURANCE RATE PREMIUM
01 01 CONTINUED
PO BOX 909
SHELTON CT 06484-0949
ADDITIONAL INTEREST - Loss Payable
BANK OF HOUSTON
3900 ESSEX LN STE 100
HOUSTON TX 77027-5316
ADDITIONAL INTEREST - LOSS Payable
KONICA BUSINESS TECHNOLOGIES
15325 SW 30TH PLACE # 100
BELLEVUE WA 98007
0082255031000
02 OJlOOO LOUISIANA ST FL 81ST
HOUSTON TX 77002-5005
FIRE RESISTIVE
NON-GOVERNMENTAL OFFICES
YOUR BUSINESS PERSONAL PROPERTY 25,000 .336 84
Special causes of Loss 2,500 Ded
Replacement Cost 80% Coins
4% Inflation Guard
Sprinkler Leakage Exclusion
03 OJ600 TRAVIS ST RM K
HOUSTON TX 77002-3009
FIRE RESISTIVE
NON-GOVERNMENTAL OFFICES
YOUR BUSINESS PERSONAL PROPERTY 25,000 .338 84
Special Causes of Loss 2,500 Ded
Replacement Cost 80% Coins
4% Inflation Guard
Sprinkler Leakage Exclusion
04 015611 KELLEY ST
HOUSTON TX 77026-1966
JOISTED MASONRY
MERC - MODERATE SUSCEPTIBILITY
BUILDING 142,000 .292 415
Special causes of Loss 2,500 Ded
Windstorm or Hail Deductible
Percentage: 2%
Replacement Cost 80% Coins
Automatic Valuation Adjustment
Sprinkler Leakage Exclusion
ADDITIONAL INTEREST - 1st Mortgagee
BANK OF HOUSTON
CONTINUED ON CP7002
CP 70 0212 92
UFGKelley_00388
29
0106 06-20-2012
IPOLICY NUMBER: 85315789
COMMERCIAL PROPERTY SUPPLEMENTAL DECLARATIONS
PREM/ LIMITOF
BLDG DESCRIBED PREMISES AND COVERAGES INSURANCE RATE PREMIUM
04 01 CONTINUED
3900 ESSEX LN STE 100
HOUSTON TX 77027-5316
04 0~5611 KELLEY ST
HOUSTON TX 77026-1966
JOISTED MASONRY
MERC - MODERATE SUSCEPTIBILITY
BUILDING 21,000 .292 61
Special Causes of Loss 2,500 Ded
Windstorm or Hail Deductible
Percentage: 2%
Replacement cost 80% Coins
Automatic Valuation Adjustment
Sprinkler Leakage Exclusion
ADDITIONAL INTEREST - 1st Mortgagee
BANK OF HOUSTON
3900 ESSEX LN STE 100
HOUSTON TX 77027-5316
Certified Acts of Terrorism coverage 127
CP 70 0212 92
UFGKelley_00389
30
0106 06-20-2012
IPOLICY NUMBER: 85315789
FORMS SUPPLEMENTAL DECLARATIONS
Premium
Applicable to the state of Texas
*SPECENDS(02-02) SPECIAL END-OUT OF SEQUENCE 143
Other Forms
Applicable to the state of Texas
CP0010(06-07) BLDG & PERSONAL PROP COVG FORM
CP0090(07-88) COMM PROP CONDITIONS
CP0140(07-06) EXCL OF LOSS DUE TO VIRUS/BACTERIA
CP0142(01-ll) TX-CHGS
CP0321(06-07) WINDSTORM/HAIL PERCENTAGE DED
CP1030(06-07) CAUSES OF LOSS-SPECIAL FORM
CP1032(08-08) WATER EXCL END
CP1056(06-07) SPRINKLER LEAKAGE EXCL
CP1218(06-07) LOSS PAYABLE PROVISIONS
*CP7001(12-92) COMM PROP DEC
*CP7002(12-92) COMM PROP SUPPLEMENTAL DEC
CP7003 (11-86) AUTOMATIC VALUATION ADJUSTMENT-APPLIES TO BLDG
*CP7034 (12-01) SEWER BACKUP COVG
CP7053(08-0l) TX-CHGS-EQUIPMENT BREAKDOWN
CP7067(07-07) EQUIP BREAKDOWN ENHANCEMENT END
CP9993(10-90) TENTATIVE RATE
IL0017(11-98) COMMON POLICY CONDITIONS
IL0275(09-07) TX-CHGS CANCEL & NONRENEW PROVISIONS FOR CASUALTY
IL0415(04-98) PROTECTIVE SAFEGUARDS
IL0952(03-0B) CAP ON LOSSES FROM CERTIFIED ACTS OF TERRORISM
IL7083(08-10) PAYMENT OF LOSSES
SPECEND(00-00) SPECIAL END
ST0013 (05-08) EQUIPMENT BREAKDOWN STUFFER
ST1333(05-07) TX-IMPORTANT NOTICE
ST1644(01-09) POLICY WEBSITE STUFFER
ST1646(03-09) NOTICE-IMPORTANT-SECURITY
ST1698(03-ll) NOTICE-PROTECTIVE SAFEGUARDS
:1cUW7002 (04-96) FORMS SUPPLEMENTAL DEC
UW70 02 04 96
UFGKelley_00390
31
Appendix Tab 5
COMMERCIAL PROPERTY
CP 10 30 06 07
CAUSES OF LOSS - SPECIAL FORM
Words and phrases that appear in quotation marks have special meaning. Refer to Section G., Definitions.
