AmGUARD Insurance v. Meisel

Case: 22-20557 Document: 91-1 Page: 1 Date Filed: 07/11/2025

United States Court of Appeals for the Fifth Circuit ____________ United States Court of Appeals Fifth Circuit

No. 22-20557 FILED July 11, 2025 ____________ Lyle W. Cayce AmGUARD Insurance Company, Clerk Plaintiff—Appellant, versus Allen Meisel; Mindy Meisel, Defendants—Appellees. ______________________________ Appeal from the United States District Court for the Southern District of Texas USDC No. 4:16-CV-2592 ______________________________ Before Richman, Graves, and Wilson, Circuit Judges.

Priscilla Richman, Circuit Judge: * AmGUARD, an insurance company, insured a building owned by the Meisels. The building sustained damage from a fire. AmGUARD denied coverage, contending the building lacked a “local fire alarm” that was “in complete working order” as the insurance policy required. In the consequent litigation, the district court granted summary judgment in favor of the Meisels. We affirm.

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No. 22-20557

I In May 2016, a fire damaged a building in Houston, Texas, owned by Allen and Mindy Meisel. 1 Between 2004 and 2016, they leased the building to the Sultanali family. The Sultanalis used the building to operate their home-furnishing business, Baths of America, Inc. (BAI).

BAI obtained an insurance policy from AmGUARD that was in effect when the fire occurred. The policy covered “direct physical loss of or damage to” the building up to $1,350,000. The Meisels were named insureds to the extent of physical damage to the building.

This case concerns an endorsement to that policy called the “Protective Safeguards” endorsement. The endorsement modified the policy by adding a condition for coverage and an exclusion from coverage.

The condition stated that the insureds were “required to maintain” specified “protective devices,” which the endorsement identified as “Central Station Burglar Alarm Local Fire Alarm.” The exclusion stated that AmGUARD would not pay for damage caused by fire if, prior to the fire, the insureds “[f]ailed to maintain any [identified] protective safeguard . . . over which [they] had control, in complete working order.”

Late on the night of the fire, Ali Sultanali received a phone call from ADT informing him that motion detectors had been triggered at the building.

Sultanali checked a video feed from cameras installed in the building and saw smoke. He told the ADT representative to call the Houston Fire Department. The fire department arrived and controlled the fire over the next hour.

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BAI filed a claim under the policy. AmGUARD sent several representatives to inspect the building, including an adjuster. There is no dispute that a “Central Station Burglar Alarm” was in place and operational at the time of the fire. But AmGUARD sent BAI and the Meisels a letter denying coverage because “there was no local fire alarm” in the building.

The Meisels responded that the building had a local fire alarm. To be clear, the only dispute in this appeal is whether there was a “Local Fire Alarm” within the meaning of the policy.

AmGUARD filed a declaratory judgment action in federal court against BAI and the Meisels, seeking a determination that it was not liable to them. BAI and the Meisels counterclaimed for, among other things, breach of contract.

About eight months after AmGUARD initiated the federal action, Servpro, 2 a business hired by BAI and the Meisels to clean the building after the fire, sued BAI and the Meisels in Texas state court. The Meisels brought AmGUARD into that case as a third-party defendant, asserting the same claims as in their counterclaims in the federal lawsuit.

AmGUARD removed the Texas lawsuit to federal court. It moved for the two lawsuits to be consolidated and for realignment of the parties, pitting AmGUARD versus BAI, the Meisels, and Servpro. Servpro and the Meisels moved to remand and objected to realignment. The district court ordered the cases to be consolidated, such that the declaratory judgment lawsuit subsumed the removed lawsuit. The court denied the motion to remand.

BAI and the Meisels moved for summary judgment, arguing that the policy covered the damage caused by the 2016 fire. The district court agreed, Case: 22-20557 Document: 91-1 Page: 4 Date Filed: 07/11/2025

No. 22-20557 holding that the policy covered the insureds’ loss. It reasoned that “[t]he building had a local fire alarm, among other alarms, that was in a normal operating state.”

AmGUARD then settled with BAI and Servpro, leaving itself and the Meisels as the only remaining parties. A year later, AmGUARD urged the district court to reconsider and revise its coverage ruling. The district court issued a ruling stating that it reconsidered its opinion on coverage, and it confirmed that opinion.

