Insurance Attorneys And Reading The Policy

Fort Worth insurance attorneys and those in Benbrook, Burleson, Crowley, and other parts of Tarrant County need to keep up with recent cases.
Here is one that was decided on September 2012. The style of the case is, Wendy Rutherford Branham v. State Farm Lloyds. The opinion was issued by the San Antonio Court of Appeals.
Branham sued State Farm Lloyds for failing to provide a defense and indemnity with regard to a lawsuit filed against her by Patrick and Melissa McCullough. The McCulloughs’ lawsuit was based on a contract they entered into with Branham to purchase a home from her. In their petition, the McCulloughs alleged that Branham “falsely represented that there was no (1) previous flooding into the home, (2) water penetration into the home, (3) active infestation of termites or other wood destroying insects, (4) previous termite or wood destroying insect damage repaired, and (5) termite or wood destroying insect damage needing repair.” The McCulloughs further alleged that Branham “failed to disclose to Plaintiffs the previous problems with water penetration and damage to the home and that Ms. Branham had filed a homeowners’ insurance claim for water damages sustained in the home.” The McCulloughs also claimed that although Branham “was paid on these water damage claims by her homeowners’ insurance carrier,” she “did not make proper repairs to the home or if she did, only made cosmetic repairs to conceal the damages.” The McCulloughs asserted numerous causes of action against Branham based on these allegations including: (1) fraudulent concealment for making affirmative false representations or omitting to disclose material facts, alleging the representations and concealments were “made with knowledge of the real facts;” (2) breach of contract for “failing to disclose the home’s previous water penetration problems and damages, thereby, fraudulently inducing Plaintiffs into entering the contract;” (3) negligence for failing to properly disclose the condition of the home; (4) DTPA violations; (5) negligent misrepresentations by supplying false information and not exercising reasonable care or competence in communicating the information; (6) common-law fraud and fraud by non-disclosure; and (7) violation of section 27.01 of the Texas Business and Commerce Code for making misrepresentations in a transaction involving real estate that Branham knew were false.
The parties filed competing motions for summary judgment. State Farm Lloyds’s motion asserted it had no duty to defend or indemnify Branham because: (1) the McCulloughs’ petition did not allege damages arising from a covered occurrence; (2) the McCulloughs’ petition did not seek property damages as defined by Branham’s policy; and (3) the policy excluded coverage for intentional conduct. The trial court granted State Farm Lloyds’s motion.
“Under the eight-corners rule, the duty to defend is determined by the claims alleged in the petition and the coverage provided in the policy.” If a petition does not allege facts within the scope of coverage, an insurer is not legally required to defend a suit against its insured.
Branham acknowledges that several of other courts have held that an insurance carrier has no duty to defend a homeowner who makes misrepresentations in selling a home. Branham argues, however, that the facts in those cases are distinguishable, at least with regard to Branham’s negligence claims, or, alternatively, that the holdings in these decisions are questionable Texas Supreme Court rulings.
In order for State Farm to have a duty to defend under the Kesslers’ policies, the alleged damages had to result from an “occurrence” or “loss.” The policies defined occurrence and loss as an “accident” that results in property damage.
The Texas Supreme Court has explained, “An accident is generally understood to be a fortuitous, unexpected, and unintended event.” An accident occurs “as the culmination of forces working without design, coordination, or plan.” “An intentional tort is not an accident and thus not an occurrence regardless of whether the effect was unintended or unexpected.” “But a deliberate act, performed negligently, is an accident if the effect is not the intended or expected result; that is, the result would have been different had the deliberate act been performed correctly.” “Thus, a claim does not involve an accident or occurrence when either direct allegations purport that the insured intended the injury (which is presumed in cases of intentional tort) or circumstances confirm that the resulting damage was the natural and expected result of the insured’s actions, that is, was highly probable whether the insured was negligent or not.” In the instant case, the damages resulting from Branham’s misrepresentation of known facts, as alleged by the McCulloughs, were not unexpected but were the natural and expected result of Branham’s design or plan to conceal the true facts. Moreover, the McCulloughs clearly allege that Branham intended the injury. Accordingly, the Court read the definition of the term “accident” in other cases as being consistent with the holdings in those cases and held that the trial court did not err in concluding that State Farm did not have a duty to defend Branham in the McCulloughs’ lawsuit.
Based on the allegations in the McCulloughs’ petition and the definition of occurrence in Branham’s insurance policy, the Court concluded State Farm did not have a duty to defend Branham against that petition. The trial court’s judgment was affirmed.
These cases can be difficult and thus an experienced Insurance Law Attorney needs to be consulted.