A. Covered Causes Of Loss b. Earth Movement
When Special is shown in the Declarations, Covered (1) Earthquake, including any earth sinking,
Causes of Loss means Risks Of Direct Physical rising or shifting related to such event;
Loss unless the loss is: (2) Landslide, including any earth sinking,
1. Excluded in Section 8., Exclusions; or rising or shifting related to such event;
2. Limited in Section C., Limitations; (3) Mine subsidence, meaning subsidence
that follow. of a man-made mine, whether or not
mining activity has ceased;
B. Exclusions
(4) Earth sinking (other than sinkhole
1. We will not pay for loss or damage caused collapse), rising or shifting including
directly or indirectly by any of the following. soil conditions which cause settling,
Such loss or damage is excluded regardless of cracking or other disarrangement
any other cause or event that contributes of foundations or other parts of realty.
concurrently or in any sequence to the loss. Soil conditions include contraction,
a. Ordinance Or Law expansion, freezing, thawing, erosion,
The enforcement of any ordinance or law: improperly compacted soil and the
action of water under the ground
{1) Regulating the construction, use or surface.
repair of any property; or
{2) Requiring the tearing down of any But if Earth Movement, as described in b.(1)
property, including the cost of removing through {4} above, results in fire or
its debris. explosion, we will pay for the loss or
damage caused by that fire or explosion.
This exclusion, Ordinance Or Law, applies
whether the loss results from: (5) Volcanic eruption, explosion or effusion.
But if volcanic eruption, explosion or
(a) An ordinance or law that is enforced effusion results in fire, building glass
even if the property has not been break age or Volcanic Action, we will
damaged; or pay for the loss or damage caused by
(b) The increased costs incurred that fire, building glass breakage or
to comply with an ordinance or Volcanic Action.
law in the course of construction,
Volcanic Action means direct loss or
repair, renovation, remodeling or
damage resulting from the eruption of a
demolition of property, or removal volcano when the loss or damage is
of its debris, following a physical
caused by:
loss to that property.
(a) Airborne volcanic blast or airborne
shock waves;
{b) Ash, dust or particulate matter; or
CP 10 30 06 07 ©ISO Properties, Inc., 2007 Page 1of10
UFGKelley_00419
60
CP 10 30 06 07
{c) Lava flow. But if the failure or surge of power, or the
All volcanic eruptions that occur within failure of communication, water or other
any 168-hour period will constitute a utility service, results in a Covered Cause of
single occurrence. Loss, we will pay for the loss or damage
Volcanic Action does not include the caused by that Covered Cause of Loss.
cost to remove ash, dust or particulate Communication services include but are not
matter that does not cause direct limited to service relating to Internet access
physical loss or damage to the or access to any electronic, cellular or
described property. satellite network.
c. Governmental Action f. War And Military Action
Seizure or destruction of property by order (1) War, including undeclared or civil war;
of governmental authority. {2} Warlike action by a military force,
But we will pay for loss or damage caused including action in hindering or
by or resulting from acts of destruction defending against an actual or expected
ordered by governmental authority and attack, by any government, sovereign or
taken at the time of a fire to prevent its other authority using military personnel
spread, if the fire would be covered under or other agents; or
this Coverage Part. (3} Insurrection, rebellion, revolution,
d. Nuclear Hazard usurped power, or action taken by
Nuclear reaction or radiation, or radioactive governmental authority in hindering or
contamination, however caused. defending against any of these.
But if nuclear reaction or radiation, or g. Water
radioactive contamination, results in fire, we {1) Flood, surface water, waves, tides, tidal
will pay for the loss or damage caused by waves, overflow of any body of water,
that fire. or their spray, all whether driven by
wind or not;
e. Utility Services
(2) Mudslide or mudflow;
The failure of power, communication, water
or other utility service supplied to the (3) Water that backs up or overflows from a
sewer, drain or sump; or
described premises, however caused, if the
failure: (4) Water under the ground surface
pressing on, or flowing or seeping
(1} Originates away from the described through:
premises; or
(a) Foundations, walls, floors or paved
(2) Originates at the described premises, surfaces;
but only if such failure involves
(b) Basements, whether paved or not;
equipment used to supply the utility
or
service to the described premises from
a source away from the described (c} Doors, windows or other openings.
premises. But if Water, as described in g.(1) through
Failure of any utility service includes lack of g.(4) above, results in fire, explosion or
sufficient capacity and reduction in supply. sprinkler leakage, we will pay for the loss or
damage caused by that fire, explosion or
Loss or damage caused by a surge of power
sprinkler leakage.
is also excluded, if the surge would not have
occurred but for an event causing a failure
of power.
