Lennar Corp. v. Great American Insurance Co.

“(1) severity factors are: of the misconduct

(the magnitude prejudicial of the effect of CORPORATION, LENNAR (2) remarks), prosecutor’s measures of Texas Land and Construc Homes (the adopted to cure the misconduct effica- tion, Limited, of and Lennar Homes cy any cautionary considered of instruction Marketing, Limited Texas Sales (8) judge), certainty Builders, Appellants, Village d/b/a (the absent conviction misconduct strength of the supporting evidence GREAT AMERICAN INSURANCE conviction).” Id. COMPANY, Sur Mosley light

The first factor is viewed plus Company, Lines Insurance Mark appellant’s fact that own counsel Company, el American Insurance Ger stated in his opening statement that he ling Company, America Insurance calling not be appellant’s would wife Company, RLI Insurance Insurance testify. implicates The second factor Pennsylvania Company State of judge’s jury instruction to disregard and Westchester Fire Insurance Com prosecutor’s comment. See Dinkins v. pany, Appellees. State, (Tex.Crim.App. No. 14-02-00860-CV. 1995) that, (noting generally, an instruc Texas, Appeals Court disregard tion to an improper jury argu (14th Dist.). Houston harm). ment is sufficient to cure The reviewing third factor involves a court’s Feb. balancing of the other presented evidence Substituted Concurring Dissenting Here, at trial. appellant en admitted to Opinion Justice Edelman gaging in the conduct which formed the April charge against Thus, basis of the him. only jury issue for the appel was whether recklessly

lant acted in placing himself in a

position in which he could be seen engag

ing in proscribed conduct. Appellant

himself presented testified and his side. jury

The instead chose to believe testi

mony of N.M. and Russell Mitchell. Given

that all three weigh factors the State’s

favor, find the error to be harmless. fifth

Appellant’s point of error is over

ruled. judgment affirm the of the trial

We

court. application from their

ages resulting numerous material defective stucco Corporation, Lennar Appellants, homes. of Texas Land and Con- Lennar Homes Limited, Homes of struction, and Lennar Limited, Marketing, Texas Sales and d/b/a “Lennar”) are (collectively Builders Village Great American Appellees, the insureds.1 Dynas- Company and American Insurance (col- Company Surplus Lines Insurance ty Dynasty”),2 Gerling lectively “American (“Gerling”), Company Insurance America Company American Insurance Markel Company (“Markel”), Insurance RLI (“RLI”), Company of the State Insurance (“ICSOP”), and Westches- Pennsylvania (“Westches- Company ter Fire Insurance Kimberly Hollingsworth Cynthia (collective- ter”), carriers are the insurance Houston, Appellants. for Phillips, Marie carriers”). appeals “the ly Meir, Winslett, Ellen L. K. Van Greg summary judgment of its motion for denial Ware, Dallas, Lynch, S. B. Lee David carrier’s motion grant of each Houston, Appellees. coverage issues. summary judgment on grant of American appeals the Lennar also FOWLER, of Justices Panel consists summary motion for Dynasty’s separate and SEYMORE. EDELMAN extra-contractual judgment on Lennar’s claims. OPINION MAJORITY SUBSTITUTE motion of Lennar’s affirm the denial We SEYMORE, Justice. W. CHARLES all carriers. summary judgment as to motions for re- appellees’ We overrule in fa- summary judgments affirm We opinion our dated We hearing. withdraw ICSOP, RLI, and West- Gerling, vor of ma- and issue this substitute June the sum- and remand chester. We reverse

jority opinion. issues favor mary judgment Dynasty. of Great an insurance This case involves American/American summary and remand home- We reverse the insured dispute over whether affirm We in favor of Markel. judgment commercial under six are covered builders of Great (“CGL”) judgment favor summary for dam- liability policies general Sales of Texas many title to Lennar Homes parent ferred Corporation is the 1. Lennar Limited, initially party to this Marketing, built also a homes were entities. The Builders, subsidiaries, Village case, which, turn, Inc. or title to transferred Builders, Inc., Village which eventu- Houston the Lennar We will refer to homeowners. of Texas ally merged Lennar Homes into collectively "Lennar.” as entities Limited, Construction, one Land & Texas Lennar Homes of parties to this case. of American is an affiliate 2. Great American Construction, Limited continued & Land although separate insurer "Village building the names the homes under Lennar, carriers will refer to these so we Builders, Village Inc.” Builders” or "Houston Dynasty.” collectively "American home, Lennar Homes Upon completion of a Construction, Limited trans- & of Texas Land Thereafter, on Dynasty Lennar’s Lennar removed the EIFS American/American from it replaced extra-contractual claims. all the homes and with a Lennar,

traditional to According stucco.3 it repaired resulting also to water Background I. although the to homes the extent From early through late Len- disputed. homes sustained nar built than more 400 homes the sought Lennar then indemnification for all Houston synthetic area with a stucco its and replacement repair costs from the called Sys- Exterior Insulation and Finish carriers. carriers to indemni The refused (“EIFS”). Lennar, tem According to the fy contending Lennar for EIFS claims the manufacturers EIFS marketed it as an coverage policies.4 there is no under their ideal for product wood-framed homes. Lennar requesting sued carriers However, Lennar later contends it discov- declaratory judgment they have a ered that defectively designed EIFS is duty indemnify to Lennar for EIFS traps such that it it water behind and does alleging claims and breach contract and not allow the water to drain. Consequent- violations of former article 21.55 of the ly, trapped damage, water can cause Texas Code the carri- Insurance based on rot, mold, such as wood and termite infes- addition, ers’ indemnify. refusal In tation, among problems, other to other Lennar asserted extra-contractual claims parts of the home. against only. Dynasty American Lennar and each carrier filed a for Through spring motion sum- Lennar had mary on judgment received a issues. complaints few from home- The trial court denied motion and owners about Lennar’s problems. EIFS-related granted the spring of all the carriers’ motions. Ameri- complaints in- Dynasty can creased after television also filed a motion for sum- programs regard- mary ing Lennar, judgment EIFS on According aired. Lennar’s extra-contrac- claims, granted tual initially trial court accepted posi- the manufacturer’s problems tion that motion.5 by were caused installation typical error were and/or II. The Issues and Review Our

wood-framed homes. Lennar complaints issue, addressed these on individu- In its first Lennar contends the al basis. September af- trial court denying erred Lennar’s mo- ter spending summary summer tion responding judgment for because Len- complaints, Lennar poli- became convinced nar all the established under product. Alternatively, issue, EIFS is a defective cies. in its second involved, approximately 3. Of the 5.American also homes Markel filed only against two homeowners filed Len- suit policies alleg- counterclaims rescind their nar. ing misrepresented Lennar it did not use EIFS and failed to the EIFS claims disclose Although replaced EIFS most Lennar, purchased policies. when it filed, being homes suit for without consisten- Dynasty, moved Markel cy, we will refer the “EIFS claims.” We summary judgment on the rescission counter- paid note that Lennar to a cash settlements claims. The trial court denied these motions homeowners; however, cases, few in most summary judgment and severed rescis- paid replace contractors to separate sion counterclaims into a action Nonetheless, repairs. make we will and/or pending appeal. this also refer to Lennar’s of all the resolution claims as "settlements.” 662 FM grounds trial are meritorious.

Lennar contends the court erred Austin, Operating v. 22 Props. City Co. granting the carriers’ motions for sum- of (Tex.2000). 868, Finally, S.W.3d was, at mary judgment because there parties summary both move for when least, genuine a issue of material fact on grants the trial one judgment and court all the coverage poli- whether exists under other, denies the re motion and we must issue, cies. In its third Lennar contends summary-judgment evi parties’ view both by granting the trial court erred dence, presented, determine all issues Dynasty’s summary judgment motion for trial judgment that the court render the extra-contractual claims. Lennar’s Id. should rendered. at 872. have issue, its fourth contends Texas applies dispute. law to this summary Lennar filed one motion for However, all judgment as to the carriers. principles govern of Well-settled review of six carriers filed its own motion each summary judgments in insurance response to summary judgment for See State Farm Fire & Cas. disputes. Co. summary judgment. Lennar’s motion for (Tex. 931, Vaughan, v. 933 S.W.2d effect, separate we have six 1998) curiam).6 on a (per prevail To tradi summary judgment for cross-motions summary judgment, tional motion for on the issues. review genuine movant must there is no establish dispute respect to each cross- is issue of material fact so the movant a for in- typical motion follows framework a of judgment entitled as matter law. coverage litigation. surance 166a(c); Tex.R. Civ. P. Fort Osteo Worth Reese, 94, Hosp., v. pathic Inc. 148 S.W.3d of con Interpretation insurance (Tex.2004). prevail To on a no-evidence as governed by tracts is same rules summary judgment, motion for the movant Trinity interpretation other contracts. adequate that “after time must establish Cowan, Universal Ins. Co. v. 945 S.W.2d discovery, there is no of one evidence (Tex.1997); Forbau v. Aetna Life a claim or (Tex.1994). more essential elements of Co., S.W.2d Ins. defense on an adverse party would contract, construing the court’s When a at trial.” Tex.R. proof have burden give to the primary concern is to effect Reese, 166a®; Civ. P. 148 S.W.3d at 99. intent. expression parties’ written motion, Forbau, To defeat a no-evidence non- at 133. 876 S.W.2d We construe more than a scintilla produce movant must as mat unambiguous insurance a raising of ma genuine evidence issue Am. v. ter of law. Mut. Co. Mfrs. Reese, (Tex.2003). 166a(i); fact. Tex.R. P. Schaefer, terial 124 S.W.3d Civ. here, When, Further, indemnify at 99.7 trial duty triggered 148 S.W.3d establishing in granting summary judgment order court’s actual facts liability underlying in the suit. Co specify the relied sured’s grounds upon, does not wan, 945 summary affirm if S.W.2d at judgment we must for sum- Lennar filed a traditional motion 6. Because the trial court resolved Lennar's request declaratory judgment via mary judgment. sum motions con- The carriers’ mary judgments, we also review denial of the no evidence both traditional and tained declaratory judgment request for under sum grounds. the individual mo- When address mary judgment Lidawi Pro standards. See tions, ground when a is a no- we will note gressive County Mut. Ins. ground. evidence (Tex.App.-Houston no Dist.] [14th § pet.); & Rem.Code 37.010 Prac. Ann. Tex. Civ. (Vernon 1997). summary ini on Lennar’s Generally, judgment an insured bears the motion for prove against tial burden to claims extra-contractual claims. scope

fall within the afforded by policy’s “insuring agree initial III. Texas Law “Occurrence” Under Servs., Comsys ment.” Tech. Inc. v. Info. in the poli “Occurrence” is defined Co., 181, City Twin Fire Ins. 130 S.W.3d accident, including “an cies as continuous 2003, (Tex.App.-Houston 193 [14th Dist.] repeated exposure substantially or denied); pet. Evergreen Nat’l Indem. Co. general same harmful conditions.” “Acci All, Inc., 669, v. Tan It 111 S.W.3d policies. dent” is not defined in the How 2003, (Tex.App.-Austin Then, pet.). no ever, Supreme the Texas Court has stated insurer bears the to prove burden an ex “ injury accidental if ‘from the an coverage. clusion or other avoidance of insured, viewpoint of the not the [it is] All, Comsys, 193; 130 S.W.3d at Tan It probable consequence natural and of the 675; 27, at May S.W.3d see Act of produced action or occurrence which 1991, R.S., 242, 11.03, § 72nd Leg., ch. words, injury; injury other if the 939, 1991 Tex. (repealed Gen. Laws reasonably anticipated could not be in 2003) (current and recodified version at sured, ordinarily not from would follow (Vernon § 554.002 Tex. Ann. Ins.Code the action or occurrence caused the Supp.2005)). Lennar asserts it is entitled ” injury.’ Mid-Century See v. Co. to coverage for the EIFS claims because it (Tex.1999) 153, Lindsey, 997 S.W.2d “legally obligated was ... pay damages (quoting Republic Nat’l Ins. Co. v. Life because of ... ‘property damage’ ... (Tex.1976)). Heyward, ” 536 S.W.2d caused an required by ‘occurrence’ as Two factors bear on the determination of the initial “insuring agreement” all whether an action insured’s constitutes an policies.8 However, all the dis carriers (1) (2) intent, accident: the insured’s pute that there “occurrence” and reasonably foreseeable effect of its “property damage” as defined in poli conduct. id. Then, cies. each carrier asserts various exclusions, conditions precedent, or other framework, Within this the Texas grounds to defeat coverage under its re Supreme Court has construed “accident” spective policy. to include the negligent acts of insured

First, we will causing damage undesigned address the “occur which is Cowan, rence” and “property damage” 828; unexpected. issues be 945 S.W.2d at they cause are common to all Bonding carriers.9 Massachusetts & Ins. v.Co. Or Then, we will review the Exterminating cross-motions kin 416 S.W.2d (Tex.1967). summary judgment contrast, as to each carrier. Fi when the ac nally, we Dynasty’s tort, will review American tion taken anis intentional there is no wordings insuring agreements plies. 8. The We must make conflicts-of-laws deci- vary slightly, they essentially but are only ques- sion when the laws of the states in same. points differ on one or tion more issue. York, Greenberg Traurig Moody, New v. P.C. carrier, Dynas- 9. We note that one (Tex.App.-Houston 161 S.W.3d 69-70 ty, argues that law applies Florida to the Thus, pet.). no will first [14th Dist.] "occurrence” issue under Ameri- its consider whether there is an "occurrence" urge application can does not law, under Texas then consider whether Flori- Florida law to other issues. da law differs from Texas law. issue, presented separate Lennar has issue, contending ap- fourth that Texas law accident, suggest The also Len- regardless of whether the results contract.10 carriers Lindsey, unexpected. are unintended or defective construction does con- nar’s Cowan, 155; S.W.2d an “occurrence” in this case. stitute 827-28; Argonaut v. Southwest Ins. Co. find that is unsettled on We Texas law (Tex. Maupin, 500 S.W.2d defective can consti- whether construction 1973); see Harken Co. Exploration conclude tute an “occurrence.” We PLC, 466, 472 Drake Ins. 261 F.3d Sphere negligent- policy, under the standard CGL (5th Cir.2001). sum, In an acci there is created, inadvertent, ly con- defective taken, intentionally an action dent when is resulting damage in to the in- struction negligently performed, and the effect but work is unintended and sured’s own had expected not the intended or result is can constitute an “occurrence.” unexpected performed non-negligently. action been that Lennar’s defec- We further conclude Cowan, Harken, at (citing 261 F.3d 472-73 an “occur- 828; Orkin, tive construction constitutes at 945 S.W.2d at 400). in rence” this case.

Here, Lennar defective con- contends its be- constitutes an “occurrence” struction Law Is On Whether A. Texas Unsettled Resulting cause the uncontroverted evidence shows Defective In Construction resulting “property was unin- damage” Damage To The Work Can Insured’s unexpected. response, and In tended An Constitute “Occurrence.” Tex- primarily carriers contend that under and appellate Texas courts fed- Several law, cannot con- defective construction have ren- applying eral courts Texas law an “occurrence” as a matter of law. stitute seemingly conflicting decisions on dered point any “property The carriers out that resulting defective in whether construction damage” solely to Lennar’s own can damage to insured’s work consti- homes. The carriers reason work—the policy.11 tute an “occurrence” under CGL to an is damage insured’s own work addressed, and the We have not Texas only, sounding economic loss in contract resolved, this Supreme Court has not is- not an “occur- and breach contract is conflict, fact, on this sue. based argument, they In an rence.” interrelated recently accepted Supreme Texas Court that a CGL is not meant assert from question certified on this issue in- performance function as a bond and Homes, Inc. Fifth See Lamar v. Circuit. demnify repair an insured for the costs to (5th Co., 428 F.3d 193 by its Mid-Continent Cas. replace its own caused work Cir.2005). perform construction properly failure to arguments 11. We have found numerous cases arti-

10. We will discuss the carriers' interrelated; together they in es- showing are a conflict nation- there is also cles sence, argue carriers that defective con- Compare, e.g., Clifford wide this issue. J. resulting damage in to the insured’s struction Shapiro, Point/Counterpoint: Inadvertent Con- Apparent- work is not an “occurrence.” own Under struction Are An “Occurrence” Defects acknowledge defective ly, the carriers Policies, (2002), CGL Law. 13 22-SPG-Constr. can construction constitute an "occurrence” Foster, Point/Counterpoint: Linda B. No damage the work of a when it results Coverage Policy under the CGL Standard third-party. generally Federated Mut. Ins. Claims, 22-SPG-Constr. Construction Defect Excavation, Inc., 197 F.3d Grapevine Co. (2002). Law. Constr., (5th Cir.1999); E & R Rubalcava Co., F.Supp.2d Burlington Inc. v. The (N.D.Tex.2000). they result- expected 1. The Carriers’ Cases intended Hartrick, generally, ing damage. See applying The several carriers cite cases Malone, 276-78; F.Supp.2d S.W.3d in support Texas law of their contention Devoe, 627-28; 50 S.W.3d at 569-72. that defective cannot consti construction hand, at Hartrick and On the other least tute an “occurrence” as a matter of law. suggest seem that defective con- Devoe example, For in Hartrick v. Great Ameri cannot an “occurrence” struction constitute can court held Lloyds Insurance is vol- general because construction that the insured’s defective construction untary resulting and intentional and the foundation, a home’s which resulted reasonably if the expected even problems structural to the dam- expect insured did not intend or home, did not an “occurrence.” constitute Hartrick, 277-78; age. See 62 S.W.3d at (Tex.App.-Houston S.W.3d Devoe, 50 S.W.3d 571-72.12 2001, pet.). [1st Dist.] no The court rea voluntary soned that the in insured’s and However, the also cite carriers Jim conduct implied tentional was its breach of Homes, Johnson Inc. v. Mid-Continent by failing properly prepare warranties to Co., Casualty in which the court did seem the failing soil and to a construct sufficient holding to make a blanket that defective foundation, and to damage the the home resulting in to damage construction the reasonably was the of foreseeable result cannot “occur- insured’s work constitute an 277; this conduct. See id. at see also F.Supp.2d rence” as a matter of 244 law. Co., Malone v. Scottsdale Ins. 147 (N.D.Tex.2003). 706, 714-19 In John- Jim (S.D.Tex.2001) 623, F.Supp.2d 627-28 Homes, underlying son com- claimants (finding insured alleged builder’s to failure plained by of numerous deficiencies improvements construct according plans to during insured construction of their home specifications and was not an “occurrence” abandoning which resulted in insured’s because the conduct voluntary was project terminating and the claimants’ intentional); Ins., v. Devoe Great Am. contract; alleged the claimants breach (Tex.App.-Austin 2001, S.W.3d no contract, violations, fraud, DTPA pet.) (finding insured’s allegedly deficient The negligence. Id. 710-12. court held construction and failure a complete duty that the had no or insurer defend home on time not an was “occurrence” indemnify the insured because there was because the voluntary construction was no Id. “occurrence.” at 714-19. The and intentional if resulting, even the poorly court that despite negligence reasoned constructed unexpected, home unfore allegations, gist com- the claimants’ seen, unintended). or plaint was breach of contract based on the properly perform insured’s failure to Hartrick, Malone, hand, On one contract. id. See The court stated that Devoe seem somewhat limited to their purpose liability policy pro- is to facts engaged because the insureds in sub- liability “proper- tect the insured from practices standard construction or failed to engineering specifi- ty damage” prod- follow architectural or caused the insured’s cations, uct, from replacement could be inferred repair but Invs., Co., Lloyds Appeals, the First Court of Inc. v. Great Am. Hartrick, recently (Tex. which decided found that App.-Houston S.W.3d [1st unintentionally may defective filed). construction pet. Dist.] constitute an "occurrence.” See Archon (N.D.Tex.1997) F.Supp. product.

