D.R. Horton-Texas, Ltd. v. Markel Int’l Ins. Co.
(Tex. Dec. 11, 2009)
The Texas Supreme Court recently reversed an appellate decision declaring that Markel International Insurance Company was not obligated to indemnify a putative additional insured in underlying construction litigation. The Texas Supreme Court held that Markel may have a duty to indemnify a general contractor for whom Markel’s named insured did work, even though it has no duty to defend that general contractor.
Owners of a newly-constructed house sued the general contractor, D.R. Horton-Texas, Ltd., for damages allegedly caused by latent defects in the house that led to mold damage. D.R. Horton tendered its defense and indemnity to Markel International, the insurer of a subcontractor who performed work on the house. Markel denied coverage on the ground that the complaint did not allege that D.R. Horton’s liability arose from the subcontractor’s work. D.R. Horton retained counsel at its own expense, settled the underlying action, and filed an action against Markel to recoup its defense and indemnity costs.
Markel moved for summary judgment, arguing that it had no duty to defend or indemnify D.R. Horton in the underlying litigation because the homeowners’ petition did not allege facts that triggered coverage. D.R. Horton responded by arguing that the homeowners’ pleadings should be liberally construed in favor of coverage. The court of appeals affirmed the lower court’s ruling that Markel did not owe D.R. Horton a defense or indemnity.
On appeal, the Texas Supreme Court ruled that D.R. Horton failed to preserve its argument that an exception to the eight-corners doctrine permits the parties to introduce extrinsic evidence relating to the duty-to-defend analysis. As a result, the court affirmed the appellate ruling that Markel was not obligated to defend D.R. Horton in the underlying litigation.
The Texas Supreme Court, however, reversed the appellate decision on the duty-to-indemnify issue. The court held that an insurer’s duty to indemnify is controlled by facts established in the underlying suit. Inasmuch as D.R. Horton produced evidence to support that its liability arose from the work of Markel’s insured, the court held that the appellate court erred in declaring that Markel was not obligated to indemnify D.R. Horton in the underlying action. The court further noted that even if Markel had no duty to defend D.R. Horton, it may still have a duty to indemnify it. Therefore, the case was remanded for further proceedings.
For a copy of the decision, click here
Carrie Appler and Joanna Roberto
https://www.goldbergsegalla.com/attorneys/Appler.html
https://www.goldbergsegalla.com/attorneys/Roberto.html
The case is published with consent from Karen Yotis