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h. "Fungus", Wet Rot, Dry Rot And Bacteria c. Smoke, vapor or gas from agricultural
Presence, growth, proliferation, spread or smudging or industrial operations.
any activity of "fungus", wet or dry rot or d. (1) Wear and tear;
bacteria. {2) Rust or other corrosion, decay,
But if "fungus", wet or dry rot or bacteria deterioration, hidden or latent defect or
results in a "specified cause of loss", we will any quality in property that causes it to
pay for the loss or damage caused by that damage or destroy itself;
"specified cause of loss". {3) Smog;
This exclusion does not apply: (4) Settling, cracking, shrinking or
expansion;
1. When "fungus", wet or dry rot or
bacteria results from fire or lightning; or (5) Nesting or infestation, or discharge or
release of waste products or secretions,
2. To the extent that coverage is provided
by insects, birds, rodents or other
in the Additional Coverage - Limited
animals.
Coverage For "Fungus", Wet Rot, Dry
Rot And Bacteria with respect to loss or (6) Mechanical breakdown, including
damage by a cause of loss other than rupture or bursting caused by centrifugal
fire or lightning. force. But if mechanical breakdown
Exclusions B.1.a. through 8.1.h. apply whether results in elevator collision, we will pay
or not the loss event results in widespread for the loss or damage caused by that
damage or affects a substantial area. elevator collision.
(7) The following causes of loss to personal
2. We will not pay for loss or damage caused by or
property:
resulting from any of the following:
(a) Dampness or dryness of
a. Artificially generated electrical, magnetic or
atmosphere;
electromagnetic energy that damages,
disturbs, disrupts or otheiwise interferes with (b) Changes in or extremes of
any: temperature; or
{c) Marring or scratching.
{1) Electrical or electronic wire, device,
appliance, system or network; or But if an excluded cause of loss that is listed
in 2.d.{1) through (7) results in a "specified
{2) Device, appliance, system or network
cause of loss" or building glass breakage,
utilizing cellular or satellite technology.
we will pay for the loss or damage caused
For the purpose of this exclusion, electrical, by that "specified cause of loss" or building
magnetic or electromagnetic energy glass breakage.
includes but is not limited to:
e. Explosion of steam boilers, steam pipes,
{a) Electrical current, including arcing;
steam engines or steam turbines owned or
(b) Electrical charge produced or leased by you, or operated under your
conducted by a magnetic or control. But if explosion of steam boilers,
electromagnetic field; steam pipes, steam engines or steam
(c) Pulse of electromagnetic energy; or turbines results in fire or combustion
explosion, we will pay for the loss or
(d) Electromagnetic waves or
damage caused by that fire or combustion
microwaves.
explosion. We will also pay for loss or
But if fire results, we will pay for the loss or damage caused by or resulting from the
damage caused by that fire. explosion of gases or fuel within the furnace
b, Delay, loss of use or loss of market. of any fired vessel or within the flues or
passages through which the gases of
combustion pass.
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f. Continuous or repeated seepage or leakage (3) Any cracking, bulging, sagging,
of water, or the presence or condensation of bending, leaning, settling, shrinkage or
humidity, moisture or vapor, that occurs expansion as such condition relates to
over a period of 14 days or more. (1) or (2) above.
g. Water, other liquids, powder or molten But if collapse results in a Covered Cause
material leaks or flows from plumbing, of Loss at the described premises, we will
heating, air conditioning or other equipment pay for the loss or damage caused by that
(except fire protective systems} caused by Covered Cause of Loss.
or resulting from freezing, unless:
This exclusion, k., does not apply:
(1) You do your best to maintain heat in the
building or structure; or (a) To the extent that coverage is
provided under the Additional
(2) You drain the equipment and shut off Coverage - Collapse; or
the supply if the heat is not maintained.
(b) To collapse caused by one or more
h. Dishonest or criminal act by you, any of the following:
of your partners, members, officers,
(i) The "specified causes of loss";
managers, employees (including leased
employees), directors, trustees, authorized (ii} Breakage of building glass;
representatives or anyone to whom you {iii) Weight of rain that collects on a
entrust the property for any purpose: roof; or
(1) Acting alone or in collusion with others; (iv) Weight of people or personal
or property.
(2) Whether or not occurring during the I. Discharge, dispersal, seepage, migration,
hours of employment. release or escape of "pollutants" unless the
This exclusion does not apply to acts of discharge, dispersal, seepage, migration,
destruction by your employees (including release or escape is itself caused by any of
leased employees); but theft by employees the "specified causes of loss". But if the
(including leased employees} is not discharge, dispersal, seepage, migration,
covered. release or escape of "pollutants" results in a
i. Voluntary parting with any property by you "specified cause of loss", we will pay for the
or anyone else to whom you have entrusted loss or damage caused by that "specified
the property if induced to do so by any cause of loss".
fraudulent scheme, trick, device or false This exclusion, I., does not apply to damage
pretense. to glass caused by chemicals applied to the
j. Rain, snow, ice or sleet to personal property glass.
in the open. m. Neglect of an insured to use all reasonable
k. Collapse, including any of the following means to save and preserve property from
conditions of property or any part of the further damage at and after the time of loss.
