Duty To Defend

When a Texas homeowner is being sued by someone, will the homeowner’s policy defend against the lawsuit.  This is a good question and a 1998, Houston Court of Appeals [1st Dist.] opinion gives some insight to the answer.  The case is styled, Freedman v. Cigna Insurance Company.

The Freedmans sold their house in 1990 to Marx.  After buying the house, Marx noticed the roof leaked.  In 1992, a portion of the roof collapsed.  Marx sued the Freedmans for not disclosing the problems with the roof asserting causes of action for fraud, DTPA violations, negligence and fraud in a real estate transaction.  The Freedmans asked their insurers, Cigna and ICNA, to defend them.  The insurers refused to defend the Freedmans.  The Freedmans eventually settle with Marx and then sued Cigna and ICNA claiming the insurers breached their contracts by not defending the Freedmans and not indemnifying the Freedmans from the resulting liability.  The Freedmans also asserted a cause of action for violations of the Tex.  Ins. Code.  The trial court granted Cigna and ICNA a summary judgement.  The Freedmans appealed.

The judgment of the trial court was affirmed by this Court of Appeals.  An “occurrence” is defined as an accident, including exposure to conditions, resulting in the bodily injury or property damage during the policy period.  As a matter of law, fraudulent promises, misrepresentations, and untrue statements do not fall within the plain meaning of the definition of occurrence.  Marx sued the Freedmans not for the roof collapse, but rather for the Freedmans misrepresentations about the condition of the roof.  Marx alleged the Freedmans represented that the roof was seven years old and needed no repairs, and that they took affirmative steps to conceal the roof’s defects.  On the face of the pleadings, Marx was suing the Freedmans for intentional acts, not an “accident.”  The trial court correctly granted the insurers’ summary judgement.

Marx’s alternative allegations that the Freedmans were negligent in not disclosing the condition of the roof does not create a duty to defend.  In evaluating whether or not an insurer has a duty to defend, the Facts alleged in the petition, not the theories of liability, are the critical factors.  In this case, the Facts alleged exclude the possibility of coverage.  The mere allegation of negligence does not control the issue.  The trial court correctly granted the insurers’ summary judgement.  Additionally, because the insurers did not wrongfully refuse to defend the Freedmans, the extra-contractual claims must also fall.