Subsequently, the district court referred the case to a magistrate judge. The magistrate judge awarded a final judgment to the Meisels of $516,061.52 in damages, eighteen percent statutory interest, $173,099.75 in pre-judgment interest, and post-judgment interest. AmGUARD timely appealed.

II “This Court must examine the basis of its jurisdiction, on its own motion, if necessary.” 3 Accordingly, we directed the parties to brief whether there is complete diversity among the parties.

Under 28 U.S.C. § 1332, “[t]he federal courts may exercise diversity jurisdiction over a civil action between citizens of different States if the amount in controversy exceeds $75,000.” 4 “To properly allege diversity jurisdiction under § 1332, the parties need to allege ‘complete diversity.’

That means ‘all persons on one side of the controversy [must] be citizens of Case: 22-20557 Document: 91-1 Page: 5 Date Filed: 07/11/2025

No. 22-20557 different states than all persons on the other side.’” 5 “As the Supreme Court has emphasized, federal diversity-of-citizenship jurisdiction ‘depends upon the state of things at the time of the action brought.’” 6 Or, for cases removed from state court, “diversity of citizenship must exist both at the time of filing in state court and at the time of removal to federal court.” 7 The parties to the declaratory judgment action brought by AmGUARD were completely diverse. The plaintiff, AmGUARD, was incorporated and had its principal place of business in Pennsylvania. The defendants—the Meisels and BAI—were Texas citizens. But the parties to the action brought by Servpro in Texas state court were not diverse. After removal, Servpro represented to the district court that it was a citizen of Texas. 8 Servpro sought remand because the defendants, such as the Meisels, were Texas citizens too.

Both AmGUARD and the Meisels contend that we nevertheless have jurisdiction. We agree. “[W]e must view each consolidated case separately to determine the jurisdictional premise upon which each stands.” 9 When the Case: 22-20557 Document: 91-1 Page: 6 Date Filed: 07/11/2025

No. 22-20557 declaratory judgment action was filed, the parties were completely diverse— and “diversity jurisdiction is determined at the time of filing.” 10 Therefore, we have jurisdiction over the declaratory judgment action. We also have jurisdiction over the removed action. “[D]ismissal of the party that had destroyed diversity” is a “method of curing a jurisdictional defect [that has] long been an exception to the time-of-filing rule.” 11 Here, the district court had dismissed the nondiverse parties by the time it confirmed the opinion on coverage at issue here. 12 We are satisfied that we have jurisdiction.

III “Courts may grant summary judgment on an issue only when ‘no genuine dispute as to any material fact’ exists ‘and the movant is entitled to judgment as a matter of law.’” 13 “A dispute is genuine ‘if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.’” 14 “[W]e must view all evidence and draw all justifiable inferences Case: 22-20557 Document: 91-1 Page: 7 Date Filed: 07/11/2025

No. 22-20557 in favor of [AmGUARD], the nonmovant.” 15 “Still, ‘[c]onclusional allegations and denials, speculation, improbable inferences, unsubstantiated assertions, and legalistic argumentation’ do not count for raising a genuine fact dispute.” 16 “We review summary judgment de novo.” 17 Two provisions of the insurance policy define the parties’ dispute.

First, the “Protective Safeguards” endorsement (PSE) provides that, “[a]s a condition of this insurance,” the Meisels were “required to maintain” listed devices. The PSE lists these devices: “Central Station Burglar Alarm Local Fire Alarm.” Second, as an “[e]xclusion[],” the PSE states that AmGUARD “will not pay for loss or damages caused by or resulting from fire if, prior to the fire,” the insureds “[f]ailed to maintain” any listed device “in complete working order.”

