Commercial Insurance Policy In Texas And Insurance Company Duty

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.