Commercial Policy Interpretation

Business owners in Weatherford, Parker County, Aledo, Azle, Mineral Wells, Millsap, Hudson Oaks, Brock, Springtown, Poolville, Cresson, and other communities through out Texas would naturally wonder about the coverages provided in their commercial insurance policies. Very few people would understand all the language. This lack of understanding extends to insurance agents, insurance companies, and even the courts and experienced Insurance Law Attorneys. The value of attorneys who deal in this area of the law is that they can provide guidance in how the courts would ultimately decide in the cases where there is a dispute. The Spreme Court of Texas recently decided a case where policy interpretation was part of the issue in controversy. The case is, The Burlington Northern and Santa Fe Railway Company F/K/A The Atchison, Topeka and Santa Fe Railway Company v. National Union Fire Insurance Company of Pittsburg, Pa. The opinion in this case was issued on February 25, 2011.
This is an insurance coverage dispute case. The insurance company took the position that based on policy language and the pleading in the lawsuit in which their insured was sued that they had no duty to defend the lawsuit or pay any damages. This is known as the “eight corners rule”, the eight corners being the “four corners” of the insurance contract and the “four corners” of the pleading, or lawsuit papers. In other words, when the two are read together, is there anything in the lawsuit allegations that invoke responsibility by the insurance company in the insurance contract to defend their insured or pay for any damages that may be part of the lawsuit.
National Union filed summary judgement motion with the trial court that was granted. The first level appeals court upheld the trial court decision. The Texas Supreme Court reversed the court of appeals and remanded the case back to the trial level for further determinations.
The lawsuit papers said in part:
The Railroad had a contract with SS Mobility Company to carry out chemical weed control. SS Mobility failed to use reasonable care to carry out its chemical weed control, and because of its improper timing in the application of chemical weed control, there was excessive vegetation at the crossing at the time of the collision, which proximately caused the collision.
Burlington Northern asked National Union to defend them in the lawsuit and National Union denied a defense saying they had no duty based on the eight corners rule. The underlying lawsuit was tried to a jury and Burlington was ordered and did pay the injured claimant. Burlington then filed this suit against National Union.
This Supreme Court stated; “As relevant to our consideration of this matter, National Union’s policy coverage contains a “completed operations” exclusion which excludes coverage for “all ‘bodily injury’ and ‘property damage’ occurring away from premises [Mobley] owns or rents and arising out of [Mobley’s] product or work.” “However, the policy also excepts from the completed operations exclusion “work that has not yet been completed or abandoned.” The policy provides that Mobley’s work would be “deemed completed” at the earliest of the following times:
(1) When all of the work called for in the contract has been completed.
(2) When all of the work to be done at the site has been completed if the contract calls for work at more than one site.
(3) When that part of the work done at a job site had been put to its intended use by any person or organization other than another contractor or sub-contractor working on the same project.
The policy also states:
Work that may need service, maintenance, correction, repair or replacement, but which is otherwise complete, will be treated as completed.
Here the court of appeals had determined that National Union did not have a duty to defend because the language in the plaintiffs’ pleadings referenced Mobley’s actions as having happened in the past, so the policy’s “completed operations” exclusion precluded a duty to defend. But unlike the cases cited by National Union in support of their position, in this case, the pleadings do not show that contractual provisions and other extrinsic evidence cannot possibly bring Mobley’s vegetation control operations within coverage of Natinal Union’s policy for the 1995 accident because the Mobley contract term was “1994 through 1996”.
In this case the court stated, “Assuming, without deciding, that the court of appeals correctly determined that National Union owed no duty to defend, the court nevertheless erred by not considering all the evidence presented by the parties when it determined the question of National Union’s duty to indemnify Burlington.
These cases can be very confusing, even to experienced attorneys, but these cases are instructive in helping attorneys understand how the courts look at these issues.