Case: 09-60209 Document: 00511051539 Page: 1 Date Filed: 03/15/2010
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
March 15, 2010
No. 09-60209 Charles R. Fulbruge III
Clerk
CATLIN SYNDICATE LIMITED,
Plaintiff–Appellee
v.
IMPERIAL PALACE OF MISSISSIPPI, INC; IMPERIAL PALACE OF
MISSISSIPPI, LLC,
Defendants–Appellants
Appeal from the United States District Court
for the Southern District of Mississippi
No. 1:08-CV-97
Before JONES, Chief Judge, and BENAVIDES and PRADO, Circuit Judges.
PRADO, Circuit Judge:
Insurer Catlin Syndicate and casino operator Imperial Palace disagree
about how to determine loss under the business-interruption provision of the
insurance policy that Catlin issued to Imperial Palace. Catlin argues that the
business-interruption provision unambiguously indicates that only historical
sales figures should be considered when determining loss. Imperial Palace
argues that the provision is ambiguous, and therefore sales figures after
reopening should also be taken into account.1
1
This issue has caused debate among courts and commentators. See, e.g., H. Richard
Chattman & Gregory D. Miller, Measuring Business Interruption Loss in Wide-Impact
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We addressed the definition of “loss” under a materially identical business-
interruption provision in Finger Furniture Co. v. Commonwealth Insurance Co.,
404 F.3d 312 (5th Cir. 2005). Finger Furniture does not control this case because
it dealt with a question of Texas law, while this case deals with a question of
Mississippi law. However, there is no significant difference between Texas and
Mississippi law on this issue. Accordingly, we find that Mississippi courts would
apply the law in the same way as Texas courts, and we AFFIRM.
I.
Hurricane Katrina damaged Imperial Palace, forcing it to shut down for
several months. When Imperial Palace reopened, its revenues were much
greater than before the hurricane; many nearby casinos remained closed, and
people who wanted to gamble had few choices. Imperial Palace submitted a
claim to its insurers, including Catlin. Catlin agreed to pay the claim, but the
parties disputed Imperial Palace’s losses. Imperial Palace stated that its losses
were approximately $165 million, while Catlin believed the losses were closer to
$65 million. The largest discrepancy was in the amount of business-interruption
loss: Imperial Palace put this amount at about $80 million, while Catlin put it
at about $6.5 million. This discrepancy resulted from the parties’ different
interpretations of the policy’s business-interruption provision, which states, in
pertinent part:
Experience of the business – In determining the amount of the Time
Element loss as insured against by this policy, due consideration
shall be given to experience of the business before the loss and the
probable experience thereafter had no loss occurred.
Catlin filed a complaint in federal district court, seeking declaratory relief.
Imperial Palace counterclaimed for breach of contract and negligence, among
other claims. The parties filed cross-motions for summary judgment. Catlin
Catastrophes: Insurance Against Catastrophes or Only Against Insured Damage from
Catastrophes?, 19 COVERAGE 1 (Jul./Aug. 2009).
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argued that under the business-interruption provision, Imperial Palace’s
recovery should be based on net profits Imperial Palace would probably have
earned if Hurricane Katrina had not struck the Mississippi Gulf Coast and
damaged its facilities. Thus, Catlin stated that Imperial Palace’s loss should be
determined by looking solely at pre-hurricane sales. Imperial Palace argued
that the correct hypothetical was not one in which Hurricane Katrina did not
strike at all; it was one in which Hurricane Katrina struck but did not damage
Imperial Palace’s facilities. Accordingly, Imperial Palace averred that its
recovery should be based in part on the amount it actually earned when it
reopened after Katrina.
After considering the parties’ arguments, the district court denied Imperial
Palace’s motion in its entirety, and granted Catlin’s motion “to the extent that
Catlin [sought] a partial summary judgment that [Imperial Palace’s] profits
upon reopening after Hurricane Katrina should not be taken into account to
determine what [Imperial Palace] would have experienced had the storm not
occurred.” Catlin Syndicate Ltd. v. Imperial Palace of Miss., Inc., No. 1:08-CV-
97, 2008 WL 5235888, at *1, *8 (S.D. Miss. Dec. 15, 2008). We granted leave to
appeal the district court’s interlocutory order solely as to this ruling.
II.
The district court has diversity jurisdiction over this case under 28 U.S.C.
§ 1332. We have jurisdiction over Imperial Palace’s interlocutory appeal under
28 U.S.C. § 1292(b).
We review the “legal determinations in a district court’s decision to grant
summary judgment de novo, applying the same legal standards as the district
court to determine whether summary judgment was appropriate.” Gonzalez v.
