Residential Premises And Fences

Arlington insurance attorneys, as well as all insurance attorneys might run across a situation that was seen in a recent 14th Court of Appeals opinion. The style of the case is Nassar v. Liberty Mutual Fire Insurance Company.
This is an appeal from a motion of summary judgment in favor of Liberty.
The Nassars owned a residence situated on six acres. In addition to the residence itself, these six acres contain a system of fences, barns, and outbuildings. Liberty insured the dwelling and other structures pursuant to a Texas Homeowners Policy Form A. This policy was in effect when Hurricane Ike hit the area and caused losses.
Liberty paid the Nassars for the damage to their dwelling, but there was a disagreement to the amount owed on the fence under the policy. A lawsuit was filed for violations of the Texas Insurance Code.
The parties agree that property damage to the Nassars’ fence from Hurricane Ike totaled $58,000, and that a Texas Homeowners Policy Form A issued by Liberty covers this property damage. The parties also agree regarding the liability limits applicable to the individual policy subsections being litigated. They disagree about which policy subsection applies to the fence.
The Nassars contend that this property damage is covered by subsection (1) of “COVERAGE A (DWELLING),” which is subject to a $247,200 liability limit. Liberty contends that property damage to the Nassars’ fence is covered pursuant to subsection (2) of “COVERAGE A (DWELLING),” which is subject to a $24,720 liability limit that Liberty already has paid.
The operative policy language reads as follows.
COVERAGE A (DWELLING)
We cover:
1. the dwelling on the residence premises shown on the declarations page including structures attached to the dwelling.
2. other structures on the residence premises set apart from the dwelling by clear space. This includes structures connected to the dwelling by only a fence, utility line or similar connection. The total limit of liability for other structures is the limit of liability shown on the declaration page or 10% of Coverage A (Dwelling) limit of liability, whichever is greater.
The term “residence premises” is defined as “the residence premises shown on the declarations page. This includes the one or two family dwelling, including other structures, and grounds where an insured resides or intends to reside within 60 days after the effective date of this policy.” The policy does not define “structures” in subsection (1) or “other structures” in subsection (2).
According to the Nassars, subsection (1) applies because their fence is a “structure attached to the dwelling” and is not “set apart from the dwelling by clear space.” They contend that “the dwelling portion of the policy covers not only the residence but structures attached to the residence.” In support of these contentions, Elie Nassar submitted a summary judgment affidavit in which he stated that “we . . . have a fence that is attached to my house/dwelling that encircles all of the property.” He further stated that the “fence is connected and attached to my home” along the east side of the house, where “the fence is attached with two 4×4 poles connected to the slab and brick of the house by cement;” along the north side of the house, where the fence is attached via 4×4 poles connected to slab, porch, or brick; and along the west side of the house, where “the fence is directly bolted into the brick and slab of the house.”
For its part, Liberty argues: “Because a fence is specifically identified as a connection that is insufficient to attach other structures to the dwelling, the fence itself cannot be an extension of the dwelling. Otherwise, like a breezeway connecting a garage, both buildings and the fence would all become part of the dwelling.” According to Liberty, the policy “equates connection by a fence or utility line with ‘clear space.'” Further, Liberty argues that “the Nassars cannot convert the entire network of fences on their six acre farm to an extension of their ‘dwelling’ by virtue of four bolts.”
The Nassars respond that “the fence falls under the ‘dwelling’ portion of coverage since it is connected to the residence premises at various points, as required by the policy language.” According to the Nassars, subsection (2)’s language “is used to preclude an insured from building random fences that radiate out over a property and connect to other things like barns, workshops, and sheds, which would lead to a claim that these structures are attached to the dwelling by virtue of a fence.”
The Court concluded that the policy’s unambiguous language forecloses application of subsection (1) to the Nassars’ claim for property damage to the fence at issue. The Court reached this conclusion because, when subsections (1) and (2) are read together,
a fence cannot be a “structure[] . . . attached to the dwelling” under subsection (1). This is so because interpreting subsection (1) as the Nassars advocate would render meaningless the following portion of subsection (2): “This includes structures connected to the dwelling by only a fence . . . .”
If a fence attached to the dwelling already is part of the dwelling under subsection (1) as a “structure . . . attached to the dwelling,” then any structure connected to the attached fence likewise would become a “structure . . . attached to the dwelling” under subsection (1). And, if any structure connected to the attached fence already is part of the dwelling under subsection (1), then no purpose would be served by the language in subsection (2) providing for distinct treatment of “other structures” that are “connected to the dwelling by only a fence . . . .”
Such an interpretation is unreasonable because it impermissibly renders language in subsection (2) meaningless. Because the Nassars’ proffered interpretation is unreasonable and does not give rise to an ambiguity, they cannot invoke the principle requiring a choice between reasonable competing policy interpretations to be determined in the insured’s favor.