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STA R IN SU RA N CE C OM PA NY;
SAV ERS PRO PERTY & CA SUALTY
IN SU RAN CE C OM PA N Y ;
EM PLOYERS REINSURANCE
C ORPO RA TIO N ,
Plaintiffs-Counter-Defendants Appellants,
No. 06-3337
(D.C. No. 01-CV-2128-CM )
(D . Kan.)
v.
B ERRY IN SU RA N CE A G EN CY;
W ALTER G. BERRY, III,
Defendants-Counter-Claimants Appellees,
This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. It may be cited,
however, for its persuasive value consistent with Fed. R. App. P. 32.1 and 10th
Cir. R. 32.1.
Background
Plaintiffs seek to garnish a professional liability insurance policy (an errors
and omissions policy) issued to W alter G. Berry, III d/b/a Berry Insurance
Agency (Berry) by ACE. The policy is a claims-made and reported policy
under which claims against the insured must be made and reported to the insurer
within the policy term to obtain coverage. The one-year policy term was from
January 25, 2001 to January 25, 2002, with a retroactive date of January 25, 1993.
Aplt. App. at 67. The policy also contains a basic extended reporting provision
which provides specific benefits for 90 days following the end of the policy term.
Id. at 76.
On M arch 16, 2001, and within the policy term, Plaintiffs filed a verified
complaint against M r. Berry alleging various wrongful acts relating to an agency
and service agreement between Plaintiffs and M r. Berry. Id. at 13753. The
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The district court determined that the initial complaint and amended
complaint contained claims potentially within the policy, and the reporting
provisions of the insurance policy are unambiguous. Star Ins. Co. v. Berry Ins.
Agency, No. 01-2128, 2006 W L 2460646, at *5*6 (D . Kan. Aug. 23, 2006).
Coverage was properly denied because M r. Berry was aware of the original
complaint and proposed amended complaint before the expiration of the policy
but did not notify ACE until after the policy expired. Id. at *6.
On appeal, Plaintiffs contend that various provisions concerning extended
reporting and the policys duration are ambiguous, and construed properly, the
January 28, 2002, notice provided to ACE through its agent timely reported the
claim under the 90-day extended reporting period. Alternatively, Plaintiffs
contend that the amended complaint did not become a claim under the policy until
February 6, 2002, when their amended complaint was deemed filed.
Discussion
In this diversity action, we review the district courts grant of summary
judgment de novo applying the same standard as the district court. Thom v.
Bristol-M yers Squibb Co., 353 F.3d 848, 851 (10th Cir. 2003). Summary
judgment is appropriate if there is no genuine issue as to any material fact and
that the moving party is entitled to a judgment as a matter of law. Fed. R. Civ.
P. 56(c). The parties agree that Texas law governs the substantive issues given
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Kansas conflict of laws rules (based upon place of contract formation). Aplt. Br.
at 15; Aplee. Br. at 1. W e give no deference to the district courts view of Texas
law. Salve Regina C ollege v. Russell, 499 U.S. 225, 231 (1991).
The interpretation of insurance contracts in Texas is governed by general
rules of contract construction. Forbau v. Aetna Life Ins. Co., 876 S.W .2d 132,
133 (Tex. 1994). The terms of a contract are considered as a whole and not in
isolation. State Farm Life Ins. Co. v. Beaston, 907 S.W .2d 430, 433 (Tex. 1995).
An insurance policy is ambiguous if it is subject to two or more reasonable
interpretations. Natl Union Fire Ins. Co. v. Hudson Energy Co., 811 S.W .2d
552, 555 (Tex. 1991). If a policy is found to be ambiguous, the policy is
construed against the insurer. Id.
Plaintiffs first contend that two provisions in the basic extended reporting
period make the policy ambiguous, and that the ambiguity should be resolved in
favor of the insured. Alternatively, Plaintiffs contend that there is another
reasonable interpretation of the basic extended reporting provision in addition to
the interpretation of the district court, i.e., whatever is covered during the basic
policy period is also covered during the extended reporting period, as long as the
wrongful act occurred before the end of the policy period and was reported by the
end of the extended reporting period. Although creative, both arguments are
entirely without merit given the language of this policy.
Section VI of the policy concerns Extended Reporting Period Coverage.
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time to report. Plaintiffs interpret this sentence to include claims made prior to
the end of the policy period. However, Plaintiffs interpretation conflicts w ith
Section VI.A which specifies that the claims that receive additional time are those
made against you during this 90 day period. Id. Of course, contracts are to be
read as a whole. State Farm, 907 S.W .2d at 433.
Other provisions of the policy support this interpretation as w ell. In
highlighting that this is a claims made and reported policy, the preamble to the
policy distinguishes between claims which are first made against you and
reported to us while this policy is in force and claims first made against you
and reported to us after the end of the policy term. Aplt. App. at 71
(capitalization in original omitted). It indicates that the policy provides coverage
for the first set of claims, but not for the second set of claims unless, and to the
extent, an extended reporting period applies. Id. (capitalization in original
omitted). Thus, the policy draws a distinction in the coverage provided based
upon when the claims are made and reported to the insurer. This clear distinction
eliminates any ambiguity in the additional time language in the Extended
Reporting Period Coverage section. For these same reasons, Plaintiffs argument
that there is another reasonable interpretation of the provision also fails.
Plaintiffs also contend that other provisions in the policy cause the policys
extended reporting provision to be ambiguous. Plaintiffs contend that the terms
policy term, policy period, and when the policy is in force are ambiguous
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the policy. See Natl Union Fire Ins. Co. v. W illis, 296 F.3d 336, 34243 (5th
Cir. 2002). Plaintiffs contentions that the initial complaint was only for
misappropriated premiums, and that the amended complaint did not overlap are
not supported by the record. As w e have discussed, M r. Berry had notice of both
the initial complaint and the proposed amended complaint within the policy
period and did not notify ACE; therefore, there is no coverage. W e need not
address these arguments further.
Plaintiffs next argument is that claims may be eligible for reporting more
than once, and alternatively that the amended complaint only became a claim once
the district court granted leave to file the amended complaint in February 2002.
Insofar as an option exists to defer reporting a claim until the extended reporting
period, Plaintiffs argue that the extended reporting provision does not contain a
limitation contained in other policy provisions defining coverage in terms of
claims first made against you. Aplt. App. at 71, 77 (supplemental extended
reporting provision). This argument was not raised below, and this court need not
address it. See Southern Hospitality, 393 F.3d at 1142.
Regarding the contention that notice was not required until the amended
complaint was filed, Plaintiffs reason that the pleading did not have legal effect
as a claim until the district court granted the motion for leave to amend the initial
complaint. If the amended complaint became a claim in February 2002, then
Plaintiffs argue the claim was timely reported to ACE and satisfies the
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