Lennar Corp. v. Markel American Insurance Co.
413 S.W.3d 750
| Tex. | 2013Background
- Lennar built approximately 800 homes using EIFS exterior insulation and finish system, which trapped moisture and caused substantial water damage over time.
- Lennar initiated a proactive remediation program (1999–2003) to remove EIFS and replace it with conventional stucco; insurers refused to participate, preferring to respond to homeowners’ claims individually.
- Lennar sued the insurer Markel after insurers denied coverage for remediation costs; trial court granted summary judgments for insurers, but Lennar prevailed on some issues on appeal.
- The court of appeals held that Lennar’s preventative EIFS removal costs were not covered and that Lennar’s settlements without Markel’s consent were prejudicial, limiting recovery.
- This Texas Supreme Court case addresses (a) whether lack of insurer consent requires prejudice to deny coverage, and (b) whether remediation-related costs and damages, including those occurring partly before and during the policy period, are covered.
- The Court ultimately held in Lennar’s favor, determining Markel must cover the full remediation costs for damaged homes and that Lennar’s settlements established liability and loss amount without prejudice to Markel.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Prejudice required for consent-to-settlement | Lennar: consent breach is not prejudicial if no harm to Markel occurred. | Markel: consent breach is prejudicial under policy terms and Hernandez requires prejudice. | Prejudice not shown; Lennar prevails on liability. |
| Coverage for costs to determine and repair damage | Lennar: costs to locate and repair damage are within 'because of' property damage. | Markel: some costs are preventative and not covered. | Costs to determine damage and to repair are covered. |
| Coverage for damages occurring during policy period and continuing after | Lennar: damage occurred during policy period and remediation costs should be covered in full. | Markel: only damages occurring during policy period are covered, pro rata or limited. | Markel covers Lennar’s total remediation costs for damaged homes. |
Key Cases Cited
- Hernandez v. Gulf Group Lloyds, 875 S.W.2d 691 (Tex. 1994) (prejudice required for insurer liability when consent is breached)
- PAJ, Inc. v. Hanover Insurance Co., 243 S.W.3d 630 (Tex. 2008) (prejudice required for breach of prompt-notice/consent-type provisions)
- Prodigy Communications Corp. v. Agricultural Excess & Surplus Insurance Co., 288 S.W.3d 374 (Tex. 2009) (prejudice required for breach unless explicit coverage scope dictates otherwise)
- Financial Indus. Corp. v. XL Specialty Ins. Co., 285 S.W.3d 877 (Tex. 2009) (prejudice requirement applies to claims-made policies absent defined scope)