the insured’s See id. at 714-15.13 966 (same).14 liability The court further stated per- is not meant function as 2. Lennar’s Cases formance bond and ensure the insured contrast, applying courts several contract in a perform will its construction concluded that Texas law have defective workmanlike manner and accordance the in- resulting construction of the contract. See id. at with the terms sured’s own can constitute an “oc- work resulting damage if the is unin- currence” Recently, expand court unexpected. example, another federal For tended and ed on Jim Johnson Homes court’s Lennar cites Great Am. Insurance Co. Homes, Inc., court in which the theory that an insured’s defective con Calli improper con- found that the insured’s resulting to its struction work home, including struction of the claimants’ cannot an “occurrence” because constitute EIFS, improper installation of only. in contract claim sounds al- damages caused various the home Homes, Lamar Inc. v. Mid-Continent F.Supp.2d leged an “occurrence.” Co., F.Supp.2d 754, Cas. 758-60 (S.D.Tex.2002). The court (W.D.Tex.2004), question La certified arising from negligently held that claims Homes, mar Inc. v. Mid-Continent Cas. inadvertent, created, de- construction Cir.2005) (5th (citing F.3d Jim allege leaving fects an “occurrence” cover- Homes, 714). F.Supp.2d Johnson to the construction- age be determined Supreme The that court noted the Texas the Id. at specific exclusions in adopted the Court has “economic loss” The court that the conse- 699-700. stated although may of a party doctrine: the acts created, or inadver- quences negligently simultaneously breach duties in tort and accidental, tent, construction defects are contract, injury the nature of the deter the vol- reasoning although that was work breached; duty mines which is when untarily intentionally performed, only injury subject economic loss to the is to perform undertaken with intent was contract, in of the a cause of action sounds Id. properly. (citing contract alone. Id. at 758-59 Jim Reed, Homes, Inc. v. 711 S.W.2d Walter recently, appellate More Texas (Tex.1986)). 617, opined The court negli an insured builder’s court held that doctrine, loss based on economic damage in to its can gence resulting work hold that Supreme Texas Court would See constitute an “occurrence.” Gehan Homes, Co., Employers contract not an “occur Mut. breach of is Ltd. v. Cas. 2004, 833, (citing (Tex.App.-Dallas rence.” See id. 759-60 Jim Wal filed). Homes, 618); specifically The court disa pet. ter 711 S.W.2d at see also Assoc., Co., stat- greed Jim Johnson Homes and & Inc. v. Home Gibson Homes, applying Texas law ac- Several other courts the insured’s In Jim Johnson result arguably in- have found that defective construction be characterized as tions could accidental, tentional, and, thus, damage ing work does not to insured’s not See, e.g., specifi- an "occurrence.” Court plans constitute failed to follow insured Homes, Inc. v. Mid-Continent many F.Supp.2d land Custom respects. See 244 cations 478, Co., Nonetheless, F.Supp.2d 484-86 to Cas. at 710-11. the court seemed Arc, (S.D.Tex.2005); v. Mid Mid-Conti generally Inc. that construction deficiencies hold A-03-CA-242-SS, Co., 2004 WL No. resulting damage to nent Cas. the insured’s work 25, (W.D. 2004) (not Feb at *7 Tex. an See id. at cannot constitute occurrence. designated publication). for 714-19. inquiry ed that the is paramount relevant not whether tute an “occurrence” because damaged work, the insured damage its own i.e. the consideration is whether was unin subject contract, unexpected).16 but tended and For the rea whether below, explained agree sons unexpected. unintended and was Id.; Lloyd’s inquiry see v. relevant is not whether the insured CU Texas Main Homes, (Tex. work, i.e., damaged own Street whether S.W.3d only, claim sounds in but App.-Austin pet.) no contract whether (finding home against unexpected. owner’s claim is unintended and builder for founda tion defects caused reliance on inaccu Resulting B. Defective Construction “occurrence”);15 rate survey alleged soil Damage To The Insured’s Can Work see also First Tex. Homes v. Inc. Mid- Constitute An “Occurrence.” Continent Cas. No. 3-00-CV-1048- (N.D.Tex. BD, 2001 WL at *3 principle The that a CGL does 2001) (not Mar.7, designated publication), generally the insured’s con- cover defective 01-10467, 'd, No. 2002 WL 334705 resulting struction in damage to its own aff (5th Cir.2002) (rejecting argument commonly work known as the “business damage to insured’s cannot eonsti- O’Shaughnessy work risk” doctrine. Arc, attempt distinguish 15. The carriers (finding to Len- Mid 2004 WL at *5 arguing they duty nar’s cases involved the to conflicting Hartrick and Main Streets Homes allegation defend when claimant’s despite suggestion they are reconcilable be- negligence, whereas this case involves the duty indemnify cause Hartrick involved the duty indemnify only when the basis duty whereas Main Street involved Homes liability Lennar's is breach of contract: See defend). Cowan, (stating duty 945 S.W.2d at 821-22 allegations defend is based on factual in the applying 16. Several other courts law Texas pleadings, duty indemnify whereas is based resulting have held that defective construction establishing actual facts the insured’s lia- damage in to the insured’s work can consti suit). bility underlying in point, At one in See,e.g., tute an "occurrence.” Ins. Co. N. of Lennar, by the cases cited the courts distin- Co., McCarthy F.Supp.2d Am. v. Bros. 123 guished, part, by the cases cited here 373, (S.D.Tex.2000); Invs., 376-77 Archon they carriers because involved indemnifica- Inc., 342; Mgmt. 174 S.W.3d at Home Owners obligations jury findings tion liability after Enters., Co., Inc. v. Mid-Continent Cas. No. contract, for opposed general breach of as 304CV2061BFH, 2452859, A. CIV. 2005 WL negligence allegations. generally Calli Oct.3, (N.D.Tex. 2005); at *3-6 Mid-Conti Homes, 698-702; F.Supp.2d 236 at Gehan Dev., Inc., nent Cas. Co. v. JHP Civ. No. Homes, 839-43; 146 S.W.3d at Main Street A.SA04CA-192-XR, 1123759, 2005 WL *1- at Homes, However, 79 S.W.3d at 694-95. (W.D.Tex. 2005) (not Apr.21, designated 4 for Lennar, by the cases cited the courts also publication); Luxury Living, Inc. v. Mid-Con distinguished by the cases cited here the car- Co., H-02-3166, tinent Cas. No. Civ. A. intentional, they op- riers because involved as 22116202, (S.D.Tex. 10, Sept. WL at *13-16 inadvertent, posed generally negligent or (not 2003) designated publication); for see defects; suggest- construction and the courts Constr., also Tealwood Inc. v. Scottsdale Ins. proper negligent ed the focus is on v. inten- 02-CV-2159-L, No. Civ.A.3 2003 WL defects, opposed negligence tional as v. 22790856, 2003) (N.D.Tex. at *5-7 Nov. Homes, generally breach contract. See Calli (not designated publication) (finding for no 698-702; Homes, F.Supp.2d at Gehan foreclosing 839-43; "occurrence” in this case Homes, but not 146 S.W.3d at Main Street possibility defective can construction consti explain, S.W.3d at 692-95. As we will we "occurrence”); Acceptance tute an v. Ins. Co. proper negligent believe the focus is on v. Homes, Inc., event, Newport Classic No. Civ.A.3:99- intentional Lennar’s defects. CV-2010BC, negate argument 2001 WL at *3-4 cases the carriers’ Tex- (N.D.Tex. 19, 2001) (not designated lawas has established defective construction Nov. (same). publication) can never constitute an "occurrence.” See workmanship poor general- 102-03 are Corp., quences Smuckler 543 N.W.2d (Minn.App.1996), abrogated by other to be borne ly on a “business risk” grounds Corp., v. as to an insurable risk. opposed Gordon insured Microsoft (Minn.2002); 791-92; Mut. O’Shaughnessy, N.W.2d 393 Grinnell at see Id. Lynne, 102-03; Reinsurance 686 N.W.2d Lynne, Co. 686 N.W.2d N.W.2d (N.D.2004); Pierce, James 123-25; Jr., Allocating 123-25 see also Jotham D. O’Connor, Duffy Every What Construction Through Surety Insurance And Risk Lawyer (1998). Know Cover- Bonds, Should About CGL PLI/Real Construction, age For 21-WTR Defective Here, generally rely the carriers (2001). passage A from Constr. Law argue doctrine to on “business risk” by many has Jersey New case been cited that defective construction cannot consti doc- explain courts to the “business risk” an “occurrence.” con tute trine: con clude that defective construction can [by The risk intended to be insured under the stitute “occurrence” standard policy] possibility CGL is (1) coverage for “busi CGL because insured, goods, or work of the products ordinarily risks” is eliminated ness or relinquished completed, once will “oc through through the exclusions—not or bodily injury proper- cause requirement in the initial “insur currence” product complet- ty other than to or (2) ing agreement”; for some itself, ed and for the insured work “business risks” is not eliminated when insured, may as a be found liable. The work, damaged or the work out of which services, may be lia- goods source of or arose, performed sub to make ble a matter contract law contractors. good is de- products work which

fective or otherwise unsuitable Agreement” “Insuring The may This lacking capacity. it is in some the “Business Risk” Exclusions to com- obligation even extend to an deficient pletely replace rebuild the First, is coverage for “business risks” This product liability, or work. howev- through ordinarily eliminated exclusions— er, coverages question is not what through requirement the “occurrence” protect The designed against. are agreement.” initial The “insuring in the liability physical for tort is a broad “insuring agreement” initial damages and not for contractu- to others Family See Am. coverage. statement of liability al of the insured for economic Girl, Inc., 268 Wis.2d Mut. Co. v. Am. product completed loss the because (2004).17 16, 65, The “in- 673 74 N.W.2d damaged is that for which the work not language suring agreement” contains no person bargained. eliminating coverage for dam- categorically Stone-E-Brick, Inc., work, a claim to the own i.e. age v. 81 N.J. insured’s Weedo (N.J.1979). Therefore, in See id. at n. 6. sounding contract. 77 405 A.2d 791 in is no demarcation the conse- There recognizes this doctrine that tort/contract Girl, despite arguments tuted an "occurrence” In the insured contractor's 17. the carriers’ faulty building preparation, the insurers that were similar to site based subcontractor, We arguments in case. See id. at 73-78. faulty a caused this advice from throughout opin- cite this resulting extensive will American Girl the to sink in foundation agree analysis; we because with its as damage. at After a thor- ion 673 N.W.2d 71-72. demonstrate, properly court consid- ough Supreme Court will analysis, the Wisconsin faulty See id. consti- ered entire CGL that the construction concluded

669 contract; “insuring agreement,” and “occur- loss can be recovered tort or in under an rence” is not reference not determine defined does instead legal category policy depends of the claim. Id. at 77. insurance which Instead, “occurrence” is defined as an “an upon language). accident, including repeated continuous or Rather, court has instructed that we exposure substantially general the same intent the rea examine the insured’s

harmful conditions.” sonably effect of conduct. foreseeable Supreme

The Texas has not held at Within Lindsey, Court See 997 S.W.2d 155. framework, that a claim in contract an in sounding cannot this “accident” includes “in damage constitute an accident under the initial acts negligent causing sured’s suring agreement.” The court applied undesigned unexpected. has which Co wan, Orkin, 828; the economic loss doctrine to determine at S.W.2d damages However, what a claimant is entitled at S.W.2d the court has Homes, recover. See Jim equated negligent constituting Walter 711 not acts as (holding S.W.2d at 617-18 a negligence claimants an “accident” with form of as exemplary damages Cowan, entitled to legal liability. for defen 945 S.W.2d at 826-28; Orkin, to properly 400; dant’s failure their construct 416 S.W.2d at see also Harken, home claim Instead, sounded in contract 261 F.3d at 472-73. only); also see Southwestern Bell Tel. Co. court has held consti negligent acts (Tex. DeLanney, v. distinguish negligent tute an accident to 1991) (holding Cowan, claimant could not recover acts from intentional torts. See only damage 826-28; tort resulting Harken, when from 945 S.W.2d at see also fact, defendant’s breach of contract was to the 261 F.3d at 472-73. Wal Jim contract). subject Homes, ters recognized court one court applied has not may the economic loss negligently, opposed to intentional doctrine to determine whether an ly, although insured’s breach contract claimant action constitutes an accident ultimately under CGL is restricted to of con breach policy; Jim Walters Homes and DeLan tract remedies. See 711 at 618. S.W.2d ney Further, did not coverage. involve insurance we consider whether the Homes, See Jim Walter at S.W.2d and unexpected was unintended —not 617-18; 494-95; DeLanney, 809 S.W.2d at damaged. Lindsey, whose work was Girl, (clari Cowan, see also Am. 155; 828; 673 N.W.2d at S.W.2d S.W.2d fying Orkin, Harken, “economic 400; loss” doctrine is a reme S.W.2d at see dies principle determines Accordingly, whether F.3d at 472-73.18 the “acci Nonetheless, suggest faulty some party courts if the construction was inadver- fail- insured’s own work from Colony Corp., tent. See Erie Ins. Exch. Dev. perform properly ure to a construction con- App.3d 136 Ohio 736 N.E.2d 952 n. presumed expected tract is to be dam- while (2000) (supp. rehearing) (noting op. 1 on the age work property third-party to the or of a is “logical basis” for dam- distinction between See, presumed to be unexpected. e.g., Bur- age prop- the work and insured’s collateral Constr., lington Design Ins. Co. v. Oceanic & erty they are is “less than clear” because both Inc., (9th Cir.2004) F.3d 383 948-49 work). Moreover, by negligent caused this law); (applying Corp. Hawaii Constr. Nabholz suggestion runs afoul of the "accident” Co., v. Fire St. Paul & Marine Ins. 354 ex- framework under Texas law. We do not (E.D.Ark.2005); F.Supp.2d 921-22 see damage expected amine whether the was Hartrick, also er, 62 S.W.3d at 277-78. Howev- perform- improper, negligent, the i.e. from damage not we do see how in- to the Harken, of the See 261 F.3d ance contract. at any expected own work than sured’s is more Cowan, 828; (citing at 472-73 945 S.W.2d damage property to the work or of third-

670 Rather, Texas Lamar Homes and Jim Johnson the

dent” framework established necessarily does elimi Supreme Court not Homes cited T.C. Bateson Construction for to the insured’s coverage nate Co., Casualty v. Mutual Lumbermens Co. work, sounding a claim in contract. i.e. own in which we recited the “business risk” liability standard con- and stated that insurance policy the CGL doctrine risk” tains certain “business exclusions. insured protect is not meant the for Girl, 74; Lynne, Am. 673 at See N.W.2d replacement repair or its own work. Notably, “your N.W.2d at 123. 686 Homes, at F.Supp.2d 335 See Lamar for precludes coverage work” exclusion v. (citing Bateson Co. Lum T.C. Constr. “ arising damage” ‘your work’ “property 784 S.W.2d bermens Mut. Cas. any part of it or of it and included in out (Tex.App.-Houston [14th Dist.] 694-95 completed operations haz- ‘products Homes, denied)); Johnson writ Jim ”19 short, “your exclu- ard.’ In work” (same).22 at F.Supp.2d 714-15 Howev for precludes coverage “property sion er, solely on the we based that doctrine arising af- damage” the insured’s work exclusions, including an ex “business risk” project is finished and in ter construction damage to the insured’s work clusion for also owner’s The possession.20 time; did address the effect at that not coverage precluding exclusions contains requirement. “occurrence” See T.C. Bate “property damage” to the insured’s for son, Further, 784 S.W.2d at 694-95. during occurring work construction.21 Bateson, we, turn, cited Weedo T.C. carriers, cited In cases here risk” the “business doc explaining when courts not effect of did consider the Weedo, (citing at trine. See id. on the “oc- the “business risk” exclusions 791). However, A.2d at court Weedo See, e.g., analysis. Lamar currence” the “occurrence” re also did not consider Homes, 758-60; F.Supp.2d at Jim but, instead, Homes, its oft-cited quirement, based F.Supp.2d at 714-19. Johnson Orkin, 400). coverage precludes for If that were the 21. One such exclusion S.W.2d case, liability coverage damage” particular part there “property would be “that negligent damage from a most acts because you property real on which or contractors negligent reasonably expect likely will be act working directly or indi- or subcontractors fact, actor have proof ed. In that the should rectly performing opera- your behalf are reasonably anticipated resulting injury is tions, property damage arises out of if the aspect proximate cause element of one pre- operations.” those Another exclusion negligence Boys Clubs claim. See Doe particular part "that cludes Dallas, Inc., Greater restored, repaired, any property be that must Instead, 1995). (Tex. we examine whether the ‘your was incor- replaced because work' per expected was was if the work rectly "property it” if the dam- performed on non-negligently. properly, formed i.e. age” "products-com- in the not included Harken, Cowan, (citing 261 F.3d pleted operations hazard.” 828; Orkin, 416 S.W.2d at 945 S.W.2d at 400). Homes, the court found Johnson Jim "products- exceptions, With applicable certain to deficiencies that the exclusions completed operations all hazard” includes during preclude arising would construction " occurring away damage’ ‘property from project not com- arising you out of premises own or rent however, already court had con- pleted; ” 'your product' 'your work’.... See 244 no occurrence. cluded there was F.Supp.2d at 717-18. discuss, we will further this exclusion 20. As exception now contains subcontractor the has modified exclusion.

