969 F.3d 554
5th Cir.2020Background
- Gilbert Gonzalez purchased a commercial general liability (CGL) policy from Mid‑Continent covering July 15, 2012–July 15, 2013 (renewed and later canceled June 6, 2014). Gonzalez installed siding on Hamilton’s house in 2013.
- In December 2016 a fire damaged Hamilton’s house; plaintiffs sued Gonzalez in state court, alleging he "improperly hammered nails through electrical wiring" during the 2013 siding work and that the resulting latent wiring damage caused the 2016 fire.
- Gonzalez tendered defense and indemnity to Mid‑Continent; the insurer refused, and Gonzalez sued Mid‑Continent for breach of contract and related claims.
- The district court (on summary judgment) held Mid‑Continent owed a duty to defend Gonzalez and entered a partial final judgment under Rule 54(b); issues of damages and indemnity remained pending.
- On appeal, the Fifth Circuit reviewed de novo under Texas law and the eight‑corners rule (policy language vs. underlying pleading) and addressed coverage and the j(5)/j(6) exclusions; it declined to decide indemnity for lack of jurisdiction.
Issues
| Issue | Plaintiff's Argument (Gonzalez) | Defendant's Argument (Mid‑Continent) | Held |
|---|---|---|---|
| Whether the CGL policy covers the Underlying Litigation (duty to defend) | The Petition alleges an "occurrence" in 2013 (nailing through wiring) that caused physical injury to tangible property during the policy period, and the policy deems resulting loss to occur at time of physical injury | The property damage (the fire) occurred in 2016, after the policy period, so no covered "occurrence" during policy term | Held: Duty to defend exists — petition alleges physical injury in 2013 and the policy deems resulting loss to occur at time of that injury, so coverage potentially triggered under eight‑corners rule |
| Whether j(5) and j(6) exclusions bar coverage | Exclusions only apply to "that particular part" of property on which insured performed work; Gonzalez worked on siding (the particular part), not internal wiring or the whole house | Exclusions apply to property damaged by the operations (arguing broadly that wired/other damage arises from the work) | Held: Exclusions do not apply — construed strictly against insurer; "that particular part" limits exclusions to the specific part worked on (siding), not separate internal wiring or entire property |
| Whether appellate court may decide duty to indemnify | Gonzalez sought both defense and indemnity; district court reserved indemnity for later adjudication | Mid‑Continent asked appellate court to rule on indemnity as well | Held: Court lacks jurisdiction to decide indemnity because no final judgment on indemnity issues (appeal limited to duty to defend) |
Key Cases Cited
- Don’s Building Supply, Inc. v. OneBeacon Insurance Co., 267 S.W.3d 20 (Tex. 2008) (property damage occurs when actual physical damage occurs; discovery date irrelevant under similar policy language)
- Wilshire Ins. Co. v. RJT Constr., LLC, 581 F.3d 222 (5th Cir. 2009) (duty to defend looks to whether underlying complaint alleges physical damage during policy period)
- VRV Dev., L.P. v. Mid‑Continent Cas. Co., 630 F.3d 451 (5th Cir. 2011) (focus on time of actual physical damage; latent damage analysis distinguishes collapse/damage timing)
- Gore Design Completions, Ltd. v. Hartford Fire Ins. Co., 538 F.3d 365 (5th Cir. 2008) (exclusion limiting coverage to "that particular part" applies to the specific component worked on, not entire property)
- Mid‑Continent Cas. Co. v. JHP Dev., Inc., 557 F.3d 207 (5th Cir. 2009) (present‑tense wording of j(5) exclusion limits application to damages during active performance of work)
- GuideOne Elite Ins. Co. v. Fielder Rd. Baptist Church, 197 S.W.3d 305 (Tex. 2006) (articulating eight‑corners rule: duty to defend determined from policy and underlying pleadings)
- Zurich Am. Ins. Co. v. Nokia, Inc., 268 S.W.3d 487 (Tex. 2008) (an insurer must defend if the pleading potentially includes a covered claim; pleadings construed liberally in favor of coverage)