Denning, 394 F.3d 388, 391 (5th Cir. 2004) (citations omitted). “Summary
judgment is proper where, after viewing the evidence in the light most favorable
to the nonmovant, the record indicates that no genuine issue of material fact
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exists.” Finger Furniture, 404 F.3d at 313 (citing Denning, 394 F.3d at 391).
Interpretation of a contract is a purely legal matter; therefore, we review the
district court’s construction of Imperial Palace’s policy de novo. See id. (citing
Sentry Ins. v. R.J. Weber Co., 2 F.3d 554, 556 (5th Cir. 1993)). Because this is
a diversity case involving a Mississippi contract, we apply Mississippi contract
law to interpret the policy. See Ideal Mut. Ins. Co. v. Last Days Evangelical
Ass’n, 783 F.2d 1234, 1240 (5th Cir. 1986) (stating that a federal court applies
the substantive law of the forum state in a diversity action). Under Mississippi
law, if a policy is worded so that it can be given only one reasonable construction,
a court must enforce the policy as written. See U.S. Fid. & Guar. Co. of Miss. v.
Martin, 998 So. 2d 956, 963 (Miss. 2008).
III.
In Finger Furniture, a tropical storm caused Finger’s stores to close for one
to two days. 404 F.3d at 313. A week after reopening, Finger slashed prices,
and sales soared. Id. Finger filed a claim for lost sales under the business-
interruption provision of its insurance contract with Commonwealth. Id. The
business-interruption provision stated, in pertinent part:
In determining the amount of gross earnings covered hereunder for
the purposes of ascertaining the amount of loss sustained, due
consideration shall be given to the experience of the business before
the date of the damage or destruction and to the probable
experience thereafter had no loss occurred.
Id. at 314.
Commonwealth denied the claim, arguing that Finger’s increased sales the
following week made up for the sales that it did not make while closed. Id. at
314. Commonwealth filed a declaratory judgment action. Id. at 313. The
district court granted Finger’s motion for summary judgment, and
Commonwealth appealed. Id.
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In affirming, we explained that the proper method for determining loss
under the business-interruption provision was to look at sales before the
interruption rather than sales after the interruption. Id. at 314. We noted that
“the policy requires due consideration of the business’s experience before the
date of the loss and the business’s probable experience had the loss not
occurred,” and that this language should be interpreted as meaning “that a
business-interruption loss will be based on historical sales figures.” Id. We
stated that “[h]istorical sales figures reflect a business’s experience before the
date of the damage or destruction and predict a company’s probable experience
had the loss not occurred,” and that “[t]he strongest and most reliable evidence
of what a business would have done had the catastrophe not occurred is what it
had been doing in the period just before the interruption.” Id.
We declined to consider post-interruption sales, noting that “the
business-loss provision says nothing about taking into account actual
post-damage sales to determine what the insured would have experienced had
the storm not occurred.” Id. Further, we stated that “[t]he contract language
does not suggest that the insurer can look prospectively to what occurred after
the loss to determine whether its insured incurred a business-interruption loss.”
Id.
The language in the business-interruption provision of Imperial Palace’s
insurance policy with Catlin mirrors the language in Finger Furniture, with one
minor distinction. In Finger Furniture, the provision said, “In determining the
amount of . . . loss . . . , due consideration shall be given to the experience of the
business before the . . . damage or destruction and to the probable experience
thereafter had no loss occurred.” Here, the provision says, “In determining the
amount of the . . . loss . . . , due consideration shall be given to experience of the
business before the loss and the probable experience thereafter had no loss
occurred.” Imperial Palace urges us to distinguish Finger Furniture on this
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basis. But this is a distinction without a difference; in the context of these
business-interruption provisions, the terms “damage or destruction” and “loss”
are functionally equivalent.2 Indeed, in common usage “damage” and
“destruction” are two definitions of “loss.” R ANDOM H OUSE W EBSTER’S
U NABRIDGED D ICTIONARY 1137 (2d ed. 2001). Likewise, “loss” is a synonym for
“damage.” Id. at 504.
In addition, Imperial Palace tries to distinguish Finger Furniture on its
facts. In Finger Furniture, the insurer argued that post-storm sales should be
taken into account to show that the insured did not actually incur any losses.
Here, the insured—not the insurer—argues that post-hurricane sales should be
taken into account to show that losses were much greater than pre-hurricane
figures would indicate. But our determination in Finger Furniture, like our
determination here, was based on a legal analysis of the business-interruption
provision and did not depend on the facts that Imperial Palace highlights. The
language in the two provisions is materially identical, so the analysis is the same
despite the factual dissimilarities.