671 exclusions, typically that is ac- passage product liability “business risk” on the — including damage parties pursuant an exclusion for to the tionable between the contract, insured’s work. See 405 A.2d at 791-93. not in tort. the terms of their Consequently, disagree we with the La insuring agreement If the never confers and mar Homes Jim Johnson Homes liability an coverage type for this as courts’ reliance on the risk” doc “business matter, then there is original definitional trine as recited in Bateson to conclude T.C. it. specifically Why no exclude need that defective construction cannot consti industry exclude would the insurance Girl, tute an “occurrence.” See Am. to the insured’s own work or damage N.W.2d at (recognizing 76-77 courts have damage if the could never be product continually misapplied Weedo to hold that considered to have arisen from cov- defective an construction cannot constitute place? ered “occurrence” in the first resulting “regrettably occurrence some Girl, Quite simply, Am. 673 N.W.2d at 78. generalizations about pol overbroad” CGL coverage for “business risks” should be icies). through appropriately eliminated Instead, which, parts we must read all of named “business risk” exclusions policy together insurance to ascertain applicable, directly when address parties’ intent give and effect to all resulting to the insured’s own work from a parts, so that none will super Girl, be rendered breach of contract. See Am. meaningless. fluous or King v. Dallas 76-78; at Erie Exch. v. N.W.2d Ins. Colo- Co., (Tex. 185, Fire S.W.3d 192-93 ny Corp., App.3d Dev. 136 Ohio 2002); Forbau, 133; 876 S.W.2d at Betco (1999); Lynne, N.E.2d see also v.Co. Houston United Cas. Ins. 686 N.W.2d at 123-25. CGL Scaffolds 29 S.W.3d 344 (Tex.App.-Houston generally contract policies do not cover pet.). no In King, [14th Dist.] arising claims out of the insured’s defective Supreme Texas expressly Court consid work, by operation but this is “busi- ered an interpreting exclusion when exclusions, ness risk” not because a loss initial requirement “occurrence” of a CGL only actionable contract can never be an rejected interpre insurer’s “insuring “occurrence” under the initial tation of “occurrence” that render Girl, would 76; agreement.” Am. N.W.2d superfluous exclusion and meaningless. N.E.2d at 947- Colony Corp., see Dev. Cowan, 192-93; 85 S.W.3d at see also

945 S.W.2d at 828. Accordingly, agree cases

Similarly, finding no “occurrence” when recog- cited Lennar because the courts the insured’s defective construction dam- requirement nized that the “occurrence” ages its own work would render the “busi- encompass damage can to the insured’s exclusions, particularly ness risk” work, depends own then exclusion, “your superfluous work” See, e.g., upon the exclusions. Calli meaningless. (con- Homes, F.Supp.2d at 699-700 inadvertent,

If ... cluding negligently losses actionable in contract are created or intentional, never for construction de- purposes opposed CGL “occurrences” coverage grant, leaving coverage of the initial to be then fects are accidental entirely construction-specific business risk exclusions are un- determined ex- Homes, clusions); necessary. The business risk exclusions Gehan liability finding no “occurrence” prop- (stating eliminate erty damage to the insured’s own is to the insured’s own work when 672 subject Property Damage contract —would Broad Form Endorse

work—the of the (“BFPD”). id.; into language policy simply read the “that Shapiro, ment See 686 there” and the surplusage is not render at 82. The BFPD deleted several PLI/Lit dam- apply “property exclusions the portions from “business risk” exclu age”). replaced specific them more sions Exception

2. The Subcontractor effectively broadened cov exclusions Girl, 83; erage. See Am. N.W.2d at significantly, coverage More for some Among at 82-84. Shapiro, PLI/Lit the “business risks” is not eliminated when the changes, other BFPD narrowed the work, damaged out of which the work “your and extended cover arose, work” exclusion damage by the sub- performed Girl, age “property damage” at for to the work of contractors. See Am. 673 N.W.2d 82-84; damage” at O’Shaughnessy, “property 543 N.W.2d a subcontractor or 103-05; Colony Corp., Devel. 736 N.E.2d arising out of the work of a subcontractor. “your Specifically, Contractors, at 948-49. the standard v. Prov See Mid-United Inc. exclusion a subcon- work” now contains Lloyds idence that the exception provides tractor which (Tex.App.-Fort writ de Worth damaged exclusion “does if the apply Girl, nied); 82-83; Am. at 673 N.W.2d work or the work out of the In the Shapiro, 686 at 84. PLI/Lit performed [your] behalf arises was industry as incorporated insurance this subcontractor.”23 BFPD the pect directly of the into CGL ex important policy by inserting

It is the subcontractor understand evolu exception. ception “your tion of subcontractor In in the exclusion. See work” Girl, exclusions past, 83; “business risk” O’Shaughnes Am. N.W.2d at operated collectively preclude 103-04; Shapiro, N.W.2d at sy, 543 damage to projects, construction 85; O’Connor, at 21-WTR PLI/Lit including damage to the of subcon work Law. at 16 n. 5.24 Constr. tractors, arising out of work Weedo, the courts In T.C. Bateson and Girl, 673 of subcontractors. See Am. risk” doctrine based recited “business 82; O’Shaughnessy, N.W.2d at 543 N.W.2d “your on a work” the earlier exclusion 103; Shapiro, at J. Further Clifford Reflec which did not policy, version CGL tions-Inadvertent Construction Defects exception. See contain a subcontractor Are An “Occurrence” Commercial Under Bateson, 694-95; 784 S.W.2d at Wee T.C. Policies, Liability General 686 PLI/Lit do, “busi 405 A.2d 791. (2003). Many unhap contractors were Bate risk” doctrine as recited T.C. ness pro this situation because more py with has been modified son Weedo being completed using subcon jects were exception cannot be re subcontractor Girl, Am. tractors. See 673 N.W.2d 82. on to defeat for all defective lied industry began insurance O’Shaughnessy, offer, construction. for an an en premium, additional inten- cases (recognizing to the known as N.W.2d at dorsement CGL during exception. The damage arising The exclusions sion and subcontractor thus, BFPD, and, do construction not contain subcontractor effec- ICSOP contains exception. exception to tively includes a subcontractor "your Mid-United work” exclusion. See Here, policies, except all the the ICSOP 827; Contractors, also Am. 754 S.W.2d at see risk” policy, contain the "business standard Girl, N.W.2d at 83. exclusions, "your including the work” exclu- 673 Girl, preting no pre-1986 policy longer (recognizing CGL 673 N.W.2d 78 sub- apply); Shapiro, (stating 686 at 87 can give “proper- contractor’s rise to PLI/Lit work most courts have to consider the failed “occurrence”); ty damage” by an caused history of exclusions determin CGL when Builders, Lee Inc. v. Farm Mut. Bureau ing construction whether defects constitute Co., 504, 997, Kan.App.2d Ins. 33 104 P.3d “occurrence”). an (2005) (finding ma- 1001-03 that defective

Instead, exception workmanship the subcontractor terials or caused unin- demonstrates insurers intended to cover project tended water insured’s some defective resulting construction “insuring was an “occurrence” under broad damage to the work. insured’s See agreement” construing and that “occur- O’Shaughnessy, (stating 543 N.W.2d at 104 narrowly rence” more render sub- would “it perverse would be willful and ... exception meaningless);25 contractor see simply ignore” exception the subcontractor Shapiro, (stating also at 85 686 PLI/Lit that is “an affirmative statement on the exception subcontractor demonstrates part policy” of those who drafted “property damage” to pro- a construction “was intended to narrow the ‘business risk’ ject arising from subcontractor’s work is doctrine”); O’Connor, 21-WTR ConstR. “occurrence”).26 an (stating Law. at 15-16 “business risk” doc- Finally, reject argument carriers’ trine should not bar some defective con- that allowing defective construction to con- coverage struction by that intended stitute an “occurrence” transform a will policy drafters of the impor- and deemed policy performance CGL into bond. As tant enough insureds to millions in pay discuss, agreement” we will the “insuring premiums). Accordingly, finding no occur- ‘property covers ... “damages because of rence for resulting defective construction ” damage’ ... caused an ‘occurrence.’ in damage to the insured’s work would Therefore, although render the exception super- subcontractor defective construction See, meaningless. e.g., may “occurrence,” fluous and Am. an the insur- constitute also, Co., 1999); L-J, e.g., 25. See Limbach LLC v. Zurich v. Inc. Bituminous Fire and Ma Co., 358, (4th Co., 117, 33, Am. 396 Ins. F.3d 362-63 Cir. rine Ins. S.C. 366 621 S.E.2d 35- 2005) law); (applying Pennsylvania (2005). However, Fid. & reasoning 37 their is con Co., Deposit v. Co. Md. Cas. Ins. trary principle to the that we consider Hartford 1212, (D.Kan.2002); F.Supp.2d policy parties’ whole ascertain intent Inc., 519, Fejes v. Alaska Ins. Co. 984 P.2d give parts, all none will effect to so that (Ak.1999); 522-24 v. Kalchthaler Keller superfluous meaningless. be rendered Co., 387, 169, 224 Wis.2d Constr. 591 N.W.2d 192-93; Forbau, King, 85 S.W.3d at (Ct.App.1999). 174-76 133; Scaffolds, S.W.2d at Betco 29 S.W.3d at 344; J.S.U.B., see v. also Inc. United States recognize jurisdictions We that some have (Fla.Dist. Co., Fire Ins. 906 So.2d 309-10 opposite, reasoning exception held the Ct.App.2005) (recognizing exclusion cannot coverage to an exclusion cannot create where coverage considering create but subcontrac none otherwise exists under the initial "insur parts exception principle tor all under See, ing agreement.” e.g., ACS Constr. Co. v. an insurance must be read harmo CGU, (5th Cir.2003) 332 F.3d 891-92 Moreover, ny). exception the subcontractor Nabholz, law); (applying Mississippi does not create where none other 921-23; Amerisure, F.Supp.2d at Inc. v. Wur agreement.” Co., "insuring wise Inc., exists under ster Constr. 818 N.E.2d Rather, originally also, restores (Ind.Ct.App.); Burlington e.g., see 945-53; “insuring agree existed under broad 383 F.3d at Ins. Co. v. Union ment,” Hottenstein, (Colo.Ct. "your precluded but was work” P.3d 1201-02 Constr., Girl, App.2003); Hawkeye- Pursell exclusion. See Am. 673 N.W.2d at 83- Inc. Ins.Co., (Iowa Sec. N.W.2d doctrine, risk” only er for result rehash of “business indemnifies the insured arising exclusions, ing damage” after the “property through the which is enforced contrast, per In a project completed.27 is Colony Corp., Devel. applicable. when formance is broader than a CGL bond general at (recognizing 736 N.E.2d “the policy guarantees completion in that it liability is a proposition policy not upon of a construction contract the default bond, is not that performance but rationale general contractor.” Black’s Law the negligent construction falls outside broad Dictionary (7th ed.1999); see Florida are insuring agreement, damages but that Regents Deposit Bd. &Fid. Co. of usually by the standard exclu- excluded (Fla.Dist.Ct. 30, 32 Maryland, 416 So.2d sions). “performance the grounds by App.1982), rejected on other the by has been modified bond” rationale Florida, Ret. Fed. Ins. Co. v. Southwest one court ex- exception. subcontractor As (stat (Fla.1998) Ctr., Inc., 707 So.2d 1119 plained: ing is to purpose performance bond industry con chose to add completion upon of the work [T]he [insurance] ensure against tractor’s default insure the exception the [subcontractor] if oc may the suffer default losses owner [“your in 1986.... work”] exclusion We curs). Therefore, “variety a of deficiencies a holding general our realize that under damage’ ‘property not that do constitute contracts out all the contractor who bond, a may performance be covered ... can to subcontractors ensure work cause additional and not all deficiencies faulty for workman- complete damage.” O’Shaughnessy, 543 property However, holding is our ship. Consequently, allowing N.W.2d at 105. the this result: it is addition creates re damage” for “property some policy. to the language of the new We from construction does sulting defective policy the closer to have not made per into a policy not transform a CGL performance general contrac- bond carrier require formance bond and CGL tors, industry has. the insurance to com pay anytime an insured fails with, its cont plete, comply or otherwise v. Keller Constr. Kalchthaler (Ct. ract.28 387, 591 N.W.2d Wis.2d reject App.1999). Consequently, we holding the extent our does the sub attempt to circumvent carriers’ give aspects per- some of a a CGL by urging that contractor exception nonetheless, bond, are, bound formance we negates an “performance rationale bond” The language current first See Lee “performance place. rationale is a occurrence carriers’ bond” vari- return of exception cov- rescission of the contract and 27. The subcontractor restores damage arising erage only property paid after was construction ous amounts before only project completed complete contractor’s based on insured “your subcon- work” exclusion contains the project and failure to of the abandonment exception, "your work” exclu- tractor according See Jim build contract. oper- “products completed applies to the sion Homes, F.Supp.2d at 710-12. Johnson hazard.” ations damages sought from The did not result arising completion “property damage” after likely agree with example, we For would Therefore, requiring project. indemni- Homes based on its the result Johnson Jim effectively by the could have insurer fication disagree although with the facts recited perform- policy into a the CGL transformed damage arising suggestion that no court’s Jim Homes scenar- ance bond Johnson from can result from defective construction io. There, sought claimants an occurrence. cite Har- The carriers unexpected. Builders, (rejecting in ed 104 P.3d at 1003 the courts found Devoe in which trick and argument “performance surer’s bond” in no occurrence because there was “per an “occurrence” because negate in voluntary and construction was sured’s bond” based on formance rationale was resulting if the tentional even “your predated exclusion that sub work” Har unexpected. See unintended and exception). contractor trick, (citing Lindsey, at 277-78 S.W.3d sum, reading the standard Devoe, 155); S.W.3d whole, negli policy as a we hold CGL 633). at (citing Maupin, 500 S.W.2d 571-72 created, inadvertent, defective gently damage to the resulting construction has Supreme The Texas Court insured’s work that is unintended own voluntary injury caused stated that an unexpected can constitute an “occurrence.” conduct is not an accident and intentional Nonetheless, “your the other work” or may just injury because “the result or may preclude risk” “business exclusions unforeseen, unexpected, have been damage. coverage for the unintended”; however, the court has made instances, coverage some will be restored to intentional respect this statement with work, if out of damaged the or the work at 155 Lindsey, torts. See 997 S.W.2d arose, performed the which was 635); at see (quoting Maupin, 500 S.W.2d by subcontractors.29 Harken, The court also 261 F.3d at 472. that explicitly rejected suggestion has Lennar’s C. Defective Construction engage “if intended to in the an actor an Constitutes “Occurrence.” injury, there gave rise to the conduct Although primarily the carriers contend Lindsey, 997 can be no ‘accident.’” See Cowan, defective construction cannot consti- 155; 828; at S.W.2d S.W.2d law, tute an “occurrence” Harken, as a matter of Adopt see also 261 F.3d at 472. they suggest also that Lennar’s defective an render insur ing approach such “would construction is not an “occurrence” this coverage illusory many ance They case. assert there is no accident things commonly pur insureds for which Cowan, voluntarily because Lennar and intention- insurance.” See 945 S.W.2d chase ally (providing example constructed homes with EIFS at 828 that there is if resulting damage even the unintend- accident a hunter shoots at he was when what Instead, question damage. 29. We must note that we whether tor’s fault caused the adding the rationale for ex- merely damaged subcontractor applies "if the work or ception applies The here. rationale is that which the arises was work out of perform- the contractor can control own by a performed on behalf subcon- [Lennar’s] necessarily ance but cannot control a subcon- fact, added). except (emphasis tractor.” performance. Fireguard Sprin- tractor's ICSOP, carriers contend the none of the Systems, kler Inc. v. Scottsdale Ins. coverage; "your precludes work” exclusion (9th Cir.1988). Here, F.2d 653-54 al- they recognize ap- presumably, it would not though built the homes and subcontractors exception. Although ply due ICSOP EIFS, damages the EIFS-related installed applies "your exclusion contends its work” faulty application from did not result exception, there is no dis- because there is no subcontractors, but rather from the fact pute here over the breadth of the subcontrac- inherently that EIFS is defective. Lennar ad- Further, any uncertainty exception. over tor mits that it selected EIFS to be installed on exception the breadth of the subcontractor although the homes it did not know was "your relevant whether would be Nevertheless, defective. the subcontractor applies whether there work" exclusion —not apparently exception quite is broad and is not anwas occurrence. limited to situations where the subcontrac- Touche, & actually person; Weatherly Deloitte is a deer but is believes intentional, (Tex.App.-Houston firing gun [14th S.W.2d although w.o.j.), grant dism’d leave Dist.] harm can be characterized as acciden- writ (Tex. tal). ed, denied, Instead, if mand. there is an “occurrence” 1997). there is taken, Dynasty American asserts intentionally negli- an action is but Florida and Texas is not the a conflict between law gently performed, and the effect result had the action because Florida law well-settled expected intended or Harken, construction cannot constitute an non-negligently. defective performed been Cowan, disagree. To the ex “occurrence.” We (citing F.3d at 400). Orkin, settled 828; may tent the issue have been when 416 S.W.2d at S.W.2d brief, filed its it has Dynasty American Here, the uncontroverted evidence become unsettled. since Lennar did not intend to demonstrates cites LaMarche v. product homes a defective build the Co., in Shelby Mutual Insurance expect resulting and did not intend stated that a CGL Supreme Florida Court Horn, damage. Daris Lennar’s Customer not a insured contrac policy does cover the EIFS Specialist Care who handled defective replace repair tor’s costs to claims, Len- by averred affidavit that when and materials. 390 So.2d workmanship early to EIFS in the nar decided use (Fla.1980). However, 325, 326-27 1990’s, marketed the EIFS manufacturers the defec court did not consider whether improved an form of stucco that as was “occurrence”; in workmanship was an tive maintenance,” install, and ide easy to “low stead, holding court based its on Wee- residential, homes. al for wood-framed exclusions in and the “business risk” do Horn further averred that Lennar was including an exclusion pre-1986 policy, EIFS was defective while Lennar unaware that did damage insured’s work homes; in constructing the EIFS was exception. See not contain a subcontractor stead, recognized EIFS Lennar first was Nonetheless, several inter id. at 326-27. September approximate defective courts have cit appellate mediate Florida stopped using the same time it EIFS. ly holding LaMarche that defective ed when construction of the Consequently, Lennar’s “occurrence” under construction is not an inad product a defective was homes with if current even the work CGL most, or, negligent because it vertent subcontractors; these performed Further, of the defect. was unaware exception that an courts have reasoned expected not the intended or damage was create exclusion cannot where an properly the homes been con resulted had See, e.g., place. in the first none exists structed, product. i.e. without a defective Co., v. Am. States Ins. Lassiter Constr. Co. construc Lennar’s defective Accordingly, (Fla.Dist.Ct.App.1997); 699 So.2d “occurrence” under tion constitutes an v. Hanover Warranty Corp. Home Owners Texas law. (Fla.Dist. Co., 527, 529-30 683 So.2d Ins. Ct.App.1996). IV. LAW UNDER FLORIDA “OCCURRENCE” However, recently, another intermediate argues that Dynasty American held that a build appellate Florida court to the “occurrence” applies Florida law con policy did cover defective asserting The er’s CGL party issue under by a subcontractor. performed bears the burden struction foreign law application J.S.U.B., Fire Inc. v. States United conflict of laws and See to first show a true (Fla.Dist. 303, 307-11 906 So.2d apply. law should then demonstrate which court La caused construc- Ct.App.2005). distinguished damage” The defective Marche, “Property defined in the damage” fo tion. is part, because LaMarche policies “[p]hysical injury tangible policy, cused on in the pre-1986 exclusions including resulting all loss of use property, including work” exclusion the“your property.”31 excep did not contain the subcontractor tion. See id. at 807-10. The J.S.U.B. contends all are “dam- its costs court held that defective construction caus damage.” of ... ages property because ing and unexpected unintended disagree. distinguish We We between “accident” mentioned that (A) categories damages: three distinct “your work” exclusion and its subcontrac repair the costs water tor exception, meaning have no if would homes, “damages which constitute because defective un construction was not covered (B) damage”; of ... the costs to property der “insuring agreement.” the initial as a replace preventa- remove and id. at 308-11. measure, tive which do not constitute because ... dam- “damages property

