Pinnacle Anesthesia Consultants, P.A. v. St. Paul Mercury Insurance Co.

Dissenting Opinion By

Justice MOSELEY.

This case presents a coverage question concerning an insurance policy. The trial court concluded there was no coverage based on an exclusion to the policy, and its partial summary judgments to that effect became part of its final judgment. On appeal, the insured asserts the trial court erred in ruling on the parties’ motions for summary judgment because the relevant exclusion is inapplicable based on its clear, plain meaning or, in the alternative, the exclusion is ambiguous and must be construed in the insured’s favor.

The majority of the panel 'of this Court affirms the trial court. I disagree because, applying the standards of interpretation applicable to exclusions in an insurance policy, I conclude the policy does not exclude the claim at issue. Therefore, I respectfully dissent.

The dispute is between the insurer/ap-pellee, St. Paul Mercury Insurance Company (St. Paul), and the insured/appellant, Pinnacle Anesthesia Consultants, P.A. (Pinnacle). Pinnacle was sued by a former employee for, inter alia, wrongful termination of á written employment contract. Pinnacle had an Employment Practices Liability Insuring Agreement (the Policy) with St. Paul. The Policy provided coverage for certain “Losses” resulting from “Wrongful Acts”; when parsed, the definition of “Wrongful Acts” includes “wrongful discharge or termination, whether actual or constructive” and “breach of an actual or implied employment contract.”

Pinnacle asserted a claim under the Policy and St. Paul defended the suit under a reservation of rights. The former employee, Dr. Neal Fisher, obtained a judgment against Pinnacle that we affirmed on appeal. See Pinnacle Anesthesia Consultants, P.A. v. Fisher, 309 S.W.3d 93 (Tex. App.-Dallas 2009, pet. denied). The judgment included damages — in excess of the Policy’s limits — for lost earnings resulting from Pinnacle’s wrongful termination of Fisher’s contract.

Whether St. Paul is liable to Pinnacle for its policy limits — the only issue in this case — hinges on an exclusionary provision in the Policy. That provision states that the insurer (St. Paul) “shall not be liable for that part of Loss that constitutes ... amounts owed under a written contract or *399agreement .... ” (Emphasis added.)1 We must decide whether Fisher’s lost-earnings damages resulting from Pinnacle’s wrongful termination of his contract constitute amounts owed under his contract. I conclude they do not.

When interpreting an insurance contract, we apply general contract construction rules to discern the parties’ intent, giving each undefined term its generally accepted meaning. See Gilbert Tex. Constr., L.P. v. Underwriters at Lloyd’s London, 327 S.W.3d 118, 126 (Tex.2010). Additionally, when interpreting an exclusion to an insurance policy

we “must adopt the construction ... urged by the insured as long as that construction is not unreasonable, even if the construction urged by the insurer appears to be more reasonable or a more accurate reflection of the parties’ intent. Exceptions or limitations on liability are strictly construed against the insurer and in favor of the insured,” and “[a]n intent to exclude coverage must be expressed in clear and unambiguous language.”

Evanston Ins. Co. v. ATOFINA Petrochemicals, Inc., 256 S.W.3d 660, 668 (Tex. 2008) (footnotes omitted) (quoting Nat’l Union Fire Ins. Co. v. Hudson Energy Co., 811 S.W.2d 552, 555 (Tex.1991)).

Pinnacle asserts the exclusionary language means — on its face or as a matter of a reasonable interpretation — that the Policy excludes from coverage amounts owed under a contract, as opposed to any and all damages resulting from the breach of a contract. In turn, “owed under” means amounts owed as a result of the operation of the contract, not its termination. St. Paul disagrees; it argues (as it must in order to prevail) that the Policy language means — and can only mean — that the Policy excludes from coverage any damages recovered under a breach of (written) contract theory of liability.2 As noted above, *400we must adopt Pinnacle’s interpretation of the exclusion if it is “not unreasonable.” See id.

Pinnacle’s interpretation of the exclusion does not do violence to its language. As noted, the Policy excludes liability for “that part of Loss that constitutes ... amounts owed under a written contract or agreement .... ” (Emphasis added.) The Policy does not define “under a written contract.” Adopting the Webster dictionary definition cited by the majority, the ordinary meaning of “under” is: “required by,” “in accordance with,” or “bound by.”

