OPRY MILLS MALL LIMITED PARTNERSHIP, ET AL.
ARCH INSURANCE COMPANY, et al.
Session September 6, 2017
from the Chancery Court for Davidson County No. 10-1504-IV
Russell T. Perkins, Chancellor
primary claim at issue in this appeal is for breach of an
insurance contract. The insured property at issue, Opry Mills
Shopping Mall, sustained catastrophic damages from the May
2010 flood in Nashville, Tennessee. Following the flood, the
insureds contended the policy provided $200 million of
coverage. The insurers insisted the policy limit for the
claim was $50 million pursuant to the High Hazard Flood Zones
Limit due to the fact the location of the Mall had been
designated on a Flood Insurance Rate Map as a Special Flood
Hazard Area. The trial court summarily ruled that the policy
limits were $200 million finding, inter alia, the
insured properties that were limited to $50 million of
coverage were listed on the High Hazard Flood Locations
schedule in Endorsement 6 of the policy, and Opry Mills
Shopping Mall was not listed. Therefore, the trial court
ruled that the policy limits for the claim were $200 million.
Following a lengthy trial, the jury awarded the insured a
judgment of almost $200 million. The insurers appealed. We
have determined the policy limits are $50 million. Because
the insurers paid the insureds $50 million before the
commencement of this action, which is all the insurers are
obligated to pay on the claim, the judgment of the trial
court is reversed. We have also determined that the trial
court did not err by summarily dismissing the insureds'
alternative claim that was based on promissory estoppel.
R. App. P. 3 Appeal as of Right; Judgment of the Chancery
Court Reversed and Remanded
William L. Harbison, Phillip F. Cramer, and Lauren Z. Curry,
Nashville, Tennessee, and Peter E. Kanaris and David E.
Heiss, Chicago, Illinois for the appellants Arch Insurance
Company; Aspen Insurance UK Ltd.; General Security Indemnity
Company of Arizona Hiscox Inc., Ironshore Specialty Insurance
Company; Lexington Insurance Co.; Liberty Mutual Fire
Insurance Company; Certain Underwriters at Lloyds of London;
Maiden Specialty Insurance Co.; RSUI Indemnity Company; Sompo
Japan Insurance Company of America; Tokio Marine &
Nichido Fire Insurance Co., Ltd. (U.S. Branch); Torus
Specialty Insurance Co.; and XL Insurance America, Inc.
R. Trauger, Paul W. Ambrosius, Nashville, Tennessee, and J.
Randolph Evans, and Anthony W. Morris, Atlanta, Georgia,
attorneys for appellant Zurich American Insurance Company.
Capparella and Gregory L. Cashion, Nashville, Tennessee, and
Andrew J. Detherage and Charles P. Edwards, Indianapolis,
Indiana, for the appellees Simon Property Group L.P. and Opry
Mills Mall Limited Partnership.
G. Clement Jr., P.J., M.S., delivered the opinion of the
Court, in which D. Michael Swiney, C.J. and Richard H.
Dinkins, J., joined.
G. CLEMENT JR., P.J., M.S.
Property Group, L.P. ("Simon") is a real estate
conglomerate that owns hundreds of real estate ventures and
commercial properties. One of the real estate ventures Simon
owned during the period relevant to this appeal was Opry
Mills Mall Limited Partnership ("Opry Mills"),
which owns Opry Mills Shopping Mall ("the Mall") in
times relevant to this appeal, Simon, its ventures and
properties were insured under a global unscheduled insurance
policy ("the Policy"). At the time of the May 2010
flood at issue, the Mall was insured under the Policy which
afforded a maximum aggregate of coverage of one billion
dollars. The risk of loss was shared by numerous insurance
companies that collectively agreed to underwrite the Policy
based on percentages of liability in layers of coverage. This
appeal involves two layers of coverage between $50 million
and $200 million.
action arises from one of the worst floods in Nashville's
history which submerged the Mall in up to 10 feet of water.
The flood resulted from a record amount of rain that fell on
May 1 and 2, 2010, from a slow moving weather system. Several
rainfall records in the area were broken, and the Cumberland
River, which is adjacent to the Mall, crested at over 51 feet
in Nashville, exceeding a level not experienced since 1937.
the Mall parking lot became submerged under water, the
decision was made to close the Mall on Sunday, May 2. The
following day, the entire Mall was completely submerged, and
it remained closed for months. Immediately thereafter, the
parties agreed to engage Crawford & Company
("Crawford") to serve as the claim adjuster, and
Crawford was on the ground as soon as the property became
accessible. When Crawford representatives first accessed the
property on May 5, the flood water had not yet receded. By
the next day, the water had receded and Crawford
representatives were able to observe the damage. Thereafter,
Crawford representatives participated in daily meetings with
contractors hired by Simon to remediate the damage. These
meetings involved what work was to be done and how it was to
Crawford reviewed the insured location, the flood conditions,
and the Policy, it reached the conclusion that the Mall was
located in a High Hazard Flood Zone, as that term was defined
in the Policy, for which the limit of coverage was $50
million. Based on this and Crawford's determination that
the compensable damages would exceed $50 million, on July 20,
2010, Crawford recommended that the insurers pay the $50
million High Hazard Flood Zones Limit. Soon thereafter, the
insurers remitted $50 million to the insureds. On July 30,
2010, the insurers formally notified Simon and Opry Mills
that they were denying coverage for any amount in excess of
September 14, 2010, Simon and Opry Mills
("Plaintiffs"), commenced this action in which they
asserted claims against fifteen insurance companies that
participated on a prorate basis in providing layers of
coverage between $50 million and $200 million
("Defendants"). The insurance companies that
participated in the first $50 million of coverage are not
involved in this appeal because that sum was paid prior to
the commencement of this action.