Consequently, same conflict exists (C) costs, inspection age”; and overhead among Florida courts as in There- Texas. costs, costs, fees, attorneys’ personnel fore, shown has not “damages not constitute do that Florida law differs from law on Texas of ... property damage.”32 issue, the “occurrence” we need Repair Damage engage in a choice of Be- analysis.30 law A. To Costs Water cause Lennar contends in issue its fourth summary According judg to the applies that Texas law to issues coverage evidence, entrapment ment of EIFS’s under the Dynasty policy, we damage to at moisture caused water least sustain fourth According- Lennar’s issue. some of the homes. on the Depending ly, applies because Texas law “oc- to the home, water damage included wood currence” under issue all the in- policies, rot, damage substrate, sheathing, to fram cluding policy, the American Dynasty insulation, sheetrock, ing, wallpaper, paint, Lennar has established an “occurrence” trim, carpet, carpet padding, wooden under all policies. baseboards, damage, mold and termite in These damages festation. constitute “Property Damage”

V. “physical injury property.” to tangible (find Girl, Although we have held that Lennar’s See Am. at 74-75 N.W.2d faulty defective construction “oc- ing constitutes an insured’s site caused preparation currence,” Lennar must also that “property damage” establish because foundation paid it “damages ... property causing building because of sank the rest of the guess summary We decline to law for how Florida 32.American moved costs, inspection judgment on these would overhead resolve the issue to determine whether costs, costs, fees, attorneys' personnel as its law with conflicts Texas law. Resolution ground. separate RLI and Markel also appropriate- the issue under Florida law is summary judg- in their mention motions for ly left to courts. its own coverage ment that there is no for these costs. we view the issue for "Property damage” is also as defined “property encompassed as these costs tangible property of use of is not "[l]oss that damage” issue raised and all carri- physically injured.” Apparently, none these are ers because claims costs due to homeowners claimed "loss of use” damage,” "damages property because ... EIFS. for which it is entitled to indemnification. crack). defective not Consequently, initially

buckle and Len- ment of welds did ... “physical damage” loss repair nar’s costs this water constitute ... under builder’s “damages prop- required constitute because (Tex. damage.”33 risk erty writ). 1996, no App.-Houston Dist.] [1st Nonetheless, the carriers claim that court defective The stated welds “property Lennar has not satisfied satisfactory initial were never “an state requirement it not damage” because did changed by some external event prove all homes sustained water dam- state,” unsatisfactory but into an instead age. Lennar’s own evidence is somewhat damaged into in a came existence state. conflicting on all sustained whether homes Although Id. at 833-34. North American event, damage.34 water In we hold a builder’s risk Shipbuilding poli involved the homes repair that Lennar’s costs cy, agree reasoning least with that did sustain water constitute interpretation of respect “prop to its “damages property because of ... dam- damage” is consistent with erty age.” “property damage” in the definition of Replacement B. Removal And Of requires “physical in policies, CGL tangible & jury” property. Fid. Lennar also it is entitled contends Md. v. Cas. Ins. Deposit Co. of Hartford to indemnification its costs remove (D.Kan. F.Supp.2d replace EIFS on all the homes. 2002) (stating meaning, plain that under its contrast, carriers contend these injury” policy unambigu in CGL “physical replacement not costs are covered because ... ap an alteration in ously “connotes initially product of an defective is not pearance, shape, color in other material “property damage.” dimension”). Here, the EIFS was not injured after to the Ship- physically application cite North American The carriers homes; changed from a Inc. Marine & Avia- EIFS was building, v. Southern Inc., satisfactory unsatisfactory into an Underwriting, in the court state tion state, physically altered.35 shipbuilder’s that the or otherwise replace- held insured Therefore, framing. suggests this presented that it evidence 33. Lennar evidence incurred damage every repair injury” the in "physical other costs to water was to home. there repair However, actually to addition to the costs point, testified that at another Horn damaged example, For on some areas. damage by the Lennar measured moisture broken, homes, driveways were windows testimony in the This raises the level walls. cracked, damaged landscaping was were every question of whether home suffered wa- damage. repair We characterize to the water damage merely whether some homes ter or “damages prop- because of ... these costs potential- which could accumulated moisture Further, cases, erty damage." in some Len- event, ly damage. Lennar estab- cause may to have removed some EIFS access nar some homes sustained lished that at least damage underlying water or deter- repair damage. water damage. We underlying mine areas to EIFS sole- characterize these costs remove Eby, superintendent in- 35.Greg a Lennar repair underlying damage as ly to water repairing water replacing in EIFS and volved damage.” "damages property ... because of homes, it is the “sub- damage to the testified itself, beyond,” is not the EIFS that strate and “all 34. Daris Horn averred affidavit that Klein, damaged. president one of Donald had rot at issue in this case” wood homes entities, testified the "actual rot- the Lennar damage. also testified substrate Horn and/or growing the mold” is ting deposition every wood home had some in her insulation, damage.” "property damage sheathing, to either Rather, the already bility EIFS was in an unsat- for its costs to entire rebuild isfactory applied state when to the homes costs at- project because these were inherently it damage.” because There- to Id. at “property defective. tributable fore, the EIFS defective does not consti- 1178.

tute “property damage.” there acknowledged phys The court

Nonetheless, suggests project including Lennar that be- ical to the injury cracked walls, blocks, slabs, cause all the joints, homes sustained dam- water floor lintels. all age, fully its costs to re- repair remove and Id. at 1183. The costs to these place “damages EIFS are of ... problems unquestionably constituted cov property We damage.” disagree. However, Even if Id. “property damage.” ered all the experienced damage, homes other problems water there were which had not cannot “property damage” conclude Lennar’s costs to re- but resulted would replace move and all EIFS on homes likely have caused the future. damage instance, “damages are because of ... property Id. For most of the walls had damage.” contrary, To the the evidence discontinuous rebar which rendered them early 2000, that in imple- reflects susceptible cracking in the future. Id. plan mented a Fidelity remove EIFS and re- The believed court made a place with a traditional good stucco on all the business decision to demolish and regardless homes of whether project potential rebuild the due to the damage. had caused any pro- During future. extensive Id. at EIFS, cess of replacing re- 1184. court was not paired some water least persuaded at that such a would decision have Nevertheless, some of the homes. necessary repair only the evi- been the physical dence demonstrates Lennar’s to ly injured property intent was currently existed. fully replace remove and the EIFS as a court proper Id. The held that the meas preventative measure because it is defec- damages ure of was the amount it would tive. to repair injured have cost the physically property. Id. Fideli Fidelity & Deposit Co. di- involved the ty’s damages apportioned total had to be chotomy damages resulting between from between its costs to consequential repair physical injury'to property in- and costs injured physically and its property costs prevent curred to physical injury prop- prevent future damage. See id. at 1183- erty. F.Supp.2d See 215 Fi- 1174-84. delity issued a performance bond for insured Similarly, here, contractor’s of a arguably construction Lennar made a school. Id. at Fidelity completed good 1175. business decision to remove and re- construction school after place the school all the EIFS to prevent further the project Nonetheless, district determined damage. considering was defec- the evidence, tive and the terminated contractor. Id. summary judgment we cannot Fidelity eventually assigned was necessary all that it was for conclude Lennar against contractor’s in- rights liability its replace to remove and all the EIFS in surer, who denied dam- repair damage, any, order to if water ages. argued Id. at Fidelity 1175-76. to each home. the costs in- that based on damage by extensive to the curred Lennar to and replace remove it project, had to be re- a preventative demolished and EIFS as measure are not built; therefore, Fidelity to “damages property was entitled because of ... dam- indemnification under the contractor’s lia- age.” Accordingly, appor- Lennar must property of ... damages pay damages

tion the EIFS-related between as because added). replace policies its costs to remove and EIFS as a damage.” (emphasis The preventative and costs re- measure its to “legally do not include a definition obli pair water to the homes.36 gated giving to pay.” Inspection phrase ordinary it meaning, means Costs, Costs, Overhead C. Attorneys’ law, such as an obli obligation imposed by Costs, Personnel and Fees gation pursuant judgment, to to a pay Lennar seeks indemnification also contract, settlement, See statute. Com it addressing for various costs incurred in n. 3 (recognizing 130 S.W.3d sys, claims, costs, including the EIFS overhead by only not manner judgment is costs, costs, personnel at inspection obligated to legally an insured can become torneys’ argues Lennar car fees. obligation can pay legal because a also indemnify must Lennar for these riers contract, out of a such as settle arise agreement” “insuring por costs under the ment); Prop. and Cas. Ins. Tex. Guar. tion of the policy. Lennar cites Missouri Am., Co., Boy Ass’n v. Scouts 947 S.W.2d Nat’l Terrazzo Co. v. Iowa Mut. writ) 1997, no (Tex.App.-Austin in court that the which the held insured’s (same); Pulp Paper liability policy building covered a owner’s see also Pa. & Co. by claim for in value caused Mut. Ins. diminution Nationwide damaged installed the insured. floors (Tex.App.-Houston [14th Dist.] (8th Cir.1984). denied) 740 F.2d The pet. (recognizing give courts terms court found that the diminution value ordi in an insurance contract their used ... “damages prop constituted because meaning un nary generally accepted Likewise, Lennar erty damage.” id. were less the shows the words costs, inspection characterizes its overhead sense). in a or different meant technical costs, costs, attorneys’ personnel fees may legally obli have been While ... “damages property because of dam EIFS claims gated pay third-party to age.” disagree. We EIFS, making replacing repairs, and/or making payments, legally cash “legally obligated to ignores costs, incur obligated to its own overhead pay” language “insuring agree costs, costs, personnel and at inspection “insuring agreement” pro The ment.” settling torneys’ fees connection with pay those vides the carrier will sums claims.37 legally obligated that Lennar “becomes to the repair early 2000 costs to early Until when Lennar decided to before between its EIFS, replace EIFS as water and its costs replace all Lennar addressed the preventative The homes on an individual basis. evidence measure. per- work is somewhat unclear as summary judgment, In their motions on these homes. Horn testified Len- formed argued that Lennar was not carriers "repairs” made on a few homes areas several nar "legally obligated pay” EIFS claims high testing revealed content. where moisture voluntarily without Although it settled them Horn characterized this work as Lennar, According being testimony some of filed. "repairs,” her reflects suits Liability Act actually Construction "repairs” may have been re- Residential these ("RCLA”) obligated legally Lennar to cure preventative EIFS a measure placement of as being filed. high might without suits moisture content construction defects because the However, §§ damage generally Tex. 27.001- Horn in- the homes. also Prop.Code Ann. (Vernon Supp.2005). appeal, repaired damage On on .007 2000 & dicated Lennar water cases, argue longer no that Lennar and in removed the carriers some homes some event, obligated any legally pay the EIFS claims. damage. not Nonetheless, to repair EIFS to In legally Lennar was obli- even if apportion also its costs incurred Lennar must Moreover, per Insuring agreement clear- limit of million “occurrence” $1 (“SIR”) of ly damages refers to the claimant’s and a self-insured retention $250,000 obligated per to “occurrence.” legally the insured becomes Terrazzo, instance, For in pay. Missouri summary judgment Lennar moved for the diminution in the measure of value was asserting that the EIFS claims are cov- building resulting damages owner’s Gerling policy they ered under because damaged from the floors. See 740 F.2d damage” caused an “property constitute The paid insured a share of those already “occurrence.” We have concluded damages pursuant settling to the claim- coverage there is no for Lennar’s contrast, ant’s In suit. See id. a replace preventative costs to EIFS as costs, costs, inspection Lennar’s overhead Therefore, measure. because is no there costs, personnel attorneys’ fees are costs, portion for a Lennar’s components not of the homeowners’ dam- the trial Lennar’s properly court denied Rather, ages. they are Lennar’s own summary judgment motion for as to Ger- in settling costs incurred connection with However, ling. we have determined Therefore, the EIFS claims. Lennar was repair Lennar’s costs to water legally obligated not to pay these costs as damage” constitute “property caused “damages property because of ... dam- “occurrence.” we consider will age.” Gerling’s summary judgment other grounds defeating sum, coverage. We find In Lennar’s costs remove and ground dispositive. one replace preventative EIFS as a measure costs, costs, and its overhead inspection In particular, Gerling contends costs, personnel attorneys’ are fees indemnify that it has no duty Lennar “damages property because of ... Lennar satisfy because cannot the SIR damage.” Consequently, the carriers have policy provides contained in the The no duty indemnify for these apply only that its ex limits However, costs. to repair Lennar’s costs $250,000 cess of the SIR. SIR is defined water “damages the homes are “the limit insurance that the insured ... property damage.” Ac- agrees to responsibility assume for in at cordingly, there remains genuine a issue of tempting payment settlement and/or ” material fact “property damage” resulting all claims from ‘occurrence.’ issue because apportion Lennar must short, $250,000 satisfy Lennar must damages damages between covered and “deductible” per “occurrence” before cov damages. non-covered erage is triggered Gerling poli under Having cy. resolved the “occurrence” and we conclude that the EIFS “property damage” all separate issues common to claim for each home constitutes carriers, “occurrence,” will next consider each and Lennar has not incurred summary $250,000 cross-motion for judgment. damages exceeding any one home. Gekling VI. Sepakate A. “Occurrences”

Gerling primary is one of carri- Lennar’s Gerling policy, ers. issued a CGL effec- all the contends that 1, 1999, June 1997 to tive June EIFS claims constitute one “occurrence.” claims, settling gated pay the it was not connection with the claims. legally obligated to incur its own costs 682 Therefore, each resulting damage. Id. contrast, the EIFS Gerling contends liability. in a new separate eight a sales resulted claim for each home constitutes law, .;38 courts Texas 150 Grocery,

