Insurance Policy Language “Arising Out Of”

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.