Starr Surplus Lines Insurance Company v. Seibert Enterprises, LLC
4:16-cv-03490
S.D. Tex.Jul 25, 2017Background
- Starr Surplus issued a Commercial General Liability policy to Seibert, a roofing subcontractor hired to perform torch-down (open-flame) roofing work on a James Coney Island restaurant.
- An underlying suit by Valley Forge (subrogee/assignee) alleged Seibert’s torching ignited a fire that caused extensive property damage and business interruption; the petition further alleged Seibert did not have a working fire extinguisher and that the nonworking extinguisher delayed firefighting and facilitated spread.
- The policy contained a Roofing Operations endorsement requiring the insured to “have at hand a functional, fully charged 15 lb. or larger dry chemical fire extinguisher during any hot tar or ‘torch-down’ process work,” and stating that if the insured failed to meet the conditions, “any resulting ‘property damage’ … will not be covered.”
- Starr Surplus sued for a declaratory judgment that it has no duty to defend or indemnify Seibert based on the alleged failure to have a working extinguisher; the parties filed cross-motions for summary judgment on the duty-to-defend/indemnify issue.
- The central legal question was whether the policy exclusion bars coverage (and thus the duty to defend) for all claims because Seibert failed to have a working extinguisher, or only for property damage that ‘‘resulted from’’ that failure (i.e., requires a causal connection).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether failure to have a working fire extinguisher voids coverage/duty to defend entirely | Starr: Policy condition noncompliance relieves insurer of duty to defend; extinguisher requirement is a coverage condition | Seibert: Exclusion applies only to property damage that "resulted from" the lack of a working extinguisher; damage from independent ignition remains covered, so duty to defend exists | Court: Exclusion is limited — it bars only property damage that resulted from the absence of a working extinguisher; because the petition also alleges ignition and initial spread unrelated to the extinguisher, duty to defend exists |
| Whether the eight-corners rule allows consideration of extrinsic evidence | Starr: Duty determined from policy and underlying pleadings; no extrinsic evidence needed | Seibert: Agreed eight-corners controls; relied on allegations in the petition to show some claims are covered | Court: Applied eight-corners rule; compared pleadings to policy language to resolve duty-to-defend question |
| Whether any de minimis exception permits insurer to refuse defense when only small portion of claim is covered | Starr: Argued that covered portion might be de minimis and defense unnecessary | Seibert: No de minimis exception; any covered claim triggers duty to defend | Court: Found no controlling de minimis exception; when any claim falls within coverage insurer must defend entire suit |
| Whether precedent cited by Starr controls here | Starr: Cited cases where failure to meet condition voided coverage | Seibert: Those cases involved different, broader policy language/warranties; not controlling | Court: Agreed those cases are distinguishable; the policy here contains a narrower “resulting from” exclusion, so precedent did not mandate no-duty result |
Key Cases Cited
- GuideOne Elite Ins. Co. v. Fielder Road Baptist Church, 197 S.W.3d 305 (Tex. 2006) (articulates the eight‑corners rule for duty to defend)
- Allstate Ins. Co. v. Disability Servs. of the Sw. Inc., 400 F.3d 260 (5th Cir.) (applying eight‑corners rule under Texas law)
- Scottsdale Ins. Co. v. Logansport Gaming, L.L.C., [citation="556 F. App'x 356"] (5th Cir.) (interpreting exclusion phrased as damage “caused by or resulting from” lack of fire suppression)
- Gehan Homes, Ltd. v. Employers Mut. Cas. Co., 146 S.W.3d 833 (Tex. App.) (duty to defend any claim within coverage requires defending entire suit)
- Gore Design Completions, Ltd. v. Hartford Fire Ins. Co., 538 F.3d 365 (5th Cir.) (when in doubt, insurer must defend)
- Merchants Fast Motor Lines, Inc. v. Nat'l Union Fire Ins. Co. of Pittsburgh, Penn., 939 S.W.2d 139 (Tex. 1997) (duty to defend determined as a matter of law from policy and pleadings)
- Travelers Indem. Co. v. Citgo Petroleum Corp., 166 F.3d 761 (5th Cir.) (discussing concurrent causation and when exclusions apply)