“occurrence.” Under see also H.E. Butt Id analysis 533, to determine apply (finding employee’s a “cause” at store F.3d or more whether a set of facts one involves of children at different molestation two Ran-Nan, Ac Inc. v. Gen. “occurrences.” “occurrences” be times constituted two Am., 738, 252 F.3d cident Ins. Co. to exposed new liabili cause the store was of (5th Cir.2001) (citing Goose Creek Consol. molestation, of ty independent for each act Co., 338, 658 S.W.2d I.S.D. v. Cont'l Cas. argument that store’s despite insured’s 1983, no (Tex.App.-Houston [1st Dist.] supervision employee of was one negligent writ)). analysis, the “cause” Under “occurrence”); Lloyds, Inc. v. State Farm interpreting “occurrence” proper focus Williams, (Tex.App.- is number of liability policy under on the a by agr.) (holding pet. dism’d Dallas give injuries rise that cause events shooting people two homeowner’s that liability, rather than insured’s “occur separate same constituted room id. injurious (citing effects. See number of from injuries resulted rences” because Grocery v. Nat’l Union Fire H.E. Butt Co. acts, independently giv separate two each (5th Cir.1998)); Co., 150 F.3d liability). rise to ing v. St. Paul Fire & Maurice Co. Pincoffs (5th Here, only contends there was F.2d Marine Ins. Cir.1971). only because there was one “occurrence” EIFS homes— of to the one cause Pincoffs, the example, For in Maurice entrap- repeated EIFS’s and continuous contami- imported and then sold insured Examining disagree. of water. We ment eight different dealers. nated bird seed resulting in Lennar's of events the number eight The dealers resold 447 F.2d claim for liability, the EIFS we conclude owners, whose to various bird seed separate “occur- home constitutes each of contamination. birds as a result died generally The that EIFS rence.” fact the district court held Although Id. traps product defective water would contami- there one “occurrence”—the was liability to resulted in Lennar’s not have nation, held that each the Fifth Circuit application absent each homeowner separate “occur- sales eight was home. Lennar EIFS to each Id. at 205-06. The court rea- rence.” of EIFS. or the manufacturer designer act of contamina- that was not the soned Rather, from liability stemmed Lennar’s liability. subjected the insured tion that that it built and sold homes with the fact the seed The insured received Id. Thus, particu- liability to a Lennar’s EIFS. not itself state and did in a contaminated applica- stemmed from the lar homeowner If Id. the insured the seed. contaminate if EIFS, resulting damage, and the tion sale, there destroyed the seed before had Fur- her home. any, particular to his or “occurrence” and no no would have been ther, entrapment not one However, once the there was liability. Id. resulting all damage to that caused made, for water insured was liable sale was that have limited applying Texas law is a cases Maurice 38. Lennar asserts that Pincoffs "faulty de- batch” cases. in defective “faulty batch” case whereas Maurice Pincoffs cases, Rather, sign one "occur- courts have found instructs Maurice Pincoffs did not resulting Maurice rence.” in the events the number of examine Pincoffs cases, ruling "faulty batch” see limit liability. id. at 206. insured’s no generally, F.2d and Lennar cites Instead, entrapment damages homes. to all homes arose EIFS’s EIFS-related v. particular on a home caused the from one “occurrence.” See Foust water (Tex. Co., 329, Ranger to that home Ins. only. denied) (hold 1998, App.-San pet. Antonio exposed separate Lennar was to a new and ing crop-duster’s application of herbicide liability for each home on EIFS was which damaged adjacent that claimants’ cotton applied. See Stonewall Ins. v. Asbes- Co. crop constituted one “occurrence” because 1178, Mgmt. Corp., tos Claims 73 F.3d (2nd Cir.1995) application procedure despite one mul 1212-14 (stating Texas law span in tiple passes refueling stops apparently support finding ap- that would hours); Carpenter Plastering of a Co. plication of few buildings asbestos to numerous Co., v. Puritan Ins. A. No. 3-87- constituted CIV separate despite “occurrences” 2435-R, 156829, *1, *4 1988 WL argument insured’s that its man- course of (N.D.Tex. 1988) (not Aug.23, designated ufacturing selling products asbestos Fina, publication) (holding multiple damages for “occurrence”); constituted one Inc. Co., building one caused defective wall v. The Travelers Indem. “occurrence”). (N.D.Tex.2002) 547, panels constituted one F.Supp.2d 549-52 Consequently, the EIFS claim for each (finding claims of numerous ex- workers separate home constitutes a “occurrence.” posed to asbestos at three Fina facilities constituted at least three “occurrences” Damages Exceeding B. No The SIR exposure Any because it was to asbestos which For Home Fina). in injuries against resulted and suit Because the claim for each Lennar cites several cases from other “occurrence,” home a separate constitutes jurisdictions purporting to show that $250,000 satisfy Lennar must SIR for only courts have found one “occurrence” each home is triggered before situations; however, similar none of these under the Gerling policy. applied

cases Texas law.39 The cases cited summary judgment evidence demonstrates by Lennar that applied have Texas law paid damages exceeding Lennar has not support argument would multiple $250,000 Gerling one home. at damages EIFS-related one home arose summary judg tached to its motion for “occurrence”; however, from one they do prepared ment a chart by Lennar reflect support argument Lennar’s ing the costs it has incurred for each See, Chemstar, e.g., Liberty Orange military Inc. v. Mut. Ins. constituted one "oc Co., 429, (9th Cir.1994) (hold- 41 F.3d 431-33 despite argument currence” insurer’s ing supplying plaster, insured's of lime subsequent spraying each in Vietnam consti ultimately plaster twenty- pitting caused "occurrence.”); separate Transport tuted a homes, "occurrence"); eight constituted one Inc., Way Freight, Ins. Co. v. Lee Motor Co., Champion Corp. Int’l v. Cont’l Cas. 1325, (N.D.Tex.1980) (hold F.Supp. 1327-31 502, (2nd Cir.1976) (holding F.2d 504-06 in- law, ing prac that under Oklahoma insured’s paneling twenty-six sured's sale of defective employment tice of discrimination constituted resulting manufacturers of vehicles despite multiple one "occurrence” victims of 1,400 “occurrence”); vehicles was one Co- discrimination and four work locations where Co., lonial Gas Co. v. Aetna Cas. & Sur. occurred); Mfg., discrimination Household (D.Mass.1993) F.Supp. (holding 983-84 Co., Liberty Inc. v. Mut. C No. 85 utility's insured use of insulation that was (N.D.Ill. 1987) WL at *4-7 Feb. later banned constituted al- one "occurrence" (not designated publication) (holding in homes); though it was installed in 390 Uni- plumbing systems sured’s sale of defective royal, F.Supp. Inc. Home Ins. ultimately which were installed in numerous (E.D.N.Y.1988) (holding man- “occurrence”). homes constituted one Agent ufacturer’s numerous deliveries RLI, to Lennar included a similar chart ICSOP Westchester. Howev- home. er, that summary judgment its evidence.40 Both we have determined Lennar’s only home with ex- repair charts show one costs costs to water constitute $250,000. ceeding Gerling damage” assumes this “property caused “occur- is a error. typographical Accordingly, amount While rence.” considered we have conceding this is an specifically grounds not amount defeating these carriers’ other for error, disputed Gerling’s Lennar not ground has coverage. find one similar dis- We fact, Lennar assumption. carriers, acknowl- so positive as to all these we will pay brief if Lennar a edges its that must together. them discuss $250,000 per to multiple SIR home due these carriers Specifically, excess assert “occurrences,” coverage be any would duty indemnify no Len- they have to Gerling under the “completely eliminated” exhausted nar Lennar has not the because Thus, effectively Lennar concedes Each excess car- underlying policy limits. exceeding not costs it has incurred underlying rier the carrier asserts Therefore, $250,000 any for home. one policy must its limits before the excess pay $250,000 the SIR satisfy Lennar cannot duty indemnify to carrier has a Lennar. “occurrence,” applicable to each and Ger- Lennar, policies do not According to the duty indemnify for ling has no to Lennar pay require underlying the carrier to Accordingly, EIFS claims. the trial the excess carrier has policy limits before the granted Gerling’s motion properly court instead, indemnify Lennar; duty a to summary judgment. for duty indemnify has a to excess carrier underlying carrier or Lennar whether RLI, ICSOP, AND WESTCHESTER

VIL paid primary policy limits. Lennar has ICSOP, RLI, and Westchester each is- RLI, not We need decide whether liability policy.41 As it sued an umbrella ICSOP, duty have a Westchester carriers, all of Lennar did with moved as indemnify long as either the asserting summary judgment underlying paid carrier Lennar has RLI, claims are under the covered limits have con primary policy because we policies and Westchester because ICSOP limits primary policy that the will cluded damage” “property claims constitute underlying paid by not either the carri be al- by an We have caused “occurrence.” satisfy er or Lennar. Lennar must a there is no ready concluded that $250,000 per SIR “occurrence” before the replace EIFS as a for Lennar’s costs Therefore, limits underlying policy amounts of the are because preventative measure. already deter triggered. As have no for a Len- portion there is home mined, EIFS claim for each is a costs, properly nar’s the trial court denied “occurrence,” has and Lennar summary separate judgment motion for Lennar’s 1, policy, effective June June Apparently, filed Chester’s the chart $5,000,000 1, 1996, homes updated policy per to include a few additional a has limit by Gerling. on the chart filed not included Unlike the RLI and ICSOP "occurrence." policies, policy is not the Westchester excess 1, August policy, 1998 to 41. RLI’s effective Gerling policy the Westchester has limit June Gerling policy pe- policy period precedes the $25,000,000 per excess “occurrence” primary policy underly- riod. Gerling policy. policy, effec- ICSOP’s ing policy also had limits of the Westchester August has tive June 1997 to $250,000 per $1 "occurrence" and million $20,000,000 per "occurrence” policy limit SIR. Gerling policy. excess to the West- and is $250,000 paid damages in “property excess of “occurrence” no damage”; (B) payments home. Lennar’s will Lennar failed to exhaust the million $1 less, trigger, (C) not even much exhaust SIR; aggregate annual certain exclu- underlying policy (D) limits. preclude coverage; sions the “known loss” and in progress” pre- “loss doctrines fact, Lennar acknowledges its brief (E) clude coverage; and Lennar failed to that if each sepa- EIFS claim constitutes a comply policy with a condition. “occurrence,” rate would Lennar “be with- out insurance as except to [American “Property A. Dam- “Occurrence” Dynasty] and specifical- Markel.”42 More age” ly, Lennar that if acknowledges each home already We have concluded that is there “occurrence,” a separate constitutes “any no coverage for Lennar’s costs to replace coverage owed to would Lennar be com- EIFS preventative as a measure. There- pletely Westchester, eliminated under fore, is no a coverage because there Therefore, ... RLI and policies.” ICSOP costs, portion of Lennar’s the trial court effectively because Lennar concedes that properly denied Lennar’s motion for sum- underlying policy limits cannot be ex- mary to judgment Dynasty. American by underlying hausted either an carrier or have determined that Len- Lennar, RLI, ICSOP, and Westchester nar’s costs to repair no water consti- duty indemnify have Lennar for the tute “property damage” caused “oc- claims.43 an Accordingly, the trial Therefore, RLI, currence.” properly granted ICSOP, court the trial court erred if summary granted Dynasty’s Westchester’s motions it American judg- ment. summary judgment motion for on ground that there no was “occurrence” Dynasty

VIII. AmeRican damage.” no “property Accordingly, we American Dynasty will pri- Dynasty’s is Lennar’s other consider American other mary carrier. Dynasty American summary judgment grounds. issued a policy, CGL effective June 1999 to June B. SIR Satisfaction 1, 2001, policy with a per limit million $1 Dynasty American contends carriers, “occurrence.” As it did with all has no duty indemnify Lennar summary Lennar moved for because judgment as- serting Lennar that it has not the SIR coverage established satisfied contained under policy the American Dynasty policy. The includes an SIR policy because the $250,000 EIFS claims “property damage” per constitute “occurrence” with a $1 caused an million Dy- aggregate “occurrence.” American annual for the SIR. nasty summary moved for judgment on to the extent other (A) following grounds: exists, there million is no wise there is an annual $1 discuss, gardless, 42. As we will later our respect conclusion the result is the same. With motions, each separate home a constitutes occur- summary judg- to the traditional dispositive is not rence under the shows, effectively ment evidence and Lennar Dynasty policies American and Markel be- concedes, Gerling neither Lennar nor ex- will Dynasty policy cause American contains underlying policy haust the re- limits. With SIR, aggregate and the Markel is motion, spect to the no-evidence Lennar has to the Dynasty excess American presented Gerling will no evidence that it or and, limits, underling policy exhaust 43. We note that Westchester’s exhaustion again, effectively they ex- concedes cannot be evidence,” ground is "no while RLI and IC- hausted. grounds SOP's exhaustion are traditional. Re- added). American con- (emphasis limit on the amount must precludes tends that this exclusion cover- Dynasty has satisfy before American damage,” any, if age “property Dy- duty indemnify Lennar. American operations. Lennar’s We dis- arose out of that Lennar failed nasty contends has agree. aggregate SIR. exhaust million $1 summary judgment Dynasty’s plain meaning, Giving the exclusion of the

ground respect to exhaustion present tense indicates the use In re- ground. SIR no-evidence applies only “property dam- exclusion sponse, Lennar cites evidence demonstrat- currently age” arising while million in ing it has incurred more than $5 Main project. Street working However, costs. repair replacement Homes, (holding S.W.3d at 696 exclu- to portion J(5) of these costs attributable coverage preclude did not for sion to damage, opposed of water as repair indicat- petition foundation defects because preventative a replacement had construction and completed ed insured measure, damage remains to be determined. homes result- sold the before Serv., premature ed); decide Bldg. it is to Inc. v. Am. Houston cf. mil- has whether Lennar exhausted Fire & Cas. $1 Gen. Accordingly, trial aggregate lion SIR. writ (Tex.App.-Houston [1st Dist.] denied) J(5) Dynas- (finding precluded granted court erred if it American exclusion occurring in- ty’s coverage damage on the for while summary judgment motion for cleaning company sured janitorial that failed exhaust ground Lennar has to not operations because had been building aggregate million SIR.44 the $1 Malone, F.Supp.2d completed); J(5) cov- (holding exclusion barred C. Exclusions erage noting, defects and for construction Dynasty that its ex- American contends exclusion, in- discussing when another J(5), M, coverage preclude and N clusions com- sured’s could not be deemed work for the EIFS claims. pleted). J(5) 1. Exclusion cites Dynasty American no evidence J(5) coverage Exclusion excludes damage occurred the water to homes damage” “property for to: building homes. To Lennar was while that the contrary, the evidence reflects particular part of real on property the homes damage began shortly after you any or contractors or subcon Therefore, exclusion indirectly completed.45 or working directly tractors were J(5) coverage for the preclude not opera are does your performing behalf on damage. Accord- tions, repair costs the water “property damage” if arises to granted it erred if ingly, the trial court operations; out those coverage necessarily preclude under Dynasty each American asserts that also Dynasty policy. American separate a "occurrence.” home constitutes each home con- our conclusion that de- not separate "occurrence" does Klein testified that EIFS-related stitutes Donald Dynasty damage begins couple "a coverage property under the American within feat completed. Mark $1 is annual million is policy because there after home months” EIFS, Williams, pay must before an architect familiar on the amount Lennar limit cli- Accordingly, fact affidavit that the Houston coverage triggered. averred is mate, likely property is damages ex- EIFS-related not that Lennar has incurred $250,000 begin shortly construction. after ceeding any for home does one (2) work”; summary judgment Dynasty or “your American J(5). based on exclusion (3) “impaired property”; work, property if or is product, such 2. Exclusion M or recalled from the market withdrawn M Exclusion excludes organiza- person or from use or for: suspected tion of a or known “Property damage” “impaired proper- defect, deficiency, inadequacy danger- or ty” property physi- or that has not been ous condition it. cally injured, arising out of: N contends exclusion (1) defect, A deficiency, inadequacy or replacement precludes dangerous “your prod- condition in inherently it EIFS because defective. “your work”; uct” or might arguably While this exclusion also (2) delay A by you anyone or failure apply replacement preven- of EIFS as a

acting your perform behalf to measure, clearly apply tative does not agreement contract or in accordance Lennar’s to repair costs water with its terms. trial Accordingly, homes. court if it granted summary judgment erred for Dynasty American contends exclusion Dynasty American based on exclusion N. M precludes coverage for replacement Prog- D. of “Known Loss” EIFS because the physi- EIFS was not in “Loss cally injured was, instead, but replaced ress” Doctrines because it was defective. While exclusion Dynasty American also moved might arguably M apply replace- to the summary judgment ground for on the EIFS, ment of it apply does not to the progress” the “known loss” and in “loss costs incurred repair physi- Lennar to preclude coverage doctrines for the EIFS cal injury —water —to Generally, fortuity claims47 is an inherent Accordingly, homes.46 the trial court all requirement policies. of risk insurance granted erred if it summary judgment for Travis, 72, Scottsdale Ins. Co. v. 68 S.W.3d Dynasty American on based exclusion M. denied); (Tex.App.-Dallas pet. 75 see Pesos, Co., Two Inc.

