Dallas Fort Worth Insurance Lawyer Blog

A decision in a Dallas, Texas, case was handed down on January 22, 2010. The results should have been the same in Fort Worth, Grand Prairie, Arlington, or Weatherford. This case was decided by the United States District Court, Northern District, Dallas Division.
The style of the case is Gemini Insurance Company v. Trident Roofing Company, L.L.C. The lawsuit arises from an incident where the Roman Catholic Diocese of Dallas and Our Lady of the Lake Catholic Church hired Trident Roofing Company, L.L.C., to perform roofing work on a Church building. In doing the roof work, Trident performed "torch down roofing". "Torch down roofing" is defined in the insurance policy as "the use of any roofing system that requires the applying of a direct flame (torch) to asphalt/modified bitumen or in the application of any other roofing material." The Church sued Trident after a fire started while Trident was using this roofing method.
Trident looked to their insurance policy with Gemini Insurance Company and demanded that Geminin protect them in the lawsuit including paying for defense costs and indemnity costs. Gemini denied coverage citing an exclusion in the insurance contract for work performed using "torch down roofing". The specific language in the policy states: "It is agreed no coverage is afforded for any liability or claim that arise(s) out of, is related to, or connected with the following: TORCH DOWN ROOFING."
When an insurance company denies coverage relying on the policy's exclusions to deny coverage, the insurer bears the burden of proving that the exclusions apply. Thus, in determining whether Gemini has a duty to defend or indemnify Trident, the Court has to compare the allegations in the lawsuit to see if the allegations fall within the scope of the policy's exclusions.
Here, Texas law applies, and Texas Courts construe the phrase "arise out of", broadly in the context of insurance exclusions. The Court stated "The Texas Supreme Court has held that "arise out of" means that there is simply a "casual connection or relation," which means that there is but-for causation, though not necessarily direct or proximate causation. That is, if it were not for the existence of the underlying event or circumstance, the damage could have existed without the damage ever occurring. A claim need only bear an incidental relationship to the described conduct to "arise out of" that conduct. Furthermore, the Fifth Circuit of Appeals had broadly construed language identical or similar to the phrase "arising in connection herewith" contained in indemnity agreements to "unambiguously encompass all activities reasonbly incident to or anticipated by the principle activity of the contract."
The Court decided the case in favor of the insurance company, Gemini. There were many allegations made against Trident in the lawsuit, all of which, Trident pointed out as being reasons why Gemini should be defending and paying the claim. The Court concluded by stating that the damage caused to parts of the Church's building and structure were caused by Trident's presence on the Church's site, and thus "arose out of" or are "connected with" Trident's torch down roofing job. Therefore, Gemini does not owe a duty to defend or to indemnify Trident in the lawsuit.

Most people would not realize how much time and money is spent with insurance companies fighting with other insurance companies. Most of these fights result from situations where a person or company has more than one policy. An example would be where an Arlington resident buys some insurance in Grand Prairie, Dallas, Fort Worth, or maybe out in Weatherford or wherever but also buys another policy at the same time or later on from another company or agent. Next, an incident happens, the result of which is the policyholder has to file a claim or seek coverage through the policies of insurance. Then what happens is, the companies start fighting with each other about which one has to pay the claim or pay the costs of defending the claim asserted. The following case is yet another example of this type of situation.
The United States Fifth Circuit Court of Appeals handed down a decision is one of these cases on January 4, 2010. The style of the case is, Trinity Universal Insurance Company; Utica National Insurance; National American Insurance Company, Subrogees of Lacy Masonery Inc., v. Employers Mutual Casualty Company.
In this case, Employers Mutual Casualty Company (EMC) and the others issued commercial general liability insurance policies to Lacy Masonry, Inc. Lacy was sued. Trinity defended and eventually settled the case on behalf of Lacy. Utica defended and eventually settled the case on behalf of Lacy. And, finally, National defended and eventually settled the case on behalf of Lacy. EMC refused to defend or participate in the settlement.
Trinity, Utica, and National, then sued EMC for EMC's pro rata share of the settlement and defense costs. EMC claimed they did not have a duty to defend and thus no duty to pay a pro rata share of settlement monies or defense costs. The court analysed the policy language and eventually ruled that EMC should have participated in the defense of Lacy. Because of the language in the EMC policy and earlier court decisions related to the policy language, the court partially agreed with EMC, that EMC did not have to contribute to the settlement costs. However, this language did nothing to protect EMC from having to handle its pro rate share of the defense costs because EMC clearly had a duty to atleast defend Lacy in the lawsuit.
A reading of the case distinguishes and explains in an understandable manner the reasoning of the court in this matter. Each situation and policy put together have to be analysed and then applied to the insurance laws in Texas to be able to fully understand the difference between one situation and another.