Imperial Palace also argues that Finger Furniture is distinguishable
because a “favorable conditions clause” might have existed in that case, but none
exists in the instant case. A favorable conditions clause prohibits consideration
of post-loss business increases when determining the amount of business-
interruption losses. If a favorable conditions clause existed in Finger Furniture,
it did not impact the analysis. Accordingly, it is not a valid basis on which to
distinguish Finger Furniture from the instant case.
Finally, Imperial Palace argues that Catlin’s interpretation of the
business-interruption provision conflates the term “loss” with the idea of an
2
Imperial Palace also argues that in Finger Furniture we used loss as a descriptive
term and did not intend to equate it with damage or destruction. Nowhere in Finger Furniture
do we find support for this argument.
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“occurrence.” In this case, Hurricane Katrina was the “occurrence”, which
inflicted “losses” on many victims, one of which was Imperial Palace. Imperial
Palace asserts that Catlin asks us to interpret the business-interruption
provision in such a way that the phrase “had no loss occurred” morphs into “had
no occurrence occurred.” Imperial Palace argues that instead, we should
disentangle the loss from the occurrence and determine loss based on a
hypothetical in which Hurricane Katrina hit Mississippi, damaged all of
Imperial Palace’s competitors, but left Imperial Palace intact: the occurrence
occurred, but the loss did not. While we agree with Imperial Palace that the loss
is distinct from the occurrence—at least in theory—we also believe that the two
are inextricably intertwined under the language of the business-interruption
provision. Without language in the policy instructing us to do so, we decline to
interpret the business-interruption provision in such a way that the loss caused
by Hurricane Katrina can be distinguished from the occurrence of Hurricane
Katrina itself.3
3
Courts interpreting similar business-interruption provisions have generally reached
the same conclusion. See, e.g., Finger Furniture, 404 F.3d at 314 (“[T]he business-loss
provision says nothing about taking into account actual post-damage sales to determine what
the insured would have experienced had the storm not occurred.”); Prudential LMI
Commercial Ins. Co. v. Colleton Enters., Inc., No. 91-1757, 1992 WL 252507, at *4 (4th Cir.
Oct. 5, 1992) (“[A]n insured under a business interruption provision such as that here in issue
may not claim as a probable source of expected earnings . . . a source that would not itself have
come into being but for the interrupting peril’s occurrence.”); Am. Auto. Ins. Co. v. Fisherman’s
Paradise Boats, Inc., No. 93-2349, 1994 WL 1720238, at *4 (S.D. Fla. Oct. 3, 1994) (“[H]ad no
hurricane occurred (the policy’s built in premise for assessing profit expectancies during
business interruption), [then] neither would the claimed earnings source.”) (quotation
omitted). But see Colleton Enters., Inc., 1992 WL 252507, at *4 (Hall, J., dissenting) (“‘Had no
loss occurred’ does not refer to the overall loss in the surrounding area; rather, it clearly refers
only to the loss incurred by the insured.”); Stamen v. Cigna Prop. & Cas. Ins. Co., No. 93-1005,
slip op. at 6 (S.D. Fla. June 10, 1994) (order granting summary judgment) (“If Cigna had
meant to preclude consideration of Food Spot’s post-hurricane profits in the lost profits
calculation, it should have substituted the word ‘occurrence’ for the word ‘loss’ in the clause
describing how business interruption losses would be calculated.”).
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Because “loss” and “damage or destruction” are equivalent terms, the
business-interruption provision in Finger Furniture is materially identical to the
provision in this case, and our interpretation of the provision in Finger Furniture
guides us now. Finger Furniture tells us “that a business-interruption loss will
be based on historical sales figures,” and that we should not “look prospectively
to what occurred after the loss.” 404 F.3d at 314. Thus, in the business-
interruption provision at hand, only historical sales figures should be considered
when determining loss, and sales figures after reopening should not be taken
into account.
Finger Furniture does not control this case because it dealt with a question
of Texas law, while this case deals with a question of Mississippi law. However,
there is no material difference between Texas and Mississippi law on this issue.
Compare Puckett v. U.S. Fire Ins. Co., 678 S.W.2d 936, 938 (Tex. 1984) (“When
there is no ambiguity [in an insurance contract], it is the court’s duty to give the
words used their plain meaning.”), with Martin, 998 So. 2d at 963 (“[I]f [an
insurance policy] is clear and unambiguous, then it must be interpreted as
written.”). Accordingly, we find that Mississippi courts would apply the law in
the same way as Texas courts.
IV.
We AFFIRM.
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