3. Exclusion N Gulf (Tex.App.-Houston S.W.2d [14th N, commonly Exclusion known as writ). Dist.] no The “known loss” exclusion, “sistership” precludes cover progress” and “loss in doctrines are com age for: ponents fortuity doctrine. See Tra Damages loss, claimed for or cost vis, 75; Pesos, Two S.W.3d expense by you incurred or others for at 501. A is a S.W.2d “known loss” loss use, withdrawal, recall, the loss of in- the insured knew had occurred at the time spection, repair, replacement, adjust- Travis, purchased policy. it See ment, disposal removal or of: (citing S.W.3d at 75 Burch v. Common (1) “your product”; County wealth Mut. Ins. 450 S.W.2d applies “property Only Dynasty 46. M Exclusion also 47. American and Markel raised damage” "impaired property.” progress” the "known doc- loss” "loss "impaired property” "tangible” is defined as policy periods trines because their are last in "your property other than work” that cannot chronologically. line “your incorporates be used because it work.” Here, work; thus, the homes are Lennar’s "impaired property.” homes are not (Tex.1970)). A prog “loss in Horn also testified that Lennar received is, additional homeowner in the “inquiries” occurs or ress” when the insured should spring 1999. The record clear on of is not be, ongoing progressive aware loss at Lennar re- Id.; whether discovered purchased policy. the time it Two and/or paired “property damage” EIFS-related Pesos, 901 S.W.2d at 501. Insurance cov spring in the or mere- these homes of 1999 erage precluded for a “known loss” ly inquiries from these home- fielded Travis, in progress.” “loss To the extent that Lennar had owners. 75; Pesos, Two S.W.2d at repaired EIFS-related discovered and/or argues American Dynasty that when home, to a then Len- “property damage” purchased Dynasty Lennar the American it clearly nar knew of the when “loss” 1, 1999,48 June knew the purchased problems; extent the EIFS-related Nonetheless, Lennar that it did asserts thus, in prog- loss” “loss “known product EIFS was defective know all preclude coverage ress” doctrines for until Len- September Regardless, the EIFS claims. We conclude that the nar of some EIFS-related “losses” knew progress” “known loss” and “loss doc- although may not have June preclude coverage trines for some of underlying prob- known the cause of the EIFS claims a matter of law. Howev- problems. lems extent of the er, a material genuine issue of fact exists the “known loss” and “loss regarding whether the “known loss” and progress” preclude coverage doctrines preclude in progress” “loss doctrines cov- homes aware on which erage the remainder the EIFS repairs had when it made and/or claims. policy.49 purchased Dynasty the American Coverage 1. Claims For Pre- Which Remaining 2. Fact Issue On Claims cluded genuine There is a issue of mate rial loss” and fact on whether “known Dynasty proved American has “loss cov progress” preclude in doctrines that the and in prog “known loss” “loss erage EIFS claims. remaining coverage ress” for some preclude doctrines conflicting The is on whether evidence EIFS matter In of the claims as a of law. the on Lennar should have about known of the particular, Lennar knew EIFS-re- damage,” any, if to these going “property 1, damage lated homes as of June to few 1,1999. homes as of June that beginning 1999. Daris Horn testified 1995, repaired in had EIFS-relat- Lennar to es- Dynasty cites evidence Further, problems homes. knew, ed on several have tablish that Lennar or should working Lennar was on some of these known, magnitude still of the EIFS- 1, in As homes June 1999. Lennar as of June 1999. problems related 1995, re- clearly pur begun knew these “losses” when it far Lennar had of back as to a few Dynasty policy. chased the American See EIFS-related pairing Travis, 75; Pesos, 1997, Two homes. Lennar was named as In EIFS is a alleging in a lawsuit S.W.2d at 501. defendant 1, as the binding negligible, we will refer June 48. The letter the American 28, "purchase” date. May policy policy was 1999. The issued 1, effective the time was June 1999. Because remand, can be it determinated On between issuance and effective date category. specific fall into this homes necessary to ad product. During spring defective of number of staff members 1999, experienced Lennar also employees Lennar an increase dress the claims. “inquiries” following notify homeowner the televi- discussed Lennar’s CGL whether Further, programs regarding sion EIFS.50 insurers of the claims.52 1999, during spring of Lennar several true and Taking Lennar’s evidence as employees, including Village Horn and the Reese, favor, see resolving all doubts its president, “discussing” Builders’ were genuine S.W.3d at there is a issue issues, EIFS employees spent several of material on whether Lennar should fact a total of 266 hours on EIFS issues. purchased have it the Ameri known when May 1999, including employees, several can Dynasty that had dam policy EIFS Horn, approved to an were attend EIFS aged, process damaging, in the remediation place seminar take June all it installed. homes which was suggests 1999. This evidence strongly Mgmt. Corp., 73 F.3d Asbestos Claims that Lennar mag- should have realized the (holding at 1214-15 “known loss” doctrine nitude of problems by the EIFS-related claims, did not bar for asbestos 1,1999. June except had claims for which insured been hand, sued, demand, On the presented pre-suit other Lennar before received evidence negating it should have real incepted; although insured knew ized the magnitude policy incepted product the EIFS-related before problems According as of June to risked causing diseases and had received Horn, through claims, the spring large number was uncertain as only had complaints. received to prospective injuries few EIFS number of claims, claims, Lennar did not suspect inher likelihood of successful Instead, ent defect in EIFS. losses); amount of ultimate net Ins. Co. of manufacturers assured Lennar Gypsum N. Am. v. F.2d U.S. problems (4th Cir.1989) due to were installation error.51 151-53 (holding “loss in Despite the increase in inqui progress” homeowner doctrine did not bar ries in spring still thought caused massive subsidence the problems were plant caused installation gypsum policy incept- beneath after error. 1999, ed; It not until September was although other subsidence had oc spent after respond Lennar incepted, summer curred before it had not policy ing complaints, to recognized facilities, more that it damaged did insured’ witnesses systematic product a subsidence, that expect defect would not the massive insured likely hundreds of At in plant indicating involve homes. that invested millions it did time, subsidence, Lennar modified its to plan expect address not massive and there problems. EIFS Lennar to iden certainty decided was no subsidence destined was occur).53 tify Therefore, all genuine EIFS homes and determine the to a there is suit, 50. The is problems unique evidence unclear on the number of this it were was told inquiries. one point, At Lennar Horn testified applicator to by North Carolina and caused inquiries had received twelve to fourteen as of error. suggested point, June 1999. At another she thirty forty inquiries Lennar had received to Ultimately, 52. Lennar decided to contact all by Regardless, that time. Lennar received a voluntarily replace EIFS. homeowners inquiries period. number of in a short time Further, stop fact did 53. that that Lennar not 1996, In Lennar had of a learned class using EIFS until late 1999 that is evidence against action in North Carolina certain EIFS 1, know did not on June 1999 that inquired When Lennar manufacturers. about Struna, (Tex.1994));54 11 S.W.3d at 359. issue of material fact on whether progress” loss” and doc an it Specifically, “known “loss insurer must was show all preclude coverage trines for the EIFS prejudiced by give failure to insured’s Accordingly, the trial erred claims. court the insurer notice of a claim. See Harwell granted Dynasty’s if it American motion Farm v. State Mut. Auto. summary judgment based on the 170, (Tex.1995); Liberty S.W.2d Mut. doc progress” loss” and “loss in

“known (Tex. Cruz, Ins. Co. v. 883 S.W.2d trines. Struna, 1993); at 359-60. S.W.3d Policy prejudiced by is lack Whether insurer

E. Condition generally question is a of fact. of notice Dynasty American also moved for Struna, In requiring 11 S.W.3d at 359-60. summary ground on the that judgment to prejudice, the insurer show Texas law coverage there is no for certain EIFS recognizes that ex only material breach a policy claims because Lennar violated Comsys, cuses performance. S.W.3d requires Specifically, condition. Bros., 123 McCarthy at 192 (citing Dy promptly notify Lennar to American Hernandez, 379; F.Supp.2d at S.W.2d claim, suit, any of or “occurrence” nasty 693). prejudiced, If the insurer is not not may that result in a claim. Lennar did is material. See the insured’s breach notify Dynasty American 693). Hernandez, (citing id. 875 S.W.2d at However, January claims until time, by already Lennar had settled that it Dynasty American asserts was American some of claims. by as a matter of Lennar’s prejudiced law there is no Dynasty contends notify- claims before settling certain EIFS notifying the claims settled before ing Dynasty American claims. Dynasty. American cites v. State Dynasty C.M.S. Lennar contends court response, Lloyds, Farm seemed to prove that American failed to as a matter law based prejudice find lack notice. it prejudiced solely on the fact that the insured settled is provision a notice No. Compliance notifying the insurer. the suit before under a precedent 3:97CV3202H, condition Civ. A. 1998 WL * Servs., (not (N.D.Tex. 1998) Struna Concord Ins. July desig- Inc., (Tex.App.-Hous However, publication). nated for 2000, no pet.). ton [1st Dist.] holding contrary Texas law. coverage, precedent enforce condition prej presume Texas does not law preju prove must that was insurer udice from “settlement without consent” comply

diced insured’s failure Prod. Co. v. Amer of notice. Hanson lack 130 at Comsys, condition. S.W.3d with the (5th Co., 108 F.3d 631 Cir. icas Ins. Am. N. v. (citing 191-92 Co. of 1997); at 192. There Comsys, 130 S.W.3d McCarthy F.Supp.2d Bros. 123 fore, Dynasty’s argu reject American (S.D.Tex.2000); 379 Hernandez Gulf a as matter prejudiced ment that it was 692-94 Lloyds, 875 S.W.2d Group However, the S.W.2d at 692-94. See 875 would all the homes on EIFS requirement expanded apply to applied. it been was has types policies. Com other of insurance See imposed originally 54. The court Hernandez McCarthy (citing sys, S.W.3d at 192-93 requirement respect to en- prejudice 379-80). Bros., F.Supp.2d at forcing clause a "settlement-without-consent" policy. in an motorist uninsured/underinsured $25,000,000 The Markel per EIFS “occurrence.” by settling Lennar’s certain law Dynasty to the American notifying Dynasty. policy claims before American is excess Bros., McCarthy F.Supp.2d at insurer’s (rejecting suggestion it 379-80 carriers, all the As it did with contrac prejudiced per was se insured summary asserting judgment moved for settling negligent tor’s owner’s construc coverage policy under the Markel there is by agreeing repairs tion suit to make be “prop- because the EIFS claims constitute notifying fore insurer of the suit because erty damage” caused an “occurrence.” sophisticated insured commercial en was summary judg- asserted several Markel tity actively attempting to limit its liabili (A) ment there is no “occur- grounds: ty); Comsys, (recogniz at 192 S.W.3d (B) damage”; “property rence” and no ing money mere fact that the insurer owes (C) preclude coverage; several exclusions it does not pay wish does constitute progress” and “loss in “known loss” law). prejudice as a matter of (D) coverage; preclude doctrines Instead, Dynasty present- American has comply failed to with certain condi- prejudiced by ed no evidence was (E) tions; and claim for each Comsys, lack of notice. See S.W.3d “occurrence,” separate home constitutes a (stating insurer failed to raise who underlying SIR has not been exhaust- collusion, fraud, even an inference of ed, limits underlying policy and/or agree- other connivance in the settlement have not been exhausted. prove prejudice ment failed to from settle- A. “Property “Occurrence” Dam- Harwell, consent); ment without cf. age” (finding S.W.2d insurer of de- prejudiced by ceased motorist was estate already We have concluded that there is give administrator’s failure to insurer no- replace no for Lennar’s costs tice of plaintiffs arising suit from auto There- preventative EIFS as measure. accident; administrator, fore, who was secre- there is no for a tary office, in plaintiffs attorney’s ap- costs, portion of Lennar’s the trial court peared pro at trial se and offered no de- properly denied Lennar’s motion for sum- motorist, fense of deceased then notified mary judgment as to Markel. judgment day

insurer of one after adverse determined that costs we have Lennar’s time file motion for appeal new trial or repair “property constitute water expired). had the trial court by an “occurrence.” damage” caused granted summary judgment erred if it on Therefore, grant- the trial court erred if it the EIFS claims Lennar before settled summary judgment ed motion for Markel’s notifying Dynasty. ground on the that there no “occur- was Ac- “property damage.” rence” and no sum, because American other cordingly, we will consider Markel’s summary judgment not entitled to defeating coverage. grounds motion, grounds raised in its summary in granting trial court erred B. Exclusions Dynasty. judgment favor of American Markel contends that its Endorsement 2, B(2), B(10), and Exclusion Exclusion IX. Markel B(6)(e) preclude coverage for Exclusion Markel issued a commercial umbrella claims. the EIFS 1, liability policy, effective June 1999 to 1, 2 June 2001 limit of 1. Endorsement 692 precludes

Endorsement 2 cover “occupied by, by, the words used or owned age “property damage” “[property use, own,” for to by,” instead of or “occupy, are occupied by, by, by any ... used or owned 2 included because Endorsement is in the According Markel, Insured.” to this en 2 passive voice—not because Endorsement precludes coverage for dorsement Further, past refers to tense. En- time, EIFS claims because at one “Care, 2 Custody, dorsement is entitled used, occupied, property owned Exclusion.” This title indi- Control upon the EIFS homes built. which were 2 coverage cates Endorsement excludes disagree. We damage arising property for in while is “care, custody, En- Lennar’s and control”—not Considering plain meaning 2, applies only damage damage property dorsement to to Len- was ever occupied, while the arising property “care, custody, nar’s and control.” used, by or owned Lennar. This exclusion Finally, Markel cites two cases which interpreted coverage has been preclude to precluded held that coverage courts in- damage exclusively for limited to the property” the “owned or leased exclu See Am. Ins. Co. property. sured’s States although no longer sions the insureds Indus., 17, F.Supp. v. Hanson 24 873 Dry leased See property. or owned (S.D.Tex.1995). The ensures exclusion Inc. v. Trav England, den Oil Co. Newof liability compensa- insurance provides (1st Co., Indem. 91 F.3d 284 elers damages tion to not owned or property for Cir.1996); Harleysville Morrone v. Mut. id; by the see controlled insured. N.J.Super. 662 A.2d Farm Fire & Co. v. En- also State Cas. (Ct.App.Div.1995). these Ass’n, Inc., glish Wash.App. Cove inapplicable are the damage cases because (2004) (stating P.3d “owned while or occurred the insureds owned prevents liability pol- exclusion property” although the insureds property leased icy to providing first-party from benefits longer property owned leased the no or insured). Dryden the claims made. See when were Nonetheless, refers us to Markel Oil, 284; Morrone, 280-81, 91 F.3d exclusion, B(6)(a), another its here, contrast, 565. Markel A.2d at rely Markel on Exclu Although does not damage” “property cites no evidence that B(6)(a) coverage, sion to defeat Markel they to the EIFS homes arose while were B(6)(a) supports exclusion urges that used, occupied, by Lennar. still or owned 2. Exclu interpretation Endorsement Accordingly, the trial court erred if it B(6)(a) excludes for sion for Markel granted summary judgment rent, own, occupy.” to “property you based on Endorsement Markel, Exclusion According to B(6)(a) present tense, then En is in the B(2) Exclusion past 2 must to the tense. dorsement refer Specifically, Markel stresses exceptions, certain Exclusion With “ “leased, occupied, in En

words or owned” B(2) ‘property excludes tense; thus, past dorsement refer obligated the insured is damage’ applies prop Endorsement damages assump reason of the pay used, occupied, ever erty that was liability agree contract or tion of in a by Lennar. owned Markel Lennar’s volun ment.” contends the EIFS homes B(6)(a), tary agreements repair read En- Despite Exclusion Clearly, present 2 in the tense. constitute contracts under which dorsement B(6)(e) liability. However, assumed exclusion Markel’s Exclusion is vir this ex inapplicable tually Dynasty’s is here. identical American B(6)(e) J(5). precludes clusion Exclusion B(2) coverage precludes Exclusion when coverage “property damage” to “[t]hat for contractually liability the insured assumes particular of real on which part property for conduct party of a third such as you work or a contractor or subcontractor indemnity through harmless hold ing you per directly indirectly are agreement. See Federated Mut. Ins. Co. forming operations, ‘property if the dam Excavation, Inc., v. Grapevine 197 F.3d age’ have operations.” is due to those We (5th Cir.1999); Bros., McCarthy of exclu already rejected application this 377-78; 123 F.Supp.2d at also Am. see Accordingly, sion. the trial court erred if Girl, 80-81; 673 N.W.2d at Inc. Olympic, it granted summary judgment for Markel v. Providence Wash. P.2d B(6)(e). based on Exclusion (Ak.1982). 1008, 1010-11 Lennar’s settle- ment EIFS claims was not contrac- Prog- C. “Known Loss” and “Loss in assumption liability, tual of a third party’s ress” Doctrines but rather from resulted Lennar’s own Markel also contends that Bros., See McCarthy conduct. in doc progress” “known loss” and “loss F.Supp.2d (holding that “as- preclude coverage trines for the EIFS sumption of liability” pre- exclusion did not analysis claims. Our similar to coverage clude agree- for insured builder’s progress” analy “known in loss” “loss through ment repair damage settlement to sis under the American faulty caused its construction because However, we evaluate Markel’s “known accepted insured liability for own con- loss” in progress” using and “loss defenses liability duct—not party). third Ac- a different date policy because MarkeFs cordingly, grant- trial if it court erred purchased July was on 1999—almost summary ed judgment for Markel based two after the American Dynasty months B(2). on Exclusion policy.55 Again, we conclude B(10) progress”

3. Exclusion “known doc loss” “loss preclude

trines for some B(10) is Markel’s “sis- EIFS as a claims matter law. Howev Exclusion er, tership” exclusion. It is virtually genuine identical issue of material fact exists Dynasty’s to American sistership exclu on whether loss” and “loss “known already sion. We have progress” concluded preclude coverage doctrines sistership exclusion does not apply Len- of the EIFS remainder claims.

nar’s costs to repair damage. water Ac 1. Coverage For Pre- Claims Which cordingly, grant trial court if it erred cluded summary ed judgment for Markel based proved Markel has the “known B(10). on Exclusion loss” in progress” pre- and “loss doctrines B(6)(e)

4. Exclusion clude for some of the EIFS Although policy nizing recovery may Markel issued ante- be had 21, 1999, July until was effective June dated to include the time which the loss Nonetheless, July we will consider long occurred as as the and the insur- insured purchase purposes 1999 as the date for of the er did not when know loss the contract progress” "known loss” and "loss doc- ). was made Burch, (recog- trines. See 450 S.W.2d at 841 the EIFS-relat- magnitude also Daris of the of claims. Markel relied on known 21, However, deposition July in of its motion 1999. support problems by Horn’s ed summary judgment. testimony Her Markel cites some additional evidence be- Lennar of the established that knew policy purchased later. cause its was a of damage to few EIFS-related July 21, 1999, particular, by In Horn and 21, it had July homes as of 1999 because actually at- employees had other Lennar process repair- in repaired, was seminar for tended the EIFS remediation Thus, clearly Lennar ing, these homes. previously approved. they which were purchased “losses” it knew these when 21, 1999, Further, Lennar had by July policy. Markel EIFS plan a to address com- formulated Further, testimony Horn’s established addition, spent Lennar plaints. “inqui- that Lennar had received further EIFS of 1999 responding summer 21, by July Again, 1999. it is not ries” claims, becom- presumably Lennar was so had clear Lennar discovered whether increasingly potential of EIFS’s ing aware repaired “property EIFS-related and/or This damage by July 1999. to cause damage” by or all of homes to some these Lennar strongly suggests should evidence merely inquiries July 1999 or fielded magnitude realized of the EIFS have To the extent from these homeowners. by that date.57 problems had discovered re- that Lennar and/or hand, presented other Lennar On the damage” to paired “property EIFS-related 21, 1999, have real- negating that it should by July home then evidence problems it clearly pur- magnitude when ized the of the EIFS knew of “loss” had July Although chased the Markel 1999. progress” loss” and doc- EIFS plan “known “loss to address com- formulated preclude coverage date, trines homes on ad- plaints by plan had Lennar was which aware complaints on an basis and/or dress the individual “property damage” EIFS-related repaired Thus, this they plan received. as were policy.56 the Markel purchased when had inference that Lennar raises the expe- had decided that all EIFS homes yet Remaining 2. Fact Issue On The addressed rienced and must be Claims the homeowner regardless whether mate genuine There is a issue of complaint. Again, Lennar averred made loss” and rial fact on whether the “known September 1999 that it did not know until preclude cov progress” “loss doctrines likely and would that EIFS was defective the remainder of the erage for damage hundreds of homes. conflicting on claims. The evidence true Taking Lennar’s evidence have Lennar should known whether favor, there is a resolving all doubts any, damage,” if ongoing “property fact of material on whether genuine issue July Markel as of 1999. these homes it pur- known Lennar should have when cited American cites the same evidence EIFS had Markel chased the argue that Lennar should have July 1999. Again, remand EIFS homes before it can be determined on category. knowing fall into of these com- homes this without contents munications, they prove cannot conclude privilege points Markel also to Lennar’s progress” loss” and "loss in Markets "known reports, logs letters, which Lennar listed several defenses. demonstrating that and memoranda communicating internally about Lennar was damaged, damag any difficulty conclude that process or was cannot ing, all homes on which it was installed. the exact amount of may proving have in See Asbestos F.3d at Mgmt., Claims has components preju- various of its costs 1214-15; Gypsum, U.S. 870 F.2d at 151- matter of At the diced Markel as a law. Consequently, genuine there is a issue least, difficulty prej- has any such whether fact material on whether the “known question is a of fact. With udiced Markel progress” pre loss” and “loss in doctrines without respect to Lennar’s settlement coverage for all the clude EIFS claims. consent, no presented Markel evidence Accordingly, the trial court erred if it in its motion for prejudiced it was granted summary Markel’s motion for summary Accordingly, the trial judgment. judgment based on the “known loss” and granted summary judg- if it court erred progress” “loss in doctrines. ment for Markel based on Lennar’s viola- Policy