property: 3. We will not pay for loss or damage caused by or
(1) An abrupt falling down or caving in; resulting from any of the following, 3.a. through
3.c. But if an excluded cause of loss that is
(2) Loss of structural integrity, including
listed in 3.a. through 3.c. results in a Covered
separation of parts of the property or
Cause of Loss, we will pay for the loss or
property in danger of falling down or
damage caused by that Covered Cause of Loss.
caving in; or
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a. Weather conditions. But this exclusion only (a) Delay in rebuilding, repairing or
applies if weather conditions contribute in replacing the property or resuming
any way with a cause or event excluded in "operations", due to interference at
Paragraph 1. above to produce the loss or the location of the rebuilding, repair
damage. or replacement by strikers or other
b. Acts or decisions, including the failure to persons; or
act or decide, of any parson, group, (b} Suspension, lapse or cancellation
organization or governmental body. of any license, lease or contract.
c. Faulty, inadequate or defective: But if the suspension, lapse or
cancellation is directly caused by
{1) Planning, zoning, development,
the "suspension" of "operations", we
surveying, siting;
will cover such loss that affects your
{2) Design, specifications, workmanship, Business Income during the "period
repair, construction, renovation, of restoration" and any extension
remodeling, grading, compaction; of the "period of restoration" in
(3) Materials used in repair, construction, accordance with the terms of
renovation or remodeling; or the Extended Business Income
(4) Maintenance; Additional Coverage and the
of part or all of any property on or off the Extended Period Of Indemnity
described premises. Optional Coverage or any variation
of these.
4. Special Exclusions
(4) Any Extra Expense caused by or
The following provisions apply only to the
resulting from suspension, lapse or
specified Coverage Forms.
cancellation of any license, lease or
a. Business Income {And Extra Expense) contract beyond the "period of
Coverage Form, Business Income restoration".
(Without Extra Expense) Coverage Form,
(5} Any other consequential loss.
Or Extra Expense Coverage Form
b. Leasehold Interest Coverage Form
We will not pay for:
(1} Paragraph B.1.a., Ordinance Or Law,
{1) Any loss caused by or resulting from: does not apply to insurance under this
{a) Damage or destruction of "finished Coverage Form.
stock"; or (2) We will not pay for any loss caused by:
(b) The time required to reproduce (a) Your cancelling the lease;
"finished stock".
(b} The suspension, lapse or cancel-
This exclusion does not apply to lation of any license; or
Extra Expense.
(c} Any other consequential loss.
(2} Any loss caused by or resulting from
direct physical loss or damage to radio c. Legal Liability Coverage Form
or television antennas (including (1} The following exclusions do not apply to
satellite dishes) and their lead-in wiring, insurance under this Coverage Form:
masts or towers. (a} Paragraph 8.1.a., Ordinance Or
(3) Any increase of loss caused by or Law;
resulting from: (b} Paragraph B.1.c., Governmental
Action;
(c) Paragraph B.1.d., Nuclear Hazard;
(d} Paragraph B.1.e., Utility Services;
and
{e) Paragraph B.1.f., War And Military
Action.
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CP 10 30 06 07
(2) The following additional exclusions C. Limitations
apply to C. insurance under this The following limitations apply to all policy forms
Coverage Form: and endorsements, unless otherwise stated.
(a) Contractual Liability We will not pay for loss of or damage
We will not defend any claim or to property, as described and limited in this
"suit", or pay damages that you are section. In addition, we will not pay for any loss
legally liable to pay, solely by that is a consequence of loss or damage as
reason of your assumption of described and limited in this section.
liability in a contract or agreement. a. Steam boilers, steam pipes, steam engines
But this exclusion does not apply to or steam turbines caused by or resulting
a written lease agreement in which from any condition or event inside such
you have assumed liability for equipment. But we will pay for loss of or
building damage resulting from an damage to such equipment caused by or
actual or attempted burglary or resulting from an explosion of gases or fuel
robbery, provided that: within the furnace of any fired vessel or
within the flues or passages through which
(1) Your assumption of liability was the gases of combustion pass.
executed prior to the accident;
and b. Hot water boilers or other water heating
equipment caused by or resulting from any
(ii) The building is Covered condition or event inside such boilers or
Property under this Coverage equipment, other than an explosion.
Form.
(b) Nuclear Hazard c. The interior of any building or structure, or
to personal property in the building or
We will not defend any claim structure, caused by or resulting from rain,
or "suit", or pay any damages, snow, sleet, ice, sand or dust, whether
loss, expense or obligation, driven by wind or not, unless:
resulting from nuclear reaction
or radiation, or radioactive (1) The building or structure first sustains
contamination, however caused. damage by a Covered Cause of Loss to
its roof or walls through which the rain,
5. Additional Exclusion snow, sleet, ice, sand or dust enters; or
The following provisions apply only to the
(2) The loss or damage is caused by or
specified property.
results from thawing of snow, sleet or
LOSS OR DAMAGE TO PRODUCTS ice on the building or structure.
