Coverage Under An Insurance Policy

Grand Prairie lawyers who handle insurance disputes and those in Dallas, Fort Worth, Mansfield, De Soto, Duncanville, Irving, Arlington, and other places in the Dallas Fort Worth area need to understand the coverages under an insurance policy. Specifically, they need to know what an ‘occurrence’ or ‘loss’ is under a policy.
The Fort Worth Court of Appeals issued an opinion in 1996, in the case styled, State Farm Lloyds and State Farm Fire and Casualty Company v. Paul and Mary Kessler. The insurers here filed a declaratory judgement pleading they had no duty to defend a suit pending against the Kesslers by the Fannings’ who had purchased a home from the Kesslers. The trial court ruled in favor of the Kesslers and this appeal followed.
This court said the following: We hold that State Farm has no duty to defend the Kesslers because (1) the Fannings’ petition does not allege property damage as defined by the policy and (2) it does not allege damages from an occurrence or loss as defined by the policy.”
Here is some background.
The Fannings sued the Kesslers for breach of contract, breach of warranty, and DTPA violations. They alleged that the Kesslers made oral and written misrepresentations about their home to induce the Fannings to buy it. Specifically, the Fannings allege that the Kesslers told them the property had no drainage or foundation problems when in reality it had severe drainage and foundation problems. The Fannings further alleged that the Kesslers knew these statements were false when made and that they knew the statements would induce the Fannings to buy a property they would not have bought had they known the truth about its condition.
The Kesslers had a standard homeowner’s policy with State Farm.
Relevant policy provisions were:
DEFINITIONS …
5. “Occurrence” means an accident including exposure to conditions, which results in bodily injury or property damage during the policy period.
6. “Property damage” means injury to, destruction of, or loss of use of property.
Looking at the issue of whether or not State Farm had a duty to defend in this case the court looks solely to the allegations in the pleading of the underlying lawsuit in the light of the policy provisions, regardless of the truth of the allegations.
State Farm argued that the trial court erred in granting the declaratory judgment because State Farm had no duty to defend, given that the Fannings’ petition alleged no claim for “property damage.”
The Fannings’ petition, as the Kesslers point out, did describe drainage and foundation problems. But those problems were not “property damage” for which the Kesslers were legally liable because the Fannings did not assert that the Kesslers injured the property, destroyed the property, or caused the resulting loss of use. Instead, the Fannings alleged that the Kesslers misrepresented the problems. The Kesslers’ alleged misrepresentations did not cause the drainage and foundation problems; those problems existed before negotiations began.
The Fannings did allege economic damges; that is, repair costs to restore the property to the condition at which the Kesslers represented it and loss of use and enjoyment because of the Kesslers’ allegedly wrongful conduct. In Texas, economic damages are not property damages as defined by liability insurance policies. In addition, the Fannings’ economic damages, including loss of use, arose because of the Kesslers’ alleged misrepresentations about the property; they arose because the Fannings did not get the property they bargained for.
The court went onto say that even if the damages alleged were property damages, which they are not, they did not result from an occurrence or loss.
The Kesslers’ policy requires that the property damages be caused by an occurrence. The policy defines occurrence as “an accident, including exposure to conditions, which result in … property damage during the policy period.” Because neither an accident nor exposure to conditions caused the damages alleged by the Fannings, no occurrence or loss happened. Therefore, the policy does not cover the damages sought by the Fannings.
This type of case can be confusing to most people. An experienced Insurance Law Attorney should be able to explain what is happening after he learns the facts and reads the insurance policy involved. Most people believe that if they have insurance, the insurance will “take care of it,” and that is simply not the case. The wording of the policy needs to be examined against the facts of the claim to see if coverage exists.
In this case the court ruled in favor of State Farm, thus reversing the trial court.