D. policy tion of conditions. Conditions

Markel further contends that cov E. SEPARATE Occurrences/Exhaustion Underlying Policy SIR erage precluded for the EIFS claims is or Limits because Lennar violated condition E of the Finally, Markel asserts it was entitled to provides Condition E that Lennar summary judgment because each home claim, suit, notify any must Markel of “occurrence,” Len- separate constitutes a may occurrence that result in a claim or SIR, underlying nar has not exhausted the provides suit. Condition E also that Len- Lennar has not exhausted the un- and/or not, cost, nar except shall at its volun own derlying policy argument limits. Markel’s tarily any payment, any make assume obli is unclear because it makes several differ- gation, any incur expense without ent in its brief and motion for arguments Markel’s consent. Markel contends summary judgment. by these failing violated conditions brief, ar- adopts Gerling’s In its Markel timely give Markel notice of the EIFS gument separate that each home is a “oc- claims and voluntarily settling the currence,” Coverage and “There Is No claims without Markel’s consent.58 How Are Because All Of The Settlements With- ever, Markel has not established that $250,000 Oc- Policy’s in The Of Per [SIR] prejudiced by Lennar’s violating these policy is currence.” Markel’s Prod., conditions. See Hanson 108 F.3d at Dynasty policy— excess to the American 631; Bros., McCarthy at F.Supp.2d Gerling policy. not the Mark- Hernandez, 379; 692-94; at S.W.2d argument el’s that none of the settlements Comsys, 130 S.W.3d 191-92. $250,000 inap- SIR Gerling exceeds the is notice, respect With to Lennar’s late plicable. only Markel offered one reason that it was Further, argument Markel’s its prejudiced summary judg- in its motion for grounds than the raised brief is different inability parse ment: “Lennar’s its dam- summary judgment. its motion for ages any rough finer than allocations for outlining summary judgment When inspection repair, accompanying motion, beginning of its grounds legal administrative and costs.” Markel underlying that the difficulty acknowledges does not elaborate on this Markel how Nonetheless, prejudice. policy Dynasty policy. is the American constitutes Further, notify undisputed that 58. Lennar did not Markel of the EIFS this date. it is January undisput- until It Markel did not consent to claims ed that Lennar had settled some of claims settlements. Dynasty’s Markel states that under X. American Motion for Judgment Summary triggered Markel has be- not been Lennar’s On $250,000 Dynasty the American SIR Extra-Contractual Claims cause properly not been exhausted. Howev- has motion, separate In a er, explained, annu- as we have there is an summary judgment moved Lennar’s pleaded million under the Lennar aggregate al SIR extra-contractual claims. $1 (A) com- three extra-contractual claims: Therefore, Dynasty policy. American (B) negligent misrepresentation; mon-law argument Dy- Markel’s that the American article 21.21 of the violations former $250,000 nasty SIR has not been exhaust- (C) Code; Insurance and Texas violations not necessarily preclude ed does former article of the Texas Insur- 21.55 Instead, Markel as we policy. under the ance Code.59 it explained, premature have to deter- Negligent Misrepre- A. Common-Law the mine Lennar has exhausted whether sentation SIR, thus, aggregate million and wheth- $1 negligent The elements of a mis trigger Dy- Lennar will American

er the (1) claim follows: representation are as policy, pol- or the Markel nasty ultimately, made a in representation defendant icy. business, in a transaction course of its (2) interest; a pecuniary in which it had Finally, body in of its sum false information supplied the defendant motion, mary judgment Markel seems guidance for the of others in their busi argument. make a different Instead of (3) ness; did not defendant exercise SIR, referring Dynasty to the American care or in obtain competence reasonable underlying Markel asserts that Ameri information; ing communicating and policy not been Dynasty can limits have (4) plaintiff pecuniary suffered loss and, thus, exhausted, policy the Markel justifiably relying representation. on the triggered. pre not it is Again, has been Corp., Inc. v. Sys., Manville Johns Roof mature to determine Lennar has whether (Tex.App.-Houston 130 S.W.3d Dynasty policy exhausted the American (citing Fed. pet.) Dist.] no [14th limits, thus, trig whether Lennar will Sloane, Bank Ass’n v. Land policy. the Markel ger (Tex.1991)). 439, 442 sum, In because not entitled Markel was summary Dynasty American moved for summary judgment any of the on judgment grounds as to no-evidence motion, raised in its the trial court grounds negligent misrepresentation Lennar’s judgment by granting summary response, alleged erred claim. Lennar that (1) misrepresen- Dynasty of Markel. American made favor apply analysis on claim and will 59. American asserts that Florida law also However, applies to extra-contractual necessarily law Lennar's law. Florida law Texas Dynasty has not claims. American statutory Texas differs from law on Lennar’s law dif- met its burden to show that Florida extra-contractual claims because as- Texas law Lennar's extra- fers from on all of the Texas Insurance Code. serts violations Weatherly, contractual claims. Nonetheless, ultimately because we conclude instance, Dy- at 650. For S.W.2d granted summary properly court that the trial nasty has not cited law to show that Florida judgment on claims under Lennar’s Texas Texas law common- differs from on Lennar’s Code, we will evaluate those Insurance negligent misrepresentation claim. law claims. Therefore, engage we need in a choice of during process, policy tations underwriting place.60 the first (2) misrepresentations conditions, regarding its did not outlining these Ralston terminating, reasons seeking to misrepresent that EIFS be claims would rescind, policy. covered. cannot read the letters as We merely Ral- misrepresentations Misrepresentations During Under- ston every possible type did not set forth writing Process of claim might not be under covered alleges that American Dynasty made misrepresentations during the underwriting process by failing to in Lennar also asserts that American form Lennar it did not intend to Dynasty’s ex failure to include an EIFS insure Lennar for EIFS claims. Lennar clusion in misrep amounted to a cites letters two written Karen Ral- resentation EIFS claims would be ston, Dynasty the American underwriter However, discussed, covered. as we have policy. the Lennar the un During Dynasty por American relies several derwriting process, Ralston communicated policy dispute coverage tions of to the even Mary Pulley, with employee an the though policy not an does contain turn, Pulley, “wholesale broker.” in com Therefore, EIFS exclusion. the absence municated with the “retail broker.” of an not representa EIFS exclusion is a the “retail broker” communi tion that the policy would EIFS cover cated “quo with Lennar. Ralston sent a Accordingly, claims. Lennar has failed to tation letter” and a “binder letter” to present misrepresenta evidence letters, Pulley. In the Ralston did not during underwriting process. tions affirmatively state that Dynasty American Misrepresentations would However, Concerning insure EIFS claims. Ralston not did state that Dy American Termination and Rescission nasty would not insure EIFS claims. Lennar also contends that Ameri argues

Lennar that Ralston’s failure to can Dynasty misrepresentations made con state that EIFS claims would not be cov cerning terminating, its reasons for and was, effect, ered a misrepresentation rescind, seeking policy. Ralston that EIFS claims be would covered. We first on March Len- learned disagree. nar requesting coverage was for EIFS The letters do misrepre- not constitute later, days Dy claims. Three American letters, sentations In omission. nasty decided to terminate the On Ralston outlined the conditions under 12, 2000, May Ralston wrote to Lennar which Dynasty American would bind the explaining Dynasty’s American reasons for policy. Lennar emphasizes that none of policy: terminating these conditions mention EIFS. underwriting ..., Ralston During process did not purport set forth the Corp. represented conditions under Lennar which claims would be had not policy building covered once the was issued. Rath- used in its home [EIFS] er, projects plans Ralston set forth five conditions under and had no for use of American Dynasty would bind the projects.... Subsequent EIFS in future service, (4) binding policy approved stated that “currently Ralston was claims valued (1) subject Dynasty's data”, receipt (5) to American a loss named schedule of all (2) completed application, Lennar's financial be insureds to covered. data, (3) confirming a letter from Lennar Dynasty Corp., “Lennar subject alleged American policy,

to the issuance broker, represented its insurance through learned that Lennar Dynasty American April 1999 that Dynasty fact, American was, applica- EIFS Corp. using Corp. its affiliates and subsid- Lennar pro- its Texas tions in one more of in its home- had used [EIFS] iaries never If true facts had been disclosed jects. (That building projects. representation Dynasty During [sic] to American false).”61 proved to be Dynas- underwriting process, American ty policy, not would have issued short, terminating, seeking when policy have issued the at the would not rescind, Dynasty policy, rate, premium same would and/or making Lennar of untrue state- accused provided respect have regarding its use EIFS. ments reasons, For these applications. Dynasty’s that American accusa- contends subject policy was canceled.... misrepresentations tions were Moreover, because American statements. Lennar did not make such to the issuance of subsequent learned more than scintilla of presented Corp.’s represen- that Lennar such state- evidence that it did not make concerning past tation and future used ments, to all Lennar respect at least with untrue, appellations of EIFS [sic] Accordingly, there is entities issue.62 by has sub- policy the risk covered fact on whether genuine issue of material stantially changed. This substantial Dynasty representa- made false American change separate risk constituted accusing making in Lennar of untrue tions reason for cancellation. use of EIFS. regarding statements its only. issue, prospective The termination was Lennar still spite of this fact However, it Dynasty claims claim prevail an American on this because cannot subsequently any decided to that it representative presented no evidence suffered relying Dy- ab on American policy pecuniary of the initio seek rescission loss to sus- nasty’s representations required as Dynasty American the same reasons. neg- action for common-law in Florida seek- tain a cause of against filed suit Lennar misrepresentation.63 Sys., ligent In the policy. petition, ing rescind Roof only, opposed to Lennar's Corporation” as The suit abated due this 61. Florida suit; Dynasty’s American rescission Ralston also decided Lennar Texas subsidiaries. pending be- is still in this suit regarding counterclaim its of use made untrue statements it. cause the trial court severed Analy- “Underwriting Risk EIFS based on poli- months after performed sis” several Ralston, binding According to before analysis cy’s reflected that date. The effective Pulley whether policy, specifically asked she past reported no of Corporation” use "Lennar EIFS, responded Pulley that and Lennar used plans to EIFS. How- and future use EIFS no However, Pulley not EIFS. Lennar did use ever, analysis stated that Lennar's also had no recollec- by affidavit that she averred acquisitions builders over the of numerous asking her whether Lennar of Ralston tion years of previous made accurate assessment Nonetheless, dis- they if did even used EIFS. exposure unlikely, acquired and the EIFS EIFS, did know whether cuss Ralston greater exposure to may present builders concerning Pulley spoken with Lennar had up possi- not follow EIFS losses. Ralston did Pulley exposure; Ralston assumed subsidiaries. exposure for Lennar ble EIFS Ralston spoken “retail broker." had identify what untrue statements could not 63.Further, alleged misrepresentation re- EIFS, regarding use of but made its policy garding was not made rescission misrepresentation." awas "there somewhere in as Ralston, guidance of Lennar its business Further, for the of the according to most misrepresenta- time, negligent required to sustain Pulley spoke "Lennar about she claim. Con misrepresentation Dynas negligent Inc., American S.W.3d granted properly the trial court sequently, Len- impression on its own ty relied Dynasty for American summary judgment regarding had made false statements nar on this claim. termi deciding to use of EIFS when and rescind the 21.21 nate B. Article Texas INSURANCECode mis alleged American made cause of action asserted a Lennar has to termi deciding representations after of the Texas article 21.21 former under explain nate and rescind when arti- 3 of former Section Insurance Code.65 Although doing reasons for so. ing its engag- from an insurer prohibits cle 21.21 Ameri damaged by it Lennar claims was is defined practice which ing in trade seeking Dynasty’s terminating, can decep- “an unfair or 21.21 to be in article no rescind, presented policy, in- in the business of practice tive act relying on damaged by evidence was 4 of former article Section surance.”66 misrepresent Dynasty’s alleged “unfair constitute 21.21 lists the acts which Enters., Energy Inc. ations.64 MCN in the busi- deceptive practices acts or Cf. Colombia, L.D.C., Omagro de 16(a) for- Section ness insurance.”67 (Tex.App.-Fort Worth the “de- incorporates 21.21 also mer article denied) com (holding manufacturing pet. in practices” enumerated ceptive acts or loss as a result pany proved pecuniary 17.46(b) An insured of the DTPA.68 section misrepresentation reliance investor’s damages actual has sustained who join operating company it would act or deceptive unfair or result of an millions de plant company spent in section 4 of article enumerated practice 17.46(b) DTPA, 21.21, There veloping plant response). section an action. See Tex. Ins.Code fore, present may maintain Lennar failed evidence 16(a). 21.21, § Ann. art. all elements of its common-law support Inc., repealed and recodified Sys., 65. Article 21.21 was tion claim. See 130 S.W.3d Roof 1, Instead, formally merely allegation April we cite it in a effective 2005. After 438. was Regardless, prove article 21.21 relevant Lennar did not that it each section of former suit. then, opinion, will for ease of any pecuniary a result of to this suffered loss as reference, they were alleged as relying misrepresentation. the See refer to the sections previously codified in article 21.21. id. R.S., 25, 1957, Leg., ch. April 55th 66. Act of damaged by it 64. Lennar contends was 401, 1, 198, § Tex. Gen. Laws 401-06 terminating policy Dynasty's American (current 2003) ver- (repealed and recodified replace policy with it had to (Vernon § 541.003 at Tex. Ins.Code Ann. sion policy. Lennar contends it was dam another Supp.2005)). Dynasty's attempted aged by American rescis legal expenses sion because incurred R.S., 10, 2001, Leg., ch. May 67. Act of 77th gap coverage and and a avoid rescission 548, 1, 290, § Gen. Laws 548-551 uncertainty 2001 Tex. business with over conducted 2003) (current ver- (repealed and recodified liability coverage for it would have whether is, §§ 541.051-.061 sion at period. policy Tex. Ann. Ins.Code (Vernon Supp.2005)). effect, damages by the complaining of caused rescission, termination, attempted and actual R.S., 17, 1995, Leg., ch. May by any Act of 74th damages caused mis opposed to as 2988, 13, 3000- § Tex. Gen. Laws regarding ter representations the reasons for (current 2003) (repealed and recodified We will attempted rescission. mination and (Ver- § 541.151 regarding the version at Tex. Ins.Code complaints address Lennar’s Ann. & Com.Code Supp.2005)); see Tex. Bus. attempted rescission non termination and actual 17.46(b) (Vernon Supp.2005). § its article 21.21 claims. when we address Ann. Dynasty presented Lennar contends American Lennar has no evi Dynasty dence American made mis 4(1), 4(10)(i), 4(10)(viii), violated sections representations regarding policy or its 4(11) 21.21, and of article and sections provisions. Specifically, already we have 17.46(b)(5) 17.46(b)(12) and of the DTPA. Dynasty determined that American did not American also moved for sum- any misrepresentations during make mary judgment as to these claims on no- underwriting process by failing to inform grounds. response, evidence policy Lennar that not cover would following supports contends conduct spe claims. In the absence of some (1) Dynasty’s these claims: American al- misrepresentation cific the insurer leged misrepresentations during un- insurance, about the an insured’s mistaken (2) derwriting process; Dynas- availability belief about the scope ty’s alleged misrepresentations concerning generally actionable under (8) rescission; termination and and Ameri- DTPA. the Insurance Code Moore Dynasty’s alleged can failure to conduct an Whitney-Vaky Agency, v. adequate investigation terminating, before (Tex.App.-San Antonio rescind, seeking and the policy.69 pet.) (holding agent’s no insurance failure liability policy to tell insured that did not Misrepresentations During employee retaliatory discharge cover (Sections Underwriting 4(1), Process claims was not actionable under Insurance 17.46(b)(5) 17.46(b)(12)) 4(11), or DTPA admitted Code where insured Dy- Apparently, Lennar cites American agent policy told him the would never nasty’s alleged misrepresentations during lawsuits); all see cover United Servs. underwriting process support Lambert, Auto. Ass’n No. 03-97-00811- 4(1) 4(11) claims under sections of CV, (Tex.App.-Aus 1999 WL *7-8 17.46(b)(5) article 21.21 and sections (not Aug.26, pet.) designated tin no 17.46(b)(12) DTPA, incorporated fail publication) (holding that insurer’s pro- article 21.21. All of these sections policy ure to inform insured that would not type misrepresentation hibit some of a re- testing plumbing problems, after cover garding provisions. or its it planned insured told insurer to obtain (“mis- 4(1) 21.21, § Ann. art. misrepre testing, not actionable Tex. Ins.Code sentation); representing any policy the terms of is- State Farm Fire & Cas. cf. (Tex. Gros, sued or to be issued or the benefits or Co. v. writ) (finding agent’s App.-Austin no advantages promised thereby”); Tex. Ins. 4(11) representation to insured homeowner 21.21, § (“[mjisrepre- Code Ann. art. boulders, be covered if would senting policy”); an insurance Tex. Bus. & driveway, fell into their had hit their which 17.46(b)(5) § (representing Ann. Com.Code claims under article 21.21 supported home or “characteristics” or goods services have DTPA, subsequently boulders and when have); they do not “benefits” which Tex. home, coverage did hit their but was de 17.46(b)(12) § (“rep- Bus. & Ann. Com.Code nied). or resenting agreement an confers remedies, rights, obligations Therefore, or presented involves Lennar has no evi- involve”). under sections support it does not have or dence to its claims which alleged particular specify particular with the sec- 69. Lennar does not which lar conduct supports particular conduct which section. tion. However, particu- match we have tried to 4(1) 4(11) 21.21, rescission, and cerning again, and and article sections termination 17.46(b)(5) 17.46(b)(12) DTPA, and presented Lennar no evidence that it suf- incorporated in article 21.21. Accord- any damages rep- fered as a result of the ingly, properly granted trial court resentations.70 Lennar failed summary judgment Dynasty for American present to support evidence all elements on these claims. 4(10)(i) of its claim. Consequently, section summary properly granted trial court Misrepresentations Concerning judgment on this claim. (Section Termination and Rescission 4(10)0)) Attempted Re- Termination 4(10)(viii)) (Section scission also contends that Ameri

