Customarily Ambiguous

A frequently reversed issue in commercial cases before the Fifth Circuit is contract ambiguity. The newest example is Porch.com v. Gallagher Re, where a contract term required an insurance broker to provide “Administrative Services,” defined to include “all servicing duties customarily performed by a reinsurance intermediary-broker after the placement of the reinsurance contract, including but not limited to . . . administering all reserve funding.”

The insured alleged that its reinsurance broker failed to recognize the difference between a mere collateral letter and a letter of credit—the specific instrument that the reinsurance contract called for—and then repeatedly misrepresented the collateral as valid.

The district court dismissed the claim, reasoning that the insured’s allegations related only to the initial placement of reinsurance. The Fifth Circuit disagreed, concluding that the contract term was, at a minimum, ambiguous as to the broker’s duties, explaining that “it is at least reasonable to interpret that provision as including [the broker’s] duties with respect to the letter of credit.”

The Court also emphasized that determination of what servicing duties are “customarily performed” by a reinsurance intermediary-broker is a fact question that cannot properly be resolved on a motion to dismiss. In so doing, the Court rejected the broker’s argument that the insured was seeking to transform purely ministerial tasks into broad duties to investigate the solvency of third parties. The Court found that the complaint simply alleged that the broker did not perform the routine administrative oversight contemplated by the contract’s broad language. No. 25-10489 (Apr. 2, 2026).