complaint asserted numerous alternative claims but only two
are relevant in this appeal. The complaint asserted a claim
for breach of contract for the wrongful denial of coverage in
excess of $50 million. The complaint also asserted an
alternative claim of promissory estoppel, which is premised
on the allegation that Defendants made pre-flood
representations that the Mall had $200 million in flood
discovery, the parties filed various motions on numerous
issues including motions for partial summary judgment.
Plaintiffs filed a motion for partial summary judgment
contending the Policy provided $200 million of coverage
because the $50 million High Hazard Flood Zones coverage
limitation did not apply due to the fact the Mall was not one
of the locations identified under Endorsement 6 as one of the
High Hazard Flood Locations. Defendants filed a joint motion
for partial summary judgment contending the $50 million
limitation of coverage applied because the Mall was located
in a High Hazard Flood Zone as that term is defined in the
Policy. Defendants also contended that the listing of High
Hazard Flood Locations in Schedule 6 applied only to
"the deductibles section" of the Policy, not to the
limitation of coverage.
trial court held a hearing on February 11, 2015, on the cross
motions for summary judgment related to the Policy limits and
held hearings on March 3 and 4, 2015, on the remaining
motions. The trial court issued an order and memorandum on
March 13, 2015, in which it stated that it was applying the
traditional Tennessee summary judgment standard because the
case was filed before the standard in Tenn. Code Ann. §
20-16-101 became law. The court also stated that because the
Policy did not contain a choice of law provision and because
the Policy was delivered to Simon whose principal office was
in Indiana, the court was applying Indiana law to interpret
stated in the order entered on March 13, 2015, the trial
court granted Plaintiffs' motion for partial summary
judgment and denied Defendants' cross motion on the
limits of coverage. Applying Indiana law to interpret the
Policy, the trial court found that the $200 million
limitation applied. The court stated in pertinent part
"that a mall situated in a High Hazard Flood Zone had to
be listed as a High Hazard Flood Location to be Subject to
the $50 Million Sublimit." Further, the court
"discern[ed] no ambiguity in the parties providing a
list of malls which are 'High Hazard Flood Locations'
immediately below a broader definition of 'High Hazard
Flood Zones, ' and the undisputed fact that Opry Mills
Mall was not on the list in 2010." The trial court
granted summary judgment to Defendants on the estoppel, TCP
A, and bad faith claims.
case then proceeded to trial before a jury. Plaintiffs
introduced evidence that they incurred expenses and business
losses as a result of the flood that included, inter
alia, $55 million for remediation expenses, $93.4
million in replacement costs, and $41 million in lost income
during the shutdown of Opry Mills. Defendants challenged the
damages claimed by Plaintiffs on numerous grounds. The jury
returned a verdict in favor of Plaintiffs, finding damages in
the following amounts on Plaintiffs' breach of contract
claims under the Policy:
Remediation Costs: $ 55, 060, 642
Replacement Costs: $ 89, 350, 351
Business Interruption Losses: $ 41, 945, 081
Consequential Damages: $ 16, 831, 605
Loss Adjustment Expenses: $ 936, 137
total award of damages, including additional consequential
damages, was $204, 123, 816. After giving Defendants a credit
for the $50 million paid on the claim prior to the
commencement of this action and "[a]fter deductions for
the deductible and participation by insurers who were not
Defendants, " the trial court apportioned the covered
damages among Defendants, that being the insurers that
participated in this action. Pursuant to the Order on
Jury's Verdict entered on November 5, 2015, Plaintiffs
were awarded a judgment of $146, 373, 816 against the
insurers that are Defendants in proportionate amounts as
specified in the order. On April 11, 2016, the trial court
entered a final judgment of $146, 373, 816 in favor of
Plaintiffs and additionally awarded Plaintiffs $373, 535.28
in discretionary costs. The judgment additionally stated that
Plaintiffs were not entitled to recover prejudgment interest.
subsequently filed motions for a new trial and for judgment
notwithstanding the verdict. The trial court denied these
motions. Defendants then timely appealed.
primary issue presented for our review is whether the
applicable limit of coverage for flood damage is $50 million
or $200 million. If we rule that the $200 million limit
applies, Defendants want us to additionally review the trial
court's other rulings including its exclusion of
evidence, its directed verdict rulings, certain jury
instructions, the verdict form, and the trial court's
denial of Defendants' motions for a new trial and
judgment notwithstanding the verdict. Conversely, if we rule that
the $50 million limit applies, Defendants' state that
their additional issues are moot.
the issues raised by Plaintiffs, if we rule that the $200
million limit applies Plaintiffs want us to determine if they
are entitled to recover prejudgment interest. Conversely, if
we rule that the $50 million limit applies, Plaintiffs want
us to determine whether reinstatement of their alternative
claim of estoppel is required.