Lennar Dynasty’s alleged misrepresentations can apparently complains Lennar concerning terminating, its reasons for attempted actual termination and re rescind, seeking to policy violated sec scission to a claim support under section 4(10) 4(10) tion of article 21.21. Section 4(10)(viii). 4(10)(viii) an prohibits Section “unfair prohibits practices settlement with “refusing pay insurer from a claim with respect to a claim an insured” and out conducting investigation a reasonable enumerates the which actions constitute claim.” respect to the Tex. Ins.Code “unfair settlement practices.” Tex. 4(10)(viii). 21.21, ar § art. Ann. 4(10). 21.21, § art. Apparently, Ann. Code gues that American did not rea Dynasty’s Lennar cites American alleged sonably investigate whether Lennar actu misrepresentations support its claim un ally made regarding untrue statements 4(10)(i). 4(10)(i) section der pro Section use of deciding EIFS before to terminate an hibits insurer from “misrepresenting to and rescind policy.71 a a policy claimant material fact or provi at issue.” Id. relating sion 4(10)(viii) However, section focus 4(10)®. § es on an pay particu insurer’s refusal to a lar claim conducting without a reasonable Dynasty’s represen- American id. 4(10)(viii) investigation. Section did tations not concern for the prohibit, mention, does not or an even Rather, representations EIFS claims. terminating, rescinding, concerned insurer’s a Dynasty’s poli American reasons for cy conducting without terminating, rescind, reasonable seeking investi Nevertheless, See id. general. gation. policy We do read section 4(10)(i) as Union Bankers Insurance Co. cites encompassing misrepresenta- Shelton, termination, concerning rescission, Supreme tions Texas See id. policy in general. Further, of a Court held that an insured faith has bad 4(10)(i) if section even did cause of encompass action insurer cancels when Dynasty’s representations basis, con- without a reasonable and the misrepresentation analysis” deciding 70. Unlike a common-law risk when to terminate claim, Nevertheless, required an prove insured is not to thought she she had reliance to maintain a under 4 claim section enough policy information to terminate the of article 21.21. 21.21, See Tex. Ann. art. Ins.Code alleged based on untrue statements Lennar’s However, 16(a). § the insured must Further, regarding EIFS. its use of claims prove damages. that it sustained actual See representative pol- who decided to rescind the id. icy investigation; did not conduct his own instead, provided he relied on information up 71. Ralston did not follow on her earlier by to him Ralston. Pulley "underwriting conversation with or 702 grounds as Lennar’s cause of action knew or known of that to

insurer should have (Tex.1994). 278, fact. 283 21.55 of the Texas under former article argues this should apply Lennar that rule imposes Article 21.55 Insurance Code.74 21.21 dis equally to article claims. We an requirements respect insurer with agree. claims, reject- or responding accepting may wrongful claims, termination be ac accepted While promptly paying and ing faith, in bad article tionable common-law 21.55, claims. Ann. art. Tex. Ins.Code 21.21, 4 of is an list statu section exclusive 3, §§ 2, prescribes penal- 4. Article 21.55 tory deceptive practices” or or “unfair acts Id. non-compliance. for an ties insurer’s See Tex. actionable under article 21.21. § “a Article a “claim” as 6. 21.55 defines 21.21, 4, 16; §§ Tri- art. Ann. Ins.Code an or a party by claim made insured first Legends Corp. Ticor Title Ins. v. Co. of ... policy policyholder under insurance ([Tex. 432, 440 California, 889 S.W.2d directly must be the insurer paid 1994, 14th writ de App.-Houston Dist.] 1(3) § (emphasis Id. add- the insured.” nied) Watson, Ins. v. (citing Allstate Co. ed). (Tex.1994)). 145, Article S.W.2d 4, 21.21, particularly and section section Dynasty’s American asserts 4(10)(viii), terminating, does not include Lennar for the timely indemnify failure to rescinding, policy conducting without claims article 21.55. Ameri- violated investigation as actionable con reasonable Lennar has no Dynasty can contends that 21.21, Ann. art. duct. See Tex. Ins.Code a matter of article 21.55 cause action as Legislature § 4.72 and Texas Because the third- EIFS claims are law because the Supreme wrongful not made Court have first-party party claims-—not claims. of a action termination rescission 21.21, able article decline to do party under not “first Article 21.55 does define faded so now.73 § See 1. several claim.” id. support evidence to its section present first-party recognized courts have 4(10)(viii)claim, proper trial court insured seeks is one in which an claim granted summary on this ly judgment own loss. See recovery the insured’s claim. Paul and Marine Hartman v. St. Fire Article 21.55 C. Texas INSURANCECode (N.D.Tex. 600, F.Supp.2d Giles, 950 1998); Ins. Co. Universe Finally, American moved Life (Tex.1997). 48, The classic summary 53 n. judgment on traditional S.W.2d Further, appro- will be more although incorpo- appeal. This issue article 21.21 of this DTPA, article 21.21 section 17.46 of rescission counter- priately rates resolved only deceptive Nonetheless, acts Dynasty’s makes actionable those con- American claim. practices specifically defined section does respect attempted rescission duct Tri-Legends, 889 S.W.2d at 17.46. support claim. an article 21.21 not Watson, 149). Wrong- (citing 876 S.W.2d at ful rescission are defined termination or R.S., Leg., ch. May 72nd 74.Act practices deceptive acts or 11.03, 1043- § Tex. Laws Gen. 17.46 cited Lennar. subsections section 2003) (current (repealed and recodified 17.46(b)(5) §§ See Tex Bus. & Com.Code Ann. §§ 542.051-.061 version Ann. Tex. Ins.Code (12). (Vernon also 21.55 was Supp.2005)). Article April effective repealed and recodified Moreover, the issue whether pertinent to the We will hereafter refer a to rescind the had reasonable basis previously they were codified sections premature trial court policy because the is Dynasty’s rescission coun- article 21.55. severed American pending from action resolution terclaim this

703 Davalos, example (Tex.App. 84 319 first-party proper insurance is S.W.3d Hartman, ty 2002), insurance. 55 at F.Supp.2d rev’d on other Corpus Christi S. (citing (Tex.2004) 603 Eric Mills Holmes & Mark (ap grounds, S.W.3d 685 Rhodes, Holmes’ Appleman insured’s claim plying article 21.55 to on InsuRance (1st ed.1996)). § 3.2 2d The insurance liability insurer for failure to de against proceeds paid are insur first-party fend). fact, in this In the courts state directly er to the insured to redress insured’s disagree request over whether an actual, (citing loss. insured’s direct See id. liability policy under a can be for a defense Holmes, 3.2); § also Black’s Law Dic see claim for of article first-party purposes a (7th ed.1999) (defining tionaRY “first- Rx.Com, Inc., Compare, e.g., 21.55. “a party policy applies insurance” as Davalos, 611-20; at F.Supp.2d S.W.3d oneself or property, one’s own such as 319; v. Ins. Dallas Bas TIG Co. insurance, insurance, disability life health (Tex. Ltd., ketball, 239-42 insurance.”). insurance, and fire denied) App.-Dallas pet. (holding in contrast, third-party In a claim one is liability claim against sureds’ insurer for inju- an insured seeks for costs after in reimbursement defense Hartman, to a third See party. ries underlying action surer refused defend F.Supp.2d Holmes, 3.3); (citing § at 603 claim). first-party The Su was not Texas Giles, 950 S.W.2d at 53 n. 2. If third recently accepted a certified preme Court party reduces claim to a judgment question from the Fifth Circuit on this settlement, the insured will suffer a loss. Homes, issue. Lamar 428 F.3d 193. See Hartman, F.Supp.2d (citing However, issue resolution of this is irrele Holmes, 3.3). However, § the insured’s analysis. to our vant “indirect,” is loss and the third loss party’s 3.3). (citing Holmes, § is “direct.” Id. request We even if a conclude that liability The insurer reimburses its insured first-party for a can be a claim for defense loss, payment insured’s indirect but 21.55, request of article Lennar’s purposes practical directly effect runs for indemnification for the EIFS claims is Holmes, third-party claimant. Id. (citing third-party holding a claim. Courts that a 3.3). § request first-party for a defense is a claim Dynasty argues based seeking that the is de recognize insured definitions, liability these claims under a costs, to, which are either or for paid fense policy third-party are first claims—not of, Rx.Com, benefit insured. party response, claims. In Lennar notes Inc., Thus, F.Supp.2d at 616-18. claim that several courts have held that a seeks for its own loss payment insured liability may a be a first-party under although underlying brought claim was claim. these cases involve third-party. Consequently, a See id request insured’s defense under liability are termed although policies See, Rx.Com, liability policy. e.g., v. Inc. duty to “third-party” policies, the defend is Fire 364 F.Supp.2d Hartford first-party a form of insurance contained (S.D.Tex.2005) (holding insured’s liability See id. within the liability for a from insurer request defense contrast, 21.55 Lennar’s article claim arti- first-party purposes claim for on request for indemnification— based citing cle 21.55 and numerous federal for a request not a defense. does applying courts Texas law that held have same); County payment losses that it N. Mut. Ins. not seek for direct Co. Rather, summary on granted judgment Lennar’s Lennar seeks indemni suffered.75 damages paid fication the to the for 21.55 claim. article Therefore, it payment homeowners. seeks sum, properly granted the trial court by third-parties. for direct losses suffered of summary judgment in favor American Hartman, 603;76 at F.Supp.2d See Dynasty on all Lennar’s extra-contractual Giles, n. 2. 950 S.W.2d claims. Nonetheless, its Lennar characterizes request first-party indemnification as a for XI. Conclusion policy proceeds claim the be because will suggests to Lennar. Lennar paid directly and first issue We overrule Lennar’s 21.55 a claim first-party that article defines for affirm denial Lennar’s motion the proceeds paid as one in the will be to all carriers. summary judgment as However, directly Lennar to the insured. overrule, sustain, and part, We incorrectly reads article 21.55. Article part, Specifically, for issue. separate requirements 21.55 has two Lennar’s second the a application: party its claim is first summary judgments the in favor we affirm policy proceeds paid claim the ai’e RLI, ICSOP, and Gerling, Westchester. directly to the insured. See Tex. Ins.Code summary judgment the in fa- We reverse 1(8). 21.55, § Ann. art. American American Dynasty/Great vor of remand for further on issues and If exists under American opinion. proceedings consistent with this Dynasty policy, proceeds paid will be in fa- summary judgment We reverse only it settled the EIFS to Lennar pro- for further vor of Markel remand seeking claims indemnification from before opinion. this ceedings consistent with Dynasty. Dynasty American American effect, still, in for direct paying will be third issue We overrule Lennar’s by third-parties. losses There- suffered summary judgment affirm in favor fore, reasoning reject Lennar’s American Dynasty/Great American transformed from third- claims were claims. Lennar’s extra-contractual merely claims party first-party claims into paying Lennar’s the claims before seek- EDELMAN, J., and dissents concurs Dynas- ing indemnification from with ty. properly opinion. trial court Consequently, discussed, court indicated that 76. We note Hartman 75. As we have did seek costs, first-party for own overhead a was not a request indemnification for defense costs, costs, inspection personnel and attor Howev- F.Supp.2d 603-04. claim. See neys’ repair in addition to the costs fees er, subsequent- judge who Hartman wrote already we have con EIFS homes. request ly case that a in another concluded duty has no to in cluded American first-party can claim. for a defense be demnify costs. these Presby- v. Connecticut Indem. Co. Travelers even costs could constitute a first- if these Res., F.Supp.2d terian Healthcare claim, 21.55 party Lennar has no article (N.D.Tex.2004). Regardless, we find respect to these costs. See Allstate claim first-par- distinguishing a portion of Hartman Bonner, (Tex. Ins. Co. claim still viable ty third-party from a claim 2001) successfully (stating that to maintain re- although judge decided that a later penalties cause under article of action quest within the defini- for a comes defense establish, 21.55, among oth the insured must first-party of a claim. tion elements, is liable for the er insurer claim). Justice, EDELMAN, appeal, RICHARD H. to this “occurrence” is defined vant accident, dissenting. concurring substituted to mean is not defined in if, policies. injury the An is accidental My the 72- majority’s concerns with insured,1 viewpoint from of the it is not the page opinion mostly in this case relate to probable of consequence the natural and First, if following aspects. the three the produced or occurrence that the the action EIFS, preventive replacement costs of or, words, injury; injury other the could overhead, inspection, personnel, and attor- reasonably anticipated by not be the in are ney’s property damage fees not within ordinarily sured or not from would follow meaning policies, majority the the as holds, action or occurrence summary then the the which caused the judgments should partially been to injury. Mid-Century have affirmed as Ins. Tex. v. Co. of (Tex.1999). against claims for those costs American Lindsey, 997 S.W.2d (as Dynasty Great American and Markel / injury voluntary An in- caused insurers). well as the other just tentional is not conduct an accident Second, despite purporting deny to injury may because the result or have summary judgment Lennar’s motion for unexpected, unforeseen, been or unintend- carriers, to opinion as all the majority hand, ed. Id. On the other the mere fact holds, unequivocally nevertheless based on an engage that actor intended to evidence, the uncontroverted that “Len- conduct that gave injury rise does nar’s defective construction constitutes an not mean that injury not acciden- was case”; ‘occurrence’ in this “Lennar’s de- Rather, tal. Id. both the actor’s intent and fective construction constitutes an ‘occur- reasonably foreseeable effect his law”; rence’ under Texas and “Lennar conduct bear on the determination of has established an ‘occurrence’ under all whether an occurrence accidental. Id. policies.” If ground this was a on is, thus, An event if accidental its effect: sought which Lennar summary judgment, (1) reasonably anticipated cannot be from majority’s then the conclusion dictates it; the use of the that produced means summary judgment be partially ren- (2) is one that the actor did not intend to dered for ground. On the produce charged and cannot be hand, other if the lack of an occurrence design producing. Trinity Universal merely ground was on which the insur- Cowan, Co. Ins. sought summary ers judgment, then our (Tex.1997). opinion go should no farther than to state summary judgment insurers’ ma- examples, As “accident” has been held terials failed to establish ground this as a (1) employer’s alleged include: an negli law, matter of Lennar’s evidence suf- gent hiring, training, and supervision issue, like, ficient to raise fact or the (as employee whose intentional conduct may the case be. sault) (2) injury;2 caused the an uninten Third, disagree I reasoning discharge gun with the tional of a resulting from an majority opinion interpreting attempt gain entry to truck reach (3) term policies. “occurrence” in the ing window;3 As rele- rear through its a hunt 1.Where the insured is not the actor who v. Dallas Fire S.W.3d (Tex.2002). actually injury, caused the the actor’s intent is imputed insured determine King, 2. See 85 S.W.3d at 193. King whether there was an occurrence. See Lindsey, 997 S.W.2d at 155. contrary, framing controlling he On the firing gun of a what er’s deliberate con- merely defective as whether issue deer, actually a be but was believed to a damage in to the in- resulting struction (4) a person;4 application and deliberate only an accident own work can be sured’s a rice mill.5 Con of to rice in pesticide a because, the Tex- question under begs the held not to versely, “accident” has been (outlined Supreme Court’s standards as (1) revealing pho of copying the include: acci- above), unquestionably can be an to showing and them oth person tos of a dent, entirely other cir- depends but (2) ers; of or the over 5000 cubic removal that the Similarly, the fact cumstances. (dirt) a from yards of material borrow by the established “accident framework” a agreement with an property pursuant not eliminate Supreme does Texas Court only be later determined to party who was damage to the insured’s own than an possession a in rather own tenant consequence because that is of no work property.7 er of the remotely part not even consideration case, trapping the of water In this of that framework. (1) if could

EIFS is accidental that effect: Likewise, broadly enough, any if framed reasonably anticipated from use not be subject potentially matter can category of (2) is one that Lennar product; and, some exclusion be covered produce and cannot be did not intend rationale, thereby fall majority under of See charged design producing. with insuring agree- scope of the within Cowan, However, the at 827. 945 S.W.2d Therefore, the fact that defective ment. majority instead framed opinion has damage an in- resulting in construction defective con- controlling issue whether come own work could within sured’s the in- resulting struction guid- provides no risk exclusion business an work can be occurrence sured’s own entrapment this ance whether water (accident). (for pages) discussing After an accident. case was the accident framework established Lennar did not Lastly, the fact not Supreme does by the Texas Court expect product intend to use defective the in- damage to eliminate not alone damage does estab- resulting work, risk and that business sured’s own all, do as a let alone so lish an accident at superfluous be rendered exclusions would (if affirmatively establishing matter law occurrence, the if not an such is proper- an issue that an accident is even Lennar has estab- majority concludes that above). Instead, us, as noted ly before all the poli- under (than lished “occurrence” is recited additional evidence evidence “the uncontroverted cies because be needed about majority opinion) would did not intend demonstrates Lennar and Lennar’s deci- properties product a defective it in the manner that it did to homes with to use build the sion resulting ef- expect water-trapping determine whether did not intend (1) reasonably anticipat- be fect: could damage.” Cowan, Cowan, 6. at 828. 945 S.W.2d at 828. 945 S.W.2d Bonding Exter Ins. Co. v. Orkin Mass. & See Maupin, v. Argonaut Ins. Co. 7. Southwest S,W.2d 396, (Tex. minating (Tex. 1973). 500 S.W.2d Exterminating Co. 1967); Orkin see also Mills, 161- Coast Rice Gulf 1962, writ ref'd (Tex.Civ.App.Houston n.r.e.). pro- means that ed from the use (2) it; is one that Lennar not

duced intend to but also

only produce, did not charged design pro-

cannot be Cowan,

ducing. See at 827. S.W.2d MERONEY, Appellant,

Brian Jeffery

CITY OF COLLEYVILLE and Jones, Appellees.

James

No. 2-05-195-CV. Texas, Appeals

Court of

Fort Worth.

May

Rehearing Aug. Overruled

Case Details

Case Name: Lennar Corp. v. Great American Insurance Co.

Court Name: Court of Appeals of Texas

Date Published: Apr 11, 2006

Citation: 200 S.W.3d 651

Docket Number: 14-02-00860-CV

Court Abbreviation: Tex. App.