casenotes
D.R. Horton-Texas, Ltd. v. Markel Intern
D.R. Horton-Texas, Ltd. v. Markel Intern'l Ins. Co., 2006 WL 1766120 (Tex. App.--Houston [14th Dist.] June 29, 2006, n.p.h.).
Background: Homebuilder D.R. Horton was sued by owners of a home for latent construction and repair defects that allegedly resulted in toxic mold. Id. slip op. *1. Horton had built the home in 1992 and the mold was discovered in 2001. Id. Although the plaintiffs' petition did not name as defendants or even mention any subcontractors in connection with the construction or repairs, Horton asserted that an independent subcontractor, Rosendo Ramirez, was responsible for the defects that allegedly caused the mold. Id. Horton, which was an additional insured for certain claims under Ramirez's general liability policies, tendered defense of the suit to both Markel Insurance and Sphere Drake Insurance, who insured Ramirez for the policy periods 1999 to 2002 and 1992 to 1999, respectively. Id. Markel never responded to Horton's request and Sphere Drake denied coverage because the damage first manifested after its policy periods. Id. Horton hired its own counsel, settled the claims against it for $50,000, and then brought a coverage action against Markel and Sphere Drake. Id. *1-2.
In the coverage action, Horton alleged causes of action for breach of contract, misrepresentation, and violations of the Texas Insurance Code against both insurers. The trial court granted summary judgment in favor of both carriers; on appeal, the court affirmed in part and reversed and remanded in part.
Analysis: With regard to Markel, the court affirmed summary judgment on the breach of contract action. Applying the eight-corners rule, the court held that the underlying petition's failure to list Ramirez as a defendant, make any reference to Ramirez, or allege that the plaintiffs were damaged by the acts or omissions of anyone other than Horton meant that the additional insured endorsement was not triggered since the "plain language" of that endorsement limited Markel's liability to those claims "arising out of work Ramirez performed for Horton." Id. *4. The court held that even "[g]iven their most liberal interpretation in favor of coverage," the factual allegations could not be interpreted as stating a claim arising from Ramirez's work. Id. In reaching this holding, the court rejected Horton's proffer of extrinsic evidence to demonstrate that Ramirez's work was responsible and Horton's argument that an "inference" could be drawn implicating Ramirez. Id. Declining to recognize an extrinsic evidence exception to the eight-corners rule, the court held that neither the facts from extrinsic evidence nor inferences from those facts could be considered in determining Markel's duty to defend. Id. *5. As the court further noted, "Our task is not to determine if the underlying facts that prompted the allegations are covered, but whether the petition alleges facts that are covered." Id. *4. Because the petition failed to invoke the duty to defend, Markel also had no duty to indemnify Horton. Id. *5.
The court remanded Horton's extra-contractual claims against Markel, however, because those causes of action were pled after Markel filed its motion for summary judgment and were therefore not addressed in Markel's motion.
While Sphere Drake offered several arguments in support of the judgment in its favor, including the fact that damages failed to manifest during its policy period, the court rejected each ground for the simple reason that Sphere Drake had failed to make its policy part of the summary judgment record. Id. *8-9. As the court noted, it could not apply the "eight-corners" rule to Sphere Drake because "in fact, only 'four corners' were presented" for the court's review. Id. *9.
Learning Points: The policy is the sine qua non of coverage analysis for coverage attorneys and courts.
