Narrative Opinion Summary
In this appellate case, Summit Custom Homes, Inc. challenges a trial court's summary judgment favoring Great American Lloyds Insurance Company and Mid-Continent Casualty Company, disputing the denial of its own summary judgment motion. Summit contends that the insurers had a duty to defend and indemnify against claims of construction defects in a home built in 1996. The Lazaruses filed suit in 2003, alleging defects related to the Exterior Insulating and Finishing System (EIFS), invoking the discovery rule for latent defects. Both insurers denied coverage, leading Summit to sue for breach of duty. The trial court sided with the insurers, but on appeal, the court found that Great American may have a duty to defend based on policy terms and the eight corners rule, which focuses on the pleadings and policy coverage. The court also examined whether the alleged damages constituted an 'occurrence' and 'property damage' under the policies, considering the business risk doctrine and subcontractor exception. While the duty to indemnify remains unresolved due to factual disputes, the appellate court reversed the summary judgment regarding Great American, affirming it for Mid-Continent due to an EIFS exclusion. Summit's claims under Texas Insurance Code Article 21.55 for penalties and fees were denied, as the statute does not apply to defense costs. The case is remanded for further proceedings concerning Great American's duties.
Legal Issues Addressed
Business Risk Doctrine and Subcontractor Exceptionsubscribe to see similar legal issues
Application: The court considers the business risk doctrine and the subcontractor exception to determine the applicability of coverage for defective construction.
Reasoning: While Great American contends that the business risk exclusion negates the existence of an 'occurrence' under the policy, the Fourteenth Court of Appeals has previously ruled that defective construction can indeed constitute an 'occurrence' that triggers an insurer's obligation to defend.
Duty to Defend under Commercial General Liability Insurancesubscribe to see similar legal issues
Application: The appellate court examines whether the insurers had a duty to defend Summit against claims related to construction defects.
Reasoning: Summit argues that the trial court wrongly granted the Insurers’ summary judgment motion, asserting that the Insurers had a duty to defend against the Lazaruses' claims. A duty to defend exists when allegations made by a third party, if true, could fall within the insurance policy's coverage.
Duty to Indemnify and Summary Judgmentsubscribe to see similar legal issues
Application: The court differentiates between the duty to defend and the duty to indemnify, finding a genuine issue of material fact regarding the latter.
Reasoning: Due to a factual dispute over whether Great American has a duty to defend, the possibility of its duty to indemnify is not negated.
Eight Corners Rulesubscribe to see similar legal issues
Application: The court applies the eight corners rule to determine the duty to defend, focusing on the allegations in the pleadings and the terms of the insurance policy.
Reasoning: This determination is based solely on the allegations in the pleadings and the policy's terms, without assessing the truth of the allegations. The 'eight corners' rule applies, which mandates strict construction of pleadings against the insurer and resolves any ambiguities in favor of coverage.
Occurrence and Property Damage in Insurance Coveragesubscribe to see similar legal issues
Application: The court analyzes whether the claims against Summit constitute an 'occurrence' and 'property damage' under the terms of the insurance policies.
Reasoning: An 'occurrence' is defined as an accident or continuous exposure to harmful conditions. [...] Assuming the allegations are true, the plaintiffs have adequately claimed physical injury to tangible property, thus establishing 'property damage.'
Texas Insurance Code Article 21.55 and Defense Costssubscribe to see similar legal issues
Application: The court addresses Summit's claim for penalties and attorneys' fees under Article 21.55, finding the statute inapplicable to defense costs.
Reasoning: Summit’s third point claims the trial court erred in denying its motion for summary judgment regarding Article 21.55 of the Texas Insurance Code, seeking an eighteen percent penalty and attorneys' fees [...] affirming that the statute was not intended to cover such situations.