Gilbert Texas Construction, L.P. v. Underwriters at Lloyd's London
327 S.W.3d 118
| Tex. | 2010Background
- DART contracted with Gilbert to construct a light rail system, with a contract requiring Gilbert to protect existing structures and utilities on adjacent property and repair any damage.
- Unusually heavy rainfall flooded a building adjacent to the construction site, leading RTR to sue DART, Gilbert, and others for various tort, statutory, and contractual theories, and as a third-party beneficiary of the Gilbert–DART contract.
- Gilbert settled RTR's breach-of-contract claim for $6.175 million after the trial court had granted summary judgment in Gilbert's favor on all non-contract-based theories; Underwriters denied coverage.
- Underwriters issued reservation-of-rights letters, later taking the position that contractual-liability exclusion barred coverage for RTR’s breach-of-contract claim, while defense remained ongoing under primary policy.
- This coverage dispute raised two issues: whether the contractual liability exclusion excludes coverage for contract-based liability and whether any exception (insured-contract or absence-of-contract liability) can restore coverage; and whether Gilbert can recover its settlement under an estoppel theory against Underwriters.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the contractual liability exclusion apply to a breach-of-contract claim? | Gilbert argues exclusion is narrow, not applicable to its own breach. | Underwriters says exclusion bars all contract-based liability unless an insured contract or absence-of-contract liability exception applies. | Yes; exclusion applies to the breach-of-contract claim. |
| Do the insured-contract or absence-of-contract exceptions restore coverage? | Gilbert contends insured-contract exception or absence-of-contract liability would restore coverage. | Underwriters contends exceptions do not restore coverage for this contract-based liability in this case. | No; neither exception brings the breach-of-contract claim back into coverage. |
| Does the second exception to the exclusion (liability Gilbert would have in the absence of the contract) apply? | Gilbert asserts it would have liability absent the DART contract, potentially triggering coverage. | Underwriters argues indemnity depends on proved facts; since RTR’s tort claims were dismissed, the only liability was contract-based. | No; the second exception does not apply to restore coverage here. |
| Is Gilbert's settlement recoverable under an estoppel theory against Underwriters? | Gilbert claims estoppel because Underwriters controlled defense and prejudiced settlement. | Underwriters disputes prejudice and argues no coverage existed for the contract claim. | No; estoppel does not apply because there was no coverage for the contract claim and no prejudicial conduct establishing estoppel. |
Key Cases Cited
- Lamar Homes, Inc. v. Mid-Continent Cas. Co., 242 S.W.3d 1 (Tex. 2007) (breach of contract may constitute an occurrence; label does not govern defense/indemnity analysis)
- Ulico Cas. Co. v. Allied Pilots Ass'n, 262 S.W.3d 773 (Tex. 2008) (estoppel cannot create coverage where none exists; prejudice analysis applied)
- Fortis Benefits v. Cantu, 234 S.W.3d 642 (Tex. 2007) (contract rights arise from the language of the contract; avoid rewriting agreements)
- Fiess v. State Farm Lloyds, 202 S.W.3d 744 (Tex. 2006) (enforce plain and unambiguous policy terms; harmonize provisions)
- Olympic, Inc. v. Providence Washington Ins. Co. of Alaska, 648 P.2d 1008 (Alaska 1982) (liability assumed by insured under any contract refers to indemnity/hold-harmless only, not breach of contract)
- Ingersoll-Rand Co. v. Valero Energy Corp., 997 S.W.2d 203 (Tex. 1999) (indemnity accrues on proven, adjudicated liability; contract language guides indemnity analysis)
- Pine Oak Builders, Inc. v. Great Am. Lloyds Ins. Co., 279 S.W.3d 650 (Tex. 2009) (duty to indemnify determined by facts as developed; overlap with defense duties)
- D.R. Horton-Tex., Ltd. v. Markel Intl. Ins. Co., 300 S.W.3d 740 (Tex. 2009) (distinction between duty to defend and duty to indemnify; depends on underlying facts)