We will not pay for loss or damage to d. Building materials and supplies not attached
any merchandise, goods or other product as part of the building or structure,. caused
caused by or resulting from error or omission by or resulting from theft.
by any person or entity (including those having
possession under an arrangement where However, this limitation does not apply to:
work or a portion of the work is outsourced) (1) Building materials and supplies held for
in any stage of the development, production sale by you, unless they are insured
or use of the product, including planning, under the Builders Risk Coverage Form;
testing, processing, packaging, installation, or
maintenance or repair. This exclusion applies (2) Business Income Coverage or Extra
to any effect that compromises the form, Expense Coverage.
substance or quality of the product. But if such
error or omission results in a Covered Cause of
Loss, we will pay for the loss or damage caused
by that Covered Cause of Loss.
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CP 10 30 06 07
e. Property that is missing, where the only c. $2,500 for patterns, dies, molds and forms.
evidence of the loss or damage is a d. $250 for stamps, tickets, including lottery
shortage disclosed on taking inventory, or tickets held for sale, and letters of credit.
other instances where there is no physical
These special limits are part of, not in addition
evidence to show what happened to the
to, the Limit of Insurance applicable to the
property.
Covered Property.
f. Property that has been transferred to a This limitation, C.3., does not apply to Business
person or to a place outside the described Income Coverage or to Extra Expense
premises on the basis of unauthorized Coverage.
instructions.
4. We will not pay the cost to repair any defect to a
2. We will not pay for loss of or damage to the system or appliance from which water, other
following types of property unless caused by the liquid, powder or molten material escapes. But
"specified causes of loss" or building glass we will pay the cost to repair or replace
breakage: damaged parts of fire-extinguishing equipment if
the damage:
a. Animals, and then only if they are killed or
their destruction is made necessary. a. Results in discharge of any substance from
an automatic fire protection system; or
b. Fragile articles such as statuary, marbles,
chinaware and porcelains, if broken. This b. Is directly caused by freezing.
restriction does not apply to: However, this limitation does not apply to
(1) Glass; or Business Income Coverage or to Extra Expense
Coverage.
{2) Containers of property held for sale.
c. Builders' machinery, tools and equipment D. Additional Coverage - Collapse
owned by you or entrusted to you, provided The coverage provided under this Additional
such property is Covered Property. Coverage - Collapse applies only to an abrupt
However, this limitation does not apply: collapse as described and limited in 0.1. through
(1) If the property is located on or within D.7.
100 feet of the described premises, 1. For the purpose of this Additional Coverage -
unless the premises is insured under the Collapse, abrupt collapse means an abrupt
Builders Risk Coverage Form; or falling down or caving in of a building or any
(2) To Business Income Coverage or to part of a building with the result that the building
Extra Expense Coverage. or part of the building cannot be occupied for its
3. The special limit shown for each category, a. intended purpose.
through d., is the total limit for loss of or 2. We will pay for direct physical loss or damage to
damage to all property in that category. The Covered Properly, caused by abrupt collapse of
special limit applies to any one occurrence of a building or any part of a building that is
theft, regardless of the types or number of insured under this Coverage Form or that
articles that are lost or damaged in that contains Covered Property insured under this
occurrence. The special limits are: Coverage Form, if such collapse is caused by
a. $2,500 for furs, fur garments and garments one or more of the following:
trimmed with fur. a. Building decay that is hidden from view,
unless the presence of such decay is known
b. $2,500 for jewelry, watches, watch
to an insured prior to collapse;
movements, jewels, pearls, precious and
semi-precious stones, bullion, gold, silver, b. Insect or vermin damage that is hidden from
platinum and other precious alloys or view, unless the presence of such damage
metals. This limit does not apply to jewelry is known to an insured prior to collapse;
and watches worth $100 or less per item.
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CP 10 30 06 07
c. Use of defective material or methods in i. Walks, roadways and other paved surfaces;
construction, remodeling or renovation if the if an abrupt collapse is caused by a cause
abrupt collapse occurs during the course of of loss listed in 2.a. through 2.d., we will pay
the construction, remodeling or renovation. for loss or damage to that property only if:
d. Use of defective material or methods (1) Such loss or damage is a direct result of
in construction, remodeling or renovation if the abrupt collapse of a building insured
the abrupt collapse occurs after the under this Coverage Form; and
construction, remodeling or renovation is
{2) The property is Covered Property under
complete, but only if the collapse is caused
this Coverage Form.
in part by:
5. If personal property abruptly falls down or caves
(1) A cause of loss listed in 2.a. or 2.b.; in and such collapse is not the result of abrupt
(2) One or more of the "specified causes of collapse of a building, we will pay for loss or
loss"; damage to Covered Property caused by such
(3) Breakage of building glass; collapse of personal property only if:
(4) Weight of people or personal property; a. The collapse of personal property was
or caused by a cause of loss listed in 2.a.
