Monthly Archives: September 2008

The Texas Supreme Court has answered the long-standing question of when property damage occurs under a standard CGL policy in Texas. The ruling departs significantly from existing law, and we predict in the short term that there will be substantial uncertainty, and likely more coverage litigation, as insureds and insurers adapt to this new rule. For many years, most lower courts have followed a manifestation or discovery rule, although both Houston Courts of Appeal had recently suggested that an exposure rule might be more appropriate. The case, Don’s Building Supply, Inc. v. OneBeacon Ins. Co., Case No. 07-0639, came to the Supreme Court on Certified Questions from the Fifth Circuit, asking: 1. When not specified by the relevant policy, what is the proper rule under Texas law for determining the time at which property damage occurs for purposes of an occurrence-based commercial general liability policy? 2. Under the rule identified in the answer to the first question, have the pleadings in lawsuits against an insured alleged that property damage occurred within the policy period of … Continue reading →

Rather than merely assuming full policy coverage is available in Texas, insureds may be required to prove not only prejudice, but the extent of any damages resulting from a prejudicial defense without reservation of rights. That’s the signal sent by the Texas Supreme Court in late August in Ulico Casualty Co. v. Allied Pilots Assoc., Case No. 06-0247, which addressed the long-standing “Wilkinson exception” to the rule that coverage cannot be created by waiver or estoppel. For years, insureds, insurers and their attorneys have operated under the presumption that Farmers Texas County Mutual Insurance Co. v. Wilkinson, 601 S.W.2d 520 (Tex. Civ. App. – Austin 1980, writ ref’d n.r.e.), correctly stated an exception to the Craddock rule established in 1937. In Washington Nat. Ins. Co. v. Craddock, 130 Tex. 251, 109 S.W.2d 165 (1937), the Supreme Court held that the doctrine of estoppel cannot be used to create insurance coverage when none exists by the terms of the policy. But Wilkinson added the caveat that “if an insurer assumes the insured’s defense without obtaining a … Continue reading →

In a 7-2 decision, the Texas Supreme Court has ruled that claims for “biological injury” are equivalent to claims for “bodily injury” and that complaints presenting broad statements such as “… brought for monetary damages” and “…. to obtain maximum legal and equitable relief” constitute a request for “damages because of bodily injury,” even when the requested relief appears to be limited to economic damages. These findings were made in Zurich American Ins. Co. v. Nokia, Inc., Case No. 06-1030, a case that once again addressed the Texas “eight corners” rule, a rule which the Court continues to strictly apply. Nokia raised the issue of whether a liability insurer had an obligation to defend putative class action complaints alleging that the use of cellular phones without headsets exposes the users to radio frequency radiation, which causes biological injury to brain cells. The difficulty was created by the fact that: (1) the complaints alleged that there were “no individual issues of injury” among the members of the class (implying that no damages were being sought for … Continue reading →