Commercial Policy Coverage Denied In Texas

Commercial business owners in Grand Prairie, Arlington, Fort Worth, Weatherford, and other places in Texas need to know the coverage provided by the commercial insurance policies they purchase. A recent Court decision went against a commercial business that thought they had insurance to cover the loss they experienced.
The Fort Worth Division of the United States District Court, Northern Division, recently handed down a decision that would at the least be interesting to home builders. The decision was issed on April 1, 2010, and it was in favor of the insurance company. The Federal Judge is John McBryde.
The style of this Federal case is, David Lewis Builders, Inc. v. Mid-Continent Casualty Company. In this case, David Lewis Builders, Inc. (Lewis) sued Mid-Continent Casualty Company (Mid-Continent) for a claim made against Lewis by Gary and Malisa Blake for whom Lewis had contracted to construct a house.
Mid-Continent had issued a commercial liability policy to Lewis. Mid-Continent denied the claim of Lewis stating that the policy did not cover contract damages or damages caused by property damage caused by Lewis’ defects in workmanship. These were exclusions in the policy among others.
The case is an interesting read and one of the points made by the Court is that the basis of the claim against Lewis by the Blakes, was a breach of contract claim, not a tort liability claim. That the harm to the Blakes was for property damages and their remedy was for breach of the contract they had with Lewis and the property damages arising there from. Tort obligations are, in general, obligations that are imposed by law to avoid injury to others. So, if a person’s conduct – such as negligently burning down a house – occurred, there would be tort liability and in this case the Mid-Continent policy would have to provide coverage. But the harm here resulted from Lewis failing to live up to their contractual obligation to the Blakes to properly construct for them a house. Because of these facts in the case and the exclusions in the Mid-Continent policy the Court refused to impose an obligation on Mid-Continent to provide coverage to Lewis for the claims being made by the Blakes.
This case is a good example of why a commercial business needs to be sure what kind of insurance coverage they have purchased to protect against losses.