Staying the Course, Texas Supreme Court Rejects Insurer’s Argument for Exception to Eight-Corners Rule in Determining Duty to Defend
April 27, 2020 —
John C. Eichman, Sergio F. Oehninger, Grayson L. Linyard & Leah B. Nommensen - Hunton Insurance Recovery BlogIn responding to a certified question from the Fifth Circuit in Richards v. State Farm Lloyds, the Texas Supreme Court held that the “policy-language exception” to the eight-corners rule articulated by the federal district court is not a permissible exception under Texas law. See Richards v. State Farm Lloyds, 19-0802, 2020 WL 1313782, at *1 (Tex. Mar. 20, 2020). The eight-corners rule generally provides that Texas courts may only consider the four corners of the petition and the four corners of the applicable insurance policy when determining whether a duty to defend exists. State Farm argued that a “policy-language exception” prevents application of the eight-corners rule unless the insurance policy explicitly requires the insurer to defend “all actions against its insured no matter if the allegations of the suit are groundless, false or fraudulent,” relying on B. Hall Contracting Inc. v. Evanston Ins. Co., 447 F. Supp. 2d 634, 645 (N.D. Tex. 2006). The Texas Supreme Court rejected the insurer’s argument, citing Texas’ long history of applying the eight-corners rule without regard for the presence or absence of a “groundless-claims” clause.
The underlying dispute in Richards concerned whether State Farm must defend its insureds, Janet and Melvin Richards, against claims of negligent failure to supervise and instruct after their 10-year old grandson died in an ATV accident. The Richardses asked State Farm to provide a defense to the lawsuit by their grandson’s mother and, if necessary, to indemnify them against any damages. To support its argument that no coverage under the policy existed, and in turn, it had no duty to defend, State Farm relied on: (1) a police report to prove the location of the accident occurred off the insured property; and (2) a court order detailing the custody arrangement of the deceased child to prove the child was an insured under the policy. The federal district court held that the eight-corners rule did not apply, and thus extrinsic evidence could be considered regarding the duty to defend, because the policy did not contain a statement that the insurer would defend “groundless, false, or fraudulent” claims. In light of the extrinsic police report and extrinsic custody order, the district court granted summary judgment to State Farm.
Reprinted courtesy of Hunton Andrews Kurth attorneys
John C. Eichman,
Sergio F. Oehninger,
Grayson L. Linyard and
Leah B. Nommensen
Mr. Oehninger may be contacted at soehninger@HuntonAK.com
Mr. Linyard may be contacted at glinyard@HuntonAK.com
Ms. Nommensen may be contacted at leahnommensen@HuntonAK.com
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Pennsylvania Finds Policy Triggered When Property Damage Reasonably Apparent
January 28, 2015 —
Tred R. Eyerly – Insurance Law HawaiiThe Pennsylvania Supreme Court addressed when a liability policy was triggered for ongoing property damage. The Court also declined to apply the multiple trigger theory. Pennsylvania Nat'l Mut. Cas. Ins. Co. v. John, 2014 Pa. LEXIS 3313 (Pa. Dec. 15, 2014).
In 2002, Appellants, co-owners of a dairy farm, expanded the size of their dairy herd and milking facility. Appellants hired LPH Plumbing to install a new plumbing system, which would include a wastewater drainage system and a separate freshwater drinking system. LPH Plumbing subcontracted with Stoltzfus Welding to weld metal pipes leading to a holding tank for the new freshwater drinking system. Construction was completed in July 2003.
Unknown to Appellants, the plumbing system was defective when dairy operations began. PVC piping for the wastewater was cracked, allowing "gray water" to escape. Further Stoltzfus failed to properly weld an intake pipe leading to a holding tank that formed a part of the freshwater drinking system for the dairy herd. Consequently, Appellants' herd was exposed to contaminated drinking water shortly after dairy operations began in July 2003.
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Tred R. Eyerly, Insurance Law HawaiiMr. Eyerly may be contacted at
te@hawaiilawyer.com
Quick Note: Be Careful with Pay if Paid Clauses (Both Subcontractors and General Contractors)
October 12, 2020 —
Christopher G. Hill - Construction Law MusingsAside from waiver of lien rights (something that will be illegal in Virginia after July 1, 2015), the most troublesome contractual impediment to payment for a subcontractor or supplier on a project often is the “pay if paid” clause. As a general rule, in Virginia, these clauses where drafted in the proper fashion, are enforceable. As I have said many times, in Virginia freedom of contract almost always wins out.
While this is the case, I emphasize that such clauses must be very explicit and specific. Furthermore, and in something that should be obvious, these clauses are generally limited by the Courts of Virginia to only be enforceable and to only forgive the need for payment if the upstream contractor on the construction job has not been paid for the work that the sub claiming non payment has done.
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The Law Office of Christopher G. HillMr. Hill may be contacted at
chrisghill@constructionlawva.com
California Fears El Nino's Dark Side Will Bring More Trouble
September 17, 2015 —
Brian K. Sullivan – BloombergA group of drought experts gathered in California this week, and it wasn’t long before the conversation turned to El Nino.
