Exclusions In An Insurance Policy

Grand Prairie insurance lawyers need to know how “exclusions” in an insurance policy work. This is partially explained in a 1994, San Antonio Court of Appeals case. The style of the case is, Telepak v. United Service Automobile Association. Here is the relevant information from the case.
The question before the court concerned whether the insured or the insurer has the burden of proof as to the applicability of an exception to an exclusion in an insurance policy. The court held that the applicability of an exception to an exclusion is a question of coverage, on which the insured has the burden of proof.
The insured brought a claim under an all-risk homeowner’s insurance policy for damage to their home. It is undisputed that the damage was incurred by the settling of the foundation. In its answer, the insurer pled the affirmative defense that “exclusion k” of the insurance policy excluded from coverage damage resulting from settling or cracking of the foundation. The insured asserted that the settling was caused by water which leaked from an air conditioner and escaped under the foundation of their home. They asserted that their loss fell under an exception to exclusion k, which stated that exclusion k would not apply to settling caused by accidental leakage from an air conditioning system. The jury charge read as follows:
Do you find that the damage to the Telepaks’ residence was caused by an accidental discharge, leakage or overflow of water from within an air conditioning system?
The jury answered “No.” There was no jury question on whether the damage was caused by settling or cracking, as that issue was undisputed. Judgment was rendered for the insurer, and the insured brought this appeal. They assert that the jury charge wrongly placed the burden of proof on the insured to negate the application of exclusion k.
It is well established in Texas that, to recover on an insurance policy, plaintiffs must prove their loss is covered by that policy.
In any suit to recover under a contract of insurance, the insurer has the burden of proof as to any avoidance or affirmative defense that must be affirmatively pleaded under the Texas Rules of Civil Procedure. Any language of exclusion in the policy and any exception to coverage claimed by the insurer constitutes an avoidance or an affirmative defense.
The question whether an exception to a proven exclusion is applicable is a coverage issue. It goes to the ultimate liability of the insurer under the policy. In this case, because the undisputed facts demonstrated the applicability of exclusion k to coverage, it was incumbent upon the insured to demonstrate the existence of facts supporting the air conditioner exception to the exclusion. In other words, it was incumbent upon the insured to prove that his loss was in fact covered by the policy.
The contested charge to the jury correctly placed the burden of proof on the insured to demonstrate, by a preponderance of the evidence, the existence of facts supporting the air conditioner exception to exclusion k. Accordingly, there was no error.