Interpretation of the Policy
primary contentions of the parties on this issue, that being
the limit of coverage for flood damage, can be summarized as
contend the facts that are most relevant to this issue can be
summarized in three sentences:
First, the Simon Policy provides $50 million of coverage for
floods in high hazard flood zones as defined by the
applicable government flood map. Second, at the time of the
May 2010 flood, the applicable government flood map reflects
Opry Mills being situated in a high hazard flood zone. Thus .
. . this entire appeal may be resolved through application of
the plain language of the Simon Policy and the
FEMA-designated location of Opry Mills.
(Internal citations to the record omitted).
contend the policies that have insured Simon, its ventures
and properties since Opry Mills and the Mall were acquired in
2007, have always listed the locations which only have $50
million in flood coverage under "High Hazard Flood
Locations." They also rely on the fact the Mall has
never appeared on that list.
Indiana Law, the trial court found that the $200 million
limitation applied. Specifically, the court stated "that
a mall situated in a High Hazard Flood Zone had to be listed
as a High Hazard Flood Location to be Subject to the $50
Million Sublimit." We respectfully disagree.
interpretation of an insurance policy is a question of law
for the court and is thus reviewed de novo. State Farm
Mut. Auto. Ins. Co. v. Jakubowicz, 56 N.E.3d 617, 619
(Ind. 2016). When interpreting insurance contracts, we are to
construe them in the same manner as any other contract.
Allstate Ins. Co. v. Dana Corp., 759 N.E.2d 1049,
1054 (Ind. 2001). Courts cannot ignore the plain words of an
insurance contract and are to "make all attempts to
construe the language in a contract so as not to render any
words, phrases, or terms ineffective or meaningless."
American Family Life Assur. Co. v. Russell, 700
N.E.2d 1174, 1177 (Ind.Ct.App. 1998) (citing Farthing v.
Life Ins. Co. of N. America, 500 N.E.2d 767, 772
(Ind.Ct.App. 1986) and Bicknell Minerals, Inc. v.
Tilly, 570 N.E.2d 1307, 1316 (Ind.Ct.App. 1991)).
a policy "must be reasonably construed, and the court
may not find coverage unless the language of the policy
admits liability." Gallant Ins. Co. v. Allstate Ins.
Co., 723 N.E.2d 452, 455 (Ind.Ct.App. 2000) (citing
Allstate Co. v. Kepchar, 592 N.E.2d 694, 696
(Ind.Ct.App. 1992)). "[E]xceptions, limitations and
exclusions must be plainly expressed in the policy."
American Family Life Assur. Co., 700 N.E.2d at 1177.
if the language of the policy is ambiguous, then the court
may apply the rules of construction in interpreting the
language." Askren Hub States Pest Control Services,
Inc. v. Zurich Ins. Co., 721 N.E.2d 270, 275
(Ind.Ct.App. 1999) (citing Eli Lilly and Co. v. Home Ins.
Co., 482 N.E.2d 467, 470 (Ind. 1985)). In determining
whether an ambiguity exists and if so, how courts are to
interpret that ambiguity, Indiana courts have previously
An ambiguity does not arise merely because the two parties
proffer differing interpretations of the policy language.
Lexington Ins. v. American Healthcare Providers, 621
N.E.2d 332, 336 (Ind.Ct.App.1993), trans.
denied. Rather, the policy is ambiguous only if it is
"susceptible to more then [sic] one interpretation and
reasonably intelligent persons would differ as to its
meaning." Commercial Union Ins. v. Moore, 663
N.E.2d 179, 181 (Ind.Ct.App.1996), trans,
denied. See Masonic Accident Ins. Co. v. Jackson, 200
Ind. 472, 481, 164 N.E. 628, 631 (1929). If there is an
ambiguity, an insurance contract should be interpreted in the
light most favorable to the insured. Eli Lilly, 482
N.E.2d at 470. The contract should be construed to further
its basic purpose of indemnity.
begin our analysis of the policy limits issue, it is
important to understand the significance of certain terms
that are used in the Policy. Two important terms, which are
defined in the Policy, are: "High Hazard Flood
Zones" and "High Hazard Flood Locations." Two
other important terms that appear in the Policy are the
"National Flood Insurance Program" and
"Special Flood Hazard Area."
for floods that occur in High Hazard Flood Zones, the Policy
provides coverage up to $200 million. Defendants rely on
Clause 3 of the Policy to insist that the $50 million limit
applies to the claim at issue. Clause 3, which pertains to