They weren’t touting it as the savior that will end the state’s four-year drought. Instead, they were looking at a darker scenario where the weather-changing phenomenon adds another year of dryness in the north while ravaging the south with floods.
“What do you say when the governor asks you what to do? ‘You prepare for flood and drought because there is a possibility you can get both,”’ said Mike Anderson, state climatologist.
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Brian K. Sullivan, Bloomberg
What to do about California’s Defect-Ridden Board of Equalization Building
October 01, 2014 —
Beverley BevenFlorez-CDJ STAFFJerry Brown recently signed into law a bill requiring the state of California “to assess its properties in the Sacramento area and develop long-term plans for renovating, replacing or selling the most troublesome buildings,” according to SF Gate. Some say the Board of Equalization building, which was built for $80 million and then repaired for $60 million has construction defects, is “jeopardizing the health and safety of public employees.”
Current problems include “[f]looding, mold, falling windows and free-falling elevators,” reported SF Gate. Furthermore, recently, “three employees filed a $75 million lawsuit against the state, alleging toxic mold in the building is causing extreme fatigue, skin rashes, persistent flu-like symptoms, respiratory illnesses, frequent headaches, memory lapses and fears of cancer.”
“This is a disaster,” Assemblyman Roger Dickinson, D-Sacramento, who authored the bill regarding assessing state capitol buildings, told SF Gate. “It endangers the health and safety of employees and the public alike. And it is costing state taxpayers tens of millions of dollars.”
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Consolidated Case With Covered and Uncovered Allegations Triggers Duty to Defend
May 20, 2015 —
Tred R. Eyerly – Insurance Law HawaiiThe Illinois Court of Appeals held that the insurer had a duty to defend a consolidated case that included one complaint alleging intentional acts and another complaint alleging negligence. Farmers Auto. Ins. Ass'n v. Neumann, 2015 Il. App. 140026 (Ill. Ct. App. March 24, 2015, reh'g denied March 24, 2015).
Neumann allegedly hit Bitner with his automobile as Bitner, a police offier, was directing traffic. Bitner sued Neumann, alleging intentional assault and intentional battery. Farmers rejected Neumann's tender because the policy did not cover intentional acts.
Farmers filed for a declaratory judgment. In his answer, Neumann included an affidavit stating that he did not intend to strike or cause bodily harm to Bitner. The trial court granted the motion to strike the affidavit.
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Tred R. Eyerly, Insurance Law HawaiiMr. Eyerly may be contacted at
te@hawaiilawyer.com
Virginia Families Hope to Sue over Chinese Drywall
October 10, 2013 —
CDJ STAFFAlthough Virginia isn't in the Fifth Circuit of the U.S. Court of Appeals, some Virginia homeowners ended up with a case there. And now the court has to decide whether Taishan Gypsum Co. Ltd. can be sued in American courts for defects in its products. The case made its way to Louisiana after the courts consolidated cases from across the country. If the court decides that the homeowners can’t sue, they could appeal to the Supreme Court, although that’s likely a longshot. Or, the homeowners could sue in the Chinese courts, also not likely.
More than 300 homes in Virginia are affected by fumes from the Chinese-made drywall, but only seven residents in the town of Hampton Roads are at the heart of the current case. They were chosen as representative of the entire group. Those seven have been collectively awarded $2.6 million, but the drywall manufacturer is appealing the judgement. If Taishan is victorious, then the damages already awarded will be overturned and there won’t be an option for the others.
The drywall emitted gases which corroded metals in the homes. One couple, Steve and Liz Heischober went through seven air conditioning coils in three years, along with problems with corrosion of appliances and electrical systems. If the current suit succeeds, the Heischobers, and the other, will be compensated for their damages, including the costs of repair and relocation. If Taishan loses, they could be responsible for about $1 billion.
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Ninth Circuit Affirms Duty to Defend CERCLA Section 104 (e) Letter
October 10, 2013 —
Tred Eyerly — Insurance Law HawaiiThe Ninth Circuit held there is a duty to defend not only a PRP letter issued by the EPA, but also a section 104 (e) letter. Anderson Brothers, Inc. v. St. Paul Fire and Marine Ins. Co., 2013 U.S. App. LEXIS 18156 (9th Cir. Aug. 30, 2013).
The insured received two letters from the EPA notifying it of potential liability under CERCLA for environmental contamination of the Portland Harbor Superfund Site. The first letter was received in January 2008, and stated that the EPA sought the insured's cooperation in its investigation of the release of hazardous substances at the site. The letter enclosed an extensive, 82-question "Information Request" seeking information about the insured's current and former activities at the site. The letter informed the insured that its voluntary cooperation was sought, but compliance with the Information Request was required by law and failure to respond could result in an enforcement action and civil penalties of $32,500 per day. The insured tendered the 104 (e) letter to St. Paul and requested a defense and indemnity pursuant to the CGL policy. St. Paul declined to provide a defense because the letter did not constitute a "suit," which was required by the policy to trigger the duty to defend.
The second letter from the EPA, received in November 2009, was entitled "General Notice Letter for the Portland Superfund Site" and notified the insured that it was a "potentially responsible party ("PRP").
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Tred EyerlyTred Eyerly can be contacted at
te@hawaiilawyer.com