(5) Weight of rain that collects on a roof. through 2.d.;
3. This Additional Coverage - Collapse does not b. The personal property which collapses is
apply to: inside a building; and
a. A building or any part of a building that is in c. The property which collapses is not of a kind
danger of falling down or caving in; listed in 4., regardless of whether that kind
b. A part of a building that is standing, even if of property is considered to be personal
it has separated from another part of the property or real property.
building; or The coverage stated in this Paragraph 5. does
c. A building that is standing or any part of a not apply to personal property if marring and/or
building that is standing, even if it shows scratching is the only damage to that personal
evidence of cracking, bulging, sagging, property caused by the collapse.
bending, leaning, settling, shrinkage or
6. This Additional Coverage - Collapse does not
expansion.
apply to personal property that has not abruptly
4. With respect to the following property: fallen down or caved in, even if the personal
a. Outdoor radio or television antennas property shows evidence of cracking, bulging,
(including satellite dishes) and their lead-in sagging, bending, leaning, settling, shrinkage or
wiring, masts or towers; expansion.
b. Awnings, gutters and downspouts; 7. This Additional Coverage - Collapse will not
increase the Limits of Insurance provided in this
c. Yard fixtures;
Coverage Part.
d. Outdoor swimming pools;
8. The term Covered Cause of Loss includes the
e. Fences; Additional Coverage - Collapse as described
f. Piers, wharves and docks; and limited in D.1. through D.7.
g. Beach or diving platforms or appurtenances;
h. Retaining walls; and
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E. Additional Coverage - Limited Coverage For 4. The coverage provided under this Limited
"Fungus", Wet Rot, Dry Rot And Bacteria Coverage does not increase the applicable Limit
1. The coverage described in E.2. and E.6. only of Insurance on any Covered Property. If a
applies when the "fungus", wet or dry rot or particular occurrence results in loss or damage
bacteria is the result of one or more of the by "fungus", wet or dry rot or bacteria, and other
following causes that occurs during the policy loss or damage, we will not pay more, for the
period and only if all reasonable means were total of all loss or damage, than the applicable
used to save and preserve the property from Limit of Insurance on the affected Covered
further damage at the time of and after that Property.
occurrence. If there is covered loss or damage to Covered
a. A "specified cause of loss" other than fire or Property, not caused by "fungus", wet or dry rot
lightning; or or bacteria, loss payment will not be limited by
the terms of this Limited Coverage, except to
b. Flood, if the Flood Coverage Endorsement
the extent that '1ungus", wet or dry rot or
applies to the affected premises.
bacteria causes an increase in the loss. Any
2. We will pay for loss or damage by "fungus", wet such increase in the loss will be subject to the
or dry rot or bacteria. As used in this Limited terms of this Limited Coverage.
Coverage, the term loss or damage means:
5. The terms of this Limited Coverage do not
a. Direct physical loss or damage to Covered increase or reduce the coverage provided under
Property caused by "fungus", wet or dry rot Paragraph F.2. (Water Damage, Other Liquids,
or bacteria, including the cost of removal of Powder Or Molten Material Damage) of this
the "fungus", wet or dry rot or bacteria; Causes Of Loss Form or under the Additional
b. The cost to tear out and replace any part of Coverage - Collapse.
the building or other property as needed to
6. The following, 6.a. or 6.b., applies only if
gain access to the "fungus", wet or dry rot or
bacteria; and Business Income and/or Extra Expense
Coverage applies to the described premises and
c. The cost of testing performed after removal,
only if the "suspension" of "operations" satisfies
repair, replacement or restoration of the
all terms and conditions of the applicable
damaged property is completed, provided
Business Income and/or Extra Expense
there is a reason to believe that "fungus",
Coverage Form.
wet or dry rot or bacteria are present.
a. If the loss which resulted in '1ungus", wet or
3. The coverage described under E.2. of this dry rot or bacteria does not in itself
Limited Coverage is limited to $15,000. necessitate a "suspension" of "operations",
Regardless of the number of claims, this limit is but such "suspension" is necessary due to
the most we will pay for the total of all loss or loss or damage to property caused by
damage arising out of all occurrences of "fungus'', wet or dry rot or bacteria, then our
"specified causes of loss" (other than fire or payment under Business Income and/or
lightning) and Flood which take place in a 12- Extra Expense is limited to the amount of
month period (starting with the beginning of the loss and/or expense sustained in a period of
present annual policy period). With respect to a not more than 30 days. The days need not
particular occurrence of loss which results in be consecutive.
"fungus", wet or dry rot or bacteria, we will not
pay more than a total of $15,000 even if the b. If a covered "suspension" of "operations"
"fungus", wet or dry rot or bacteria continues to was caused by loss or damage other
be present or active, or recurs, in a later policy than "fungus", wet or dry rot or bacteria but
period. remediation of "fungus", wet or dry rot
or bacteria prolongs the "period of
restoration", we will pay for loss and/or
expense sustained during the delay
(regardless of when such a delay occurs
during the "period of restoration"), but such
coverage is limited to 30 days. The days
need not be consecutive.
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F. Additional Coverage Extensions 3. Glass
1. Property In Transit a. We will pay for expenses incurred to put up
This Extension applies only to your personal temporary plates or board up openings if
property to which this form applies. repair or replacement of damaged glass is
delayed.
a. You may extend the insurance provided by
this Coverage Part to apply to your personal b. We will pay for expenses incurred to
property (other than property in the care, remove or replace obstructions when
custody or control of your salespersons) in repairing or replacing glass that is part of a
transit more than 100 feet from the building. This does not include removing or
described premises. Property must be in or replacing window displays.
on a motor vehicle you own, lease or This Coverage Extension, F.3., does not
operate while between points in the increase the Limit of Insurance.
coverage territory.