The parties agree that Texas law governs this case’s contract-law questions. 18 “Texas law ‘places the burden of establishing coverage upon the insured [and] the burden of establishing an exclusion upon the insurer.’” 19 We begin with the condition to coverage. The Meisels identify several devices they allege the building had that constituted local fire alarms within Case: 22-20557 Document: 91-1 Page: 8 Date Filed: 07/11/2025

No. 22-20557 the meaning of the policy. They point to two alarm panels that were installed in the building. AmGUARD does not dispute that the building contained those alarm panels. In 2016, BAI hired a company named DirectSat to install an Ademco panel at the rear of the building and a Honeywell panel at the front of the building. The Ademco panel could be programmed to manually activate a fire alarm from the keypad. The Honeywell panel had a “PANIC” icon on its home screen, represented by an exclamation point in a yellow triangle. Pressing the PANIC icon would show an emergency screen, which showed a symbol of a flame labeled “Fire.” A representative for DirectSat attested that the panels were programmed such that if either “fire” button were pressed, an alarm would sound from both keypads as well as sirens located in the building.

AmGUARD contends that neither of the alarm panels constituted a “Local Fire Alarm” within the meaning of the policy. 20 Citing a code written by the National Fire Protection Association, AmGUARD argues that the alarm panels “are not permitted for use as a fire alarm in a commercial setting” because they are “neither used exclusively for ‘fire alarm initiating purposes’ nor ‘red in color.’” It stresses that the public would not recognize the panels as fire alarms.

“The interpretation of the [term “Local Fire Alarm”] as used in the insurance contract is a question of law, which the court reviews de novo.” 21 “Under Texas law, ‘insurance policies are construed according to common Case: 22-20557 Document: 91-1 Page: 9 Date Filed: 07/11/2025

No. 22-20557 principles governing the construction of contracts . . . .’” 22 The insurance policy does not define the term “Local Fire Alarm.” “Words not defined in a contract are to be understood ‘according to their plain and ordinary meaning.’” 23 “Courts may look to dictionaries to discern the meaning of a commonly used term that the contract does not define.” 24 We conclude that the alarm panels were local fire alarms within the meaning of the PSE. A fire alarm is “a device that makes a loud sound to warn people when there is a fire.” 25 In a recent unpublished case, we “interpret[ed] the plain language of ‘Fire Alarm: Local’” in a similar insurance contract “as requiring an alarm that sounded in the particular place that it alerted.” 26 The alarm panels meet these definitions. They had dedicated fire-alarm buttons, which would trigger alarms from the panels themselves and from sirens. Further, the PSE defined several types of protective devices that AmGUARD could require an insured to maintain.

One of them was:

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Automatic Fire Alarm, protecting the entire building, that is: (1) Connected to a central station; or (2) Reporting to a public or private fire alarm station.

But the PSE did not require the insured to maintain an “Automatic Fire Alarm”—just a “Local Fire Alarm,” which the PSE did not define. If AmGUARD desired BAI’s fire alarm to be automatic, red in color, or used exclusively for fire-alarm initiating purposes, it could have specified that in the PSE. The alarm panels constituted a local fire alarm within the plain and ordinary meaning of that term.

AmGUARD urges that there is a genuine fact issue about whether the panels had dedicated fire buttons. It points to the Ademco panel’s manual, which states that the fire-alarm system applies only to residential systems.

But with respect to the Honeywell panel, AmGUARD merely asserts— without identifying any summary judgment evidence—that “the Honeywell panel did not have a dedicated ‘fire’ button.” Indeed, the only summary judgment evidence on this issue is the affidavit of the DirectSat representative, who attested that the Honeywell panel was equipped with such a button. Even assuming that AmGUARD is correct that there is a fact issue about the existence of a dedicated fire button on the Ademco panel, there is no evidence casting doubt about the Honeywell panel’s button.

Accordingly, the Meisels are entitled to summary judgment on the coverage issue.

The final issue is whether the Meisels are nevertheless excluded from recovering because the alarm panels were not in “complete working order.”

It is AmGUARD’s burden to establish this exception. 27 Ultimately, Case: 22-20557 Document: 91-1 Page: 11 Date Filed: 07/11/2025

No. 22-20557 however, AmGUARD failed to point to any evidence that the alarm panels were not in complete working order. Accordingly, AmGUARD has not carried its burden to demonstrate a genuine issue of material fact about whether the alarm-panel fire alarm was less than fully functional. * * * For the foregoing reasons, the district court’s grant of summary judgment to the Meisels is AFFIRMED.