The United States Court of Appeals for the Fifth Circuit, decided another case this month dealing with the duty of an insurance company to defend a lawsuit filed against one of its insureds. The decision on this case was handed down by the court on January 4, 2010. The case was an appeal from the United States District Court for the Southern District of Texas. The Fifth Circuit, located in Louisiana, handles appeals that would arise out of Dallas, Fort Worth, Arlington, Grand Prairie, small towns like Weatherford, and all other places in Texas.
In the opening paragraph of the decision the court makes the following statement, "We have occasion once again to take up the seemingly simple task of determining whether an insurance company owes a duty to defend an underlying liability lawsuit, and because the insurer in this case indeed has such a duty, it is also an occasion to again remind: when in doubt, defend." As stated in this blog in the past, the courts draw a distinction between the obligation of an insurance company to defend an insured who has been sued and the obligation of an insurance company to pay a claim.
The case at issue here is styled, Essex Insurance Company v. Hines. The policy was a "Commercial General Liability Coverage" and another one called a "Commercial Property Coverge" policy. The facts here are relevant to deciding the existence or lack there of, as it relates to coverage in the wording in the policy. What Essex was failing to see was how Texas law applies in the difference between the duty to defend and the duty to pay under a policy of insurance.
Under Texas law, an insurer has a duty to defend a policyholder in actions brought by a third party who asserts claims "potentially" covered by the insurance policy. The key word here being, "potentially." When determining whether an insurance company owes a duty to defend its policyholder, Texas courts follow the "eight corners" rule, which directs the court to examine only "the allegations in the pleadings" which is the first four courners, and "the language of the insurance policy", which is the second four corners.
The insurance company argued that the policy did not cover the type of loss the third party was sueing about. The court was saying that maybe the insurance company was right, but the allegations in the lawsuit were sufficient to raise the possibility that coverage would be triggered and thus the insurance company should be providing a defense to Hines.
Anytime someone is sued and they have a policy of insurance that "might" provide coverage, they should take the lawsuit papers to their insurance company. If the insurance company refuses to defend the lawsuit then an experienced Insurance Law Attorney should be contacted.

A lot of insurance contracts have written into them an appraisal clause or paragraph. Whether you bought the policy in Grand Prairie, Arlington, Dallas, Fort Worth, or out in Weatherford, Texas, you could be forced to submit to an appraisal process if the insurance company insists on enforcing that portion of the insurance contract.
A recent case, JM Walker, LLC v. Acadia Insurance Company, is an example of how these situations are sometimes handle. Each case would be different depending on the wording of the appraisal provision in the contract and the facts of the case.
In this case, Walker was the owner of five building in North Richland Hills, Texas. The roofs of the building suffered damage from a hailstorm. Walker submitted a claim to Acadia, but Acadia denied coverage after its adjuster determined that the roofs did not need to be replaced and that the damage that did exist, was less than the $5,000 deductible that applied in the case.
Walker contested the adjusters findings and Acadia invoked its contractual right to appraisal. Walker then filed a lawsuit, but the Judge compelled the parties to submit to the appraisal process.
The umpire in the appraisal process found on behalf of Walker and found the cost of repair to be $423,053.96. Acadia paid the amount.
Walker filed an appeal in the United States Fifth Circuit, which is the case written about here. Walker wanted more money for his damages, plus was seeking monies for the "bad faith" conduct of Acadia and their handling of the claim.
The Court in its decision stated that under Texas law, "appaisal awards made pursuant to the provisions of an insurance contract are binding and enforceable, and every reasonable presumption will be indulged to sustain an appraisal award." The Court wrote that an otherwise binding appraisal may be disregarded in three situations: "(1) when the award was made without authority; (2) when the award was made as a result of fraud, accident, or mistake; or (3) when the award was not in compliance with the requirements of the policy."
Walker argued all three points and was shot down on all three points. The case is a good place to look to get an idea of how the courts look at these appraisal processes and how they are handled.

The United States Court of Appeals for the Fifth Circuit is a federal court located outside of Texas. Cases that originate in Texas, including the Dallas, Fort Worth, Arlington, and Grand Prairie areas will end up in this Fifth Circuit Court when it is on an appeal.
A case decided in late December of 2009 discusses "notice" provisions in insurance policies. These provisions are important for the people or businesses who have these policies to understand.
The case is styled, "East Texas Medical Center Regional Healthcare System v. Lexington Insurance Co".
East Texas Medical Center Regional Healthcare System had various policies of insurance to provide coverage in the event they had claims or lawsuits made against them.
Lexington Insurance Company provided to East Texas a "claims-made" policy. A claims-made policy is a policy of insurance that provides coverage only for claims made during the term of the policy regardless of when the actual claim arose.
In this case, East Texas received notice from an attorney for one of its patients that they may be sued for wrongs they may have committed. East Texas sent to Lexington a "loss run" document before the Lexington policy had expired which was suppose to be notice to Lexington of the potential claim. About 11 days before the policy expired, East Texas was sued by its patient. It was 7 months later before East Texas notified Lexington of the lawsuit. Lexington denied coverage to East Texas.
There were several issues argued to the court. One of these was whether or not the loss run document was sufficient notice to Lexington of the claim. The court decided in East Texas favor on this issue. The next was whether or not East Texas had immediately or "as soon as practicable", notified Lexington of the lawsuit. This was a requirement under the policy of insurance. On this issue the court decided against East Texas.
Once the court had decided that East Texas had violated the policy provision related to notifying Lexington about the lawsuit then the burden to prove that the East Texas failure to promptly notify them of the lawsuit, hurt Lexington, or as the court put it; that Lexington was prejudiced by East Texas not notifying Lexington as soon as practicable. On this issue the court remanded the case to the trial court.
The lesson learned on this case is really pretty simple. Whenever a claim or even a potential claim is being made against a person or business that has insurance coverage, it is vital that the insurance company is notified. And just a phone call is not sufficient. The notice needs to be in writing and the notice needs to be immediate. And lastly, there needs to be constant and immediate follow-up of all further communications related to the claim.