G. Definitions
b. Loss or damage must be caused by or result
1. "Fungus" means any type or form of fungus,
from one of the following causes of loss:
including mold or mildew, and any mycotoxins,
(1) Fire, lightning, explosion, windstorm spores, scents or by-products produced or
or hail, riot or civil commotion, or released by fungi.
vandalism. 2. "Specified causes of loss" means the following:
(2) Vehicle collision, upset or overturn. fire; lightning; explosion; windstorm or hail;
Collision means accidental contact of smoke; aircraft or vehicles; riot or civil
your vehicle with another vehicle or commotion; vandalism; leakage from fire-
object. It does not mean your vehicle's extinguishing equipment; sinkhole collapse;
contact with the roadbed. volcanic action; falling objects; weight of snow,
(3) Theft of an entire bale, case or package ice or sleet; water damage.
by forced entry into a securely locked a. Sinkhole collapse means the sudden sinking
body or compartment of the vehicle. or collapse of land into underground empty
There must be visible marks of the spaces created by the action of water on
forced entry. limestone or dolomite. This cause of loss
c. The most we will pay for loss or damage does not include:
under this Extension is $5,000. (1) The cost of filling sinkholes; or
This Coverage Extension is additional {2) Sinking or collapse of land into
insurance. The Additional Condition, man-made underground cavities.
Coinsurance, does not apply to this Extension.
b. Falling objects does not include loss or
2. Water Damage, Other Liquids, Powder Or
damage to:
Molten Material Damage
{1) Personal property in the open; or
If loss or damage caused by or resulting from
covered water or other liquid, powder or molten {2) The interior of a building or structure, or
material damage loss occurs, we will also property inside a building or structure,
pay the cost to tear out and replace any part of unless the roof or an outside wall of the
the building or structure to repair damage to building or structure is first damaged by
the system or appliance from which the water a falling object.
or other substance escapes. This Coverage c. Water damage means accidental discharge
Extension does not increase the Limit of or leakage of water or steam as the direct
Insurance. result of the breaking apart or cracking of a
plumbing, heating, air conditioning or other
system or appliance (other than a sump
system including its related equipment and
parts), that is located on the described
premises and contains water or steam.
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Appendix Tab 6
COMMERCIAL PROPERTY
CP 10 32 08 08
THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY.
WATER EXCLUSION ENDORSEMENT
This endorsement modifies insurance provided under the following:
COMMERCIAL PROPERTY COVERAGE PART
STANDARD PROPERTY POLICY
A. The exclusion in Paragraph B. replaces the Water 5. Waterborne material carried or otherwise
Exclusion in this Coverage Part or Policy. moved by any of the water referred to in
B. Water Paragraph 1., 3. or 4., or material carried or
1. Flood, surface water, waves (including tidal otherwise moved by mudslide or mudflow.
wave and tsunami), tides, tidal water, overflow This exclusion applies regardless of whether any of
of any body of water, or spray from any of the above, in Paragraphs 1. through 5., is caused by
these, all whether or not driven by wind an act of nature or is otherwise caused. An example
(including storm surge); of a situation to which this exclusion applies is the
2. Mudslide or mudflow; situation where a dam, levee, seawall or other
boundary or containment system fails in whole or in
3. Water that backs up or overflows or is otherwise part, for any reason, to contain the water.
discharged from a sewer, drain, sump, sump
pump or related equipment; But if any of the above, in Paragraphs 1. through 5.,
4. Water under the ground surface pressing on, or results in fire, explosion or sprinkler leakage, we will
flowing or seeping through: pay for the loss or damage caused by that fire,
explosion or sprinkler leakage (if sprinkler leakage is
a. Foundations, walls, floors or paved
a Covered Cause of Loss).
surfaces;
b. Basements, whether paved or not; or
c. Doors, windows or other openings; or
CP 10 32 08 08 @ Insurance Services Office, Inc., 2008 Page 1of1
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Appendix Tab 7
CAUSE l'\O. 2013-36796
KELLEY STREET ASSOCIATES, LLC § IN Tl IF DISTRICT COURT OF
~
s
Plaintifl s~
ss
vs. ss OF HARRIS COU::-..ITY. TEXAS
§
CITY OF I IOUSTO:.l :\ND UNITED FIRE §
AND CASUALTY COMl'A:.IY §
~
~
Defendants. ~ 295 1i; JUDICIAi. DISTRICT
AFFIDAVIT OF DUANE H. KAM INS IN SUPPORT OF
PLAIJWIFF'S MOTION FOR PARTIAL SUMMARY .JUDGMENT
AGAINST UNITED FIRE AND CASUALTY COMPANY
THE ST ATE OF TEXAS
COUNTY OF HARRIS
On this day Duane I I. Kamins personally appeared before me. the undersigned notary public,
\\ho being by me duly sworn on his oath deposed and said:
l."My name is Duane 11. Kamins. I am the President of Kelley Street Associates. LLC ("Kelley
Street"). the Plaintiff in the above-styled lawsuit. I am responsible for insuram:c coverage and
claims for Kelley Street. l have personal knowkdge of all the statements made herein. each of
which is trm: and corre<:I.