Keeping these definitions in mind, some damages resulting from breach of contract are “amounts owed under” the contract and some are not. For example, amounts owed under a contract — and excluded from coverage — would include severance pay to a former employee as specified by a contract, or other amounts earned under the terms of a contract (such as salary and other benefits) before the contract was terminated. “Amounts owed under” a contract would also include damages resulting from the incorrect calculation of a salary or a bonus or “draw” to be paid under the contract’s terms.

However, some breach of contract damages result — not from the operation of the contract — but from its termination. Unlike a dispute over calculating compensation, lost-earnings damages arise from the termination of the contract, not its operation. Under Pinnacle’s interpretation, those damages would not be excluded from coverage.

I find nothing about Pinnacle’s argued interpretation of the Policy to be unreasonable. It does not contravene the terms of the Policy, but instead adheres to the meaning of the text of the Policy. Nor does Pinnacle’s interpretation leave the exclusion empty and without meaning. Therefore, we are bound to adopt Pinnacle’s interpretation of the exclusion. See Evanston Ins. Co., 256 S.W.3d at 668.3

The proper measure of damages in an action for breach of contract “is the benefit-of-the-bargain measure, which seeks to restore the injured party to the economic position it would have been in had the contract been performed.” See Brown v. Ogbolu, 331 S.W.3d 530, 535 (Tex.App.-Dallas 2011, no pet. h.). The jury findings on which the “Loss” — Fisher’s judgment against Pinnacle — was based was consistent with this measure of damages.4

Applying the generally accepted meaning of the term “under” to the exclusionary language, the trial court should have concluded the damages awarded to Fisher for lost earnings were not damages awarded “under a written contract.” In other words, they did not constitute “amounts owed [as required by] a written contract,” “amounts owed [in accordance with] a written contract,” or “amounts owed [as bound by] a written contract”; rather, they constitute damages caused by — and owed as a *401result of — the wrongful termination of a written contract.

Because the plain language of the Policy shows that the damages awarded to Fisher were not awarded “under a written contract” and, alternatively, because I find Pinnacle’s interpretation to be reasonable, I conclude the exclusion at issue here does not exclude the damages awarded to Fisher from the Policy’s coverage. I would reverse the trial court’s judgment and render judgment declaring that St. Paul owes Pinnacle its applicable policy limits under the Policy.

.The entire exclusion at issue in this case states:

Exclusions Applicable to All Coverages of This Insuring Agreement and to Loss Other than Defense Costs
The Insurer shall not be liable for that part of Loss that constitutes:
1. amounts owed under a written contract or agreement: provided that this exclusion shall not apply to:
(a) Defense Costs;
(b) to the extent that the Insured would have been liable for such Loss in the absence of the contract or agreement; or
(c) severance pay owed pursuant to a settlement agreement in a Claim for Loss otherwise covered hereunder if the Insurer consents to the inclusion of such severance pay in such settlement agreement;
2. compensation earned by the claimant in the course of employment but not paid by the Company including any unpaid salary, wages, or bonuses; provided that this exclusion shall not apply to:
(a) back pay or front pay; or
(b) Defense Costs.
3.fringe benefits, deferred payments (including insurance premiums in connection with an employee benefit plan), stock, stock options or warrants, stock appreciation rights, or similar rights in securities or rights to purchase securities, or the value thereof, or other perquisites, or any amounts that constitute severance pay pursuant to an express written obligation as part of employment termination; provided that this exclusion shall not apply to:
(a) medical, pension, disability, life insurance or other similar employee benefits or insurance premiums in connection with such employee benefit plans to the extent a judgment or settlement in a Claim for actual or constructive wrongful discharge or termination expressly includes a monetary amount for consequential damages representing such employee benefits or insurance premiums; or
(b) Defense Costs.

. St. Paul seeks to buttress this view throughout its brief by referring to the language at issue as the "Contract Damages Exclusion.” *400This language constitutes a label, not an argument.

. Whether St. Paul’s analysis of the Policy’s exclusion is a reasonable one is not the dis-positive issue; St. Paul’s construction may be reasonable (or even more reasonable than Pinnacle’s) and Pinnacle must still prevail so long as its interpretation also is reasonable. See Evanston Ins. Co., 256 S.W.3d at 668.

. The jury awarded past lost earnings, defined as "the cash value of the earnings Dr. Fisher would have received in the past had Pinnacle not terminated him ... less any amounts actually earned by Dr. Fisher in the past." (Emphases added.) It also awarded future lost earnings, defined as "the cash value of the earnings Dr. Fisher would, in all reasonable probability, earn in the future, less any earnings, had Pinnacle not terminated him without "Cause." (Emphases added.)