The Supreme Court of Texas issued an opinion on a case on December 11, 2009, that will make insurance companies who have issued commercial policies, to take a second look before denying a claim in certain situations.
The case involved here is titled, D.R. Horton-Texas, LTD. v. Markel International Insurance Company, LTD. This case came out of the Texas Court of Appeals in Houston. It could have been a case arising out of the Dallas or Fort Worth or surrounding areas like Arlington, Grand Praire, or Irving.
In this case, a couple, the Holmes, purchased a home from the builder, D.R. Horton-Texas, LTD. Defects in construction were discovered and as a result of these defects, mold had infested the home. The Holmes sued Horton, saying Horton was responsible for the problems Holmes was experiencing. It appeared ,a sub-contractor, Ramirez, was the person who caused the problems. Ramirez had an insurance policy from Markel International Insurance Company, LTD. Horton sought coverage from Markel, based on the Ramirez policy wherein Horton was an additional insured. Markel refused to get involved and Horton eventually settled the case, then sought reimbursement of defense costs and the settlement payment from Horton, the result of which was this lawsuit.
Well established law in Texas is as follows: In liability insurance policies generally, an insurer assumes both the duty to indemnify the insured, that is, to pay all covered claims and judgments against an insured, and the duty to defend any lawsuit brought against the insured that alleges and seeks damages for an event "potentially" covered by the policy, even if groundless, false or fraudulent. However, the duty to defend and the duty to indemnify are distinct and separate duties. In other words, one duty may exist without the other and the duties enjoy a degree of independence from each other.
It is well settled in Texas law that facts established in a lawsuit control the duty to indemnify. The duty to defend in a lawsuit, however, is established according to the eight-corners doctrine. This is looking at the four-corners of the insurance contract and the four-corners of the lawsuit pleadings.
The Court in this case ruled that the lawsuit pleadings may not have invoked a duty of the insurance company to defend the lawsuit but the reality that the Markel policy covering Ramirez named Horton as an additional insured brought up the issue that Markel may have had a responsibility to indemnity Horton.

The following is a short discussion of a case trying to interpret Missouri law, in part. The relevance to people in Dallas, Fort Worth, Arlington, or Grand Prairie areas is that the case was heard in a Texas Court in the Southern District of Texas and that the appeal was to the United States Court of Appeals for the Fifth Circuit, which is a Court that makes decisions regarding lots of Texas cases.
The case is Westchester Surplus Lines Insurance Company v. Maverick Tube Corporation. The opinion of the Court was issued on December 10, 2009.
The dispute involved the application of Missouri state law in determining if an insurance "occurrence" and the duty of the insurance company to indemnify existed.
In this case, Maverick had purchased insurance policies from Westchester. The policies purchased provided for indemnification for "property damage" resulting from an "occurrance". An "occurrance" was defined as an accident, including continuous or repeated exposure to substantially the same general harmful conditions.
In 2006, Maverick sold a specific casing, P-110, to Dominion Exploration and Production Company for use and operation in its gas wells. In September 2006, Dominion experienced catastrophic failure in four gas wells that were using the P-110 casing. A subsequent investigation showed the P-110 casing to be the cause of the problems Dominion was experiencing.
Dominion made a written demand for its losses to Maverick and eventually settled for a substantially less amount of money. Maverick then asked Westchester to indemnify per the insurance policy and Westchester refused. The lawsuit followed.
The Court got into more specific issues in this case and a discussion of Missouri law. The more relevant issues in an insurance law context were also discussed and these included an insurance companies duties to not only pay claims but their duty to defend claims asserted against their insured in some situations regardless of whether or not the insurance company may or may not have to later pay on the claim. These issues in part, were breach of contract claims, warranties, performance issues, DTPA causes of action, failure to perform cases, etc.
The case is another illustration of some of the complex situations that can arise in an insurance context. The wording of the insurance contract, the facts of the claim, and the existing insurance law, all have to be looked at together to get an understanding of what may be the final outcome in a particular case.