2. "Kelley Street was formed in 2005 for the purpose of developing and owning an
office building and industrial facility located at 5825 Kelley Stn:et in l louston. Texas (the ·Kelley
Street Building'). The Kelley Street Building was completed in 2008.
3. "Kelley Street purchased commercial propc11y insurance for the Kelley Street
Building from United Fire & Casualty Company(' United Fire'), an insurance company licensed
to ::;ell property insurance in Texas. LJnited Fire issued Sl1ch insmancc under its policy no.
85315789 (the 'Policy'). co\'ering the period from January I. 2012. to 2013. A true copy of the
Policy is attached hereto as Exhibit A-1.
4. ..On October 2, 2012, Kelley Street suffered a loss due to a failure of the plumbing
system in the Kelley Street Building. Specifically. on the evening of October 2 water began to flow
through a series of floor drains in the building. most but not all of which wcre lrn:atcd in bathrooms.
The water Jcvcl reached scvcrnl inchcs throughout the building beforc water to the building was
shut off. Kelley Street incurred costs of more than $150.000.00 to drain and dry the building and
to repair the damagc caused by this cxeessivc water llow.
5. "On Oetobcr 3. 2012. Kelley Street provided notice of this loss to United Fire.
Notice was givcn to United Fire by Kelley Street's insurance llgcnt, GEM Insurance Agencies. LP.
A true copy of the Property l.oss Notice is attached hereto as Exhibit A-2.
EXHIBIT
I A
25
6. "'By letter dated October 8. 2012, United Fire denied coverage for this loss. A true
copy of this letter is attached hereto as Exhibit A-3.
7. ..ln November 2012. United Fire issued an endorsement to the Policy that. according
lo United Fire, would provide coverage for the loss to $50.000.00. Payment in that amount was
subsequently made and accepted by Kelley Street without waiving the right to claim full coverage
under the Policy. An exchange of emails between myself and Joyce Wilson, an adjustt:r for United
fire. is attached hert:to as Exhibit A-4: Ms \Vi Ison confirmed that the payment and acceptance of
this partial payment of losses would not prejudice Kelley Street's clOIS
~,.,,.,...._..... __
Comm, EJll CM/0512017
~~...,.,..
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Appendix Tab 8
CAUSE NO. 2013-36796
KELLEY STREET ASSOCIATES, LLC § IN THE DISTRICT COURT OF
§
Plaintiff, §
§
VS. § OF HARRIS COUNTY, TEXAS
§
CITY OF HOUSTON AND UNITED FIRE §
AND CASUALTY: COMPANY §
§
Defendants, § 295TH JUDICIAL DISTRICT
AFFIDAVIT OF JOHN MOORE IN SUPPORT OF
PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT
AGAINST UNITED FIRE AND CASUALTY COMPANY
THE STATE OF TEXAS §
§
COUNTY OF HARRIS §
On this day John Moore personally appeared before me, the undersigned notary public, who
being by me duly sworn on his oath deposed and said:
1. "My name is John Moore. I am a plumber employed by Raven Mechanical, LP.
I inspected the Kelley Street property personally, as described below. I have personal lrnowledge
of all the statements made herein, each of which is true and correct.
2. "I have been employed as a plumber since about 2002, and I have been employed
at Raven Mechanical since 2005, I am licensed as a Master Plumber in the'state of Texas.
3. "On October 2, 2012, Raven Mechanical was called regarding an emergency at 5825
Kelley Street i.J.1 Houston. I was assigned to visit the property, to assess the cause of the flooding
water in the building, and to propose any necessary plumbing repairs.
4, "When I arrived and walked tlrrough the building, I found that the water level was
at several inches throughout the building.
11
5. 1 examined the plumbing throughout the. building, including the bathrooms and
'kitchen as well as floor drains at various locations. I found that the flush valves in all the toilets
were malfunctioning due to damage caused by debris, rocks and dirt that had been introduced into
the domestic water main following a repair on the water main in Kelley Street, in front of the
building. Due to the damaged flush valves, water had been continually flowing into the sanitary
sewer septic system in the building. The septic system could not keep up with the volume of water
being introduced to the system; after the septic system filled, water came up through the drains
throughout the building, resulting in the flooding of the building.
EXHIBIT
I rs
99
6. 11
After my examination, I filled out a report on the work order issued by Raven
Mechanical. A true copy of the completed Work Order, with the notes that I wrote on it the same
day as my visit to the property, is attached hereto as Exhibit B-1. I made these notes in the ordinary
course of business h1 connection with the above-des •'b site assessment."
STATE OF TEXAS §
§
COUNTY OF HARRIS §
SWORN TO AND SUBSCRIBED BEFO
e CJNDYYOUNG
Notary Publlo, State of Tew
My Comm!Mlon Expires
SEPTEMBER 13. 2018
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100