RSUI Indemnity Company v. The Lynd Company
Supreme Court of Texas, No. 13-0080 (May 8, 2015)
Opinion by Justice Boyd; Dissent by Chief Justice Hecht
Hurricane Rita damaged 15 out of more than 100 commercial properties for which Lynd had procured excess insurance coverage from RSUI on a single policy. A “Scheduled Limit of Liability” endorsement limited coverage to “the least” of three alternative calculations. Construing this endorsement, RSUI insisted the losses should be calculated separately for each property, so that the total amount payable was the sum of the least amounts payable for each property. Lynd, on the other hand, argued the losses from all the damaged properties should be aggregated, so that the total amount payable was the least of three aggregate calculations. Lynd sued for breach of contract and statutory bad faith. The trial court found in favor of RSUI, and entered a take-nothing judgment. The San Antonio Court of Appeals reversed and rendered judgment for Lynd, awarding the disputed coverage amount of $4.2 million, plus another $3.3 million in penalties, interest, and attorneys’ fees. The Texas Supreme Court affirmed 6-3 after a painstaking analysis of the policy language, the competing interpretations, and public policy considerations—ultimately relying on the principle that if the insured offers a reasonable interpretation of policy terms it must be adopted, even if the insurer’s interpretation might be “more reasonable.” The dissent criticized the result as “unrealistic” because it meant “the policy pays more of the losses for one property if others are damaged at the same time.” The majority opinion should be required reading for anyone seeking to apply Texas law to determine the meaning and application of policy terms.
