The Texas Supreme Court recently addressed the economic loss rule, a legal concept that can have a significant impact on construction defect cases and other cases involving contractual relationships. As clarified by the Court in LAN/STV v. Martin Eby Constr. Co. (Tex. June 20, 2014), a plaintiff seeking purely economic losses based on negligent performance of services cannot recover such losses in tort. Rather, a party can only be liable for purely economic losses if the party contractually accepted such liability. In LAN/STV v. Martin Eby, for example, the general contractor on a major construction project sued the project architect for negligent performance of the architect’s design services. The losses sought by the contractor, however, were purely economic losses. The contractor alleged that it had under-bid the project with the owner because of the architect’s design plans, and it ultimately spent more money than anticipated due to necessary changes arising out of the architect’s alleged negligence. The Supreme Court held that the contractor could not assert such a claim in tort against the architect due to the … Continue reading

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The issue presented to the First Court of Appeals in Oleksy v. Farmers Ins. Exchange, 410 S.W.3d 378 (Tex. App. – Houston [1st District] 2013, pet. denied) was whether the exception to the auto exclusion in a homeowner policy applied.  The exception provided that the auto exclusion does not apply to motor vehicles which are not subject to motor vehicle registration and are designed and used for recreational purposes and are not owned by an insured.  Farmers asserted that the exception did not apply because the snowmobile was subject to registration in New York, and there was an inference that Oleksy owned the snowmobile.  Oleksy filed a cross-motion wherein he argued that Texas law applied, and the exception applied because the snowmobile was not subject to motor-vehicle registration in Texas and he did not own the snowmobile.  The trial court granted summary judgment in favor of Farmers, denied Oleksy’s motion, and issued a final declaratory judgment that the policy provided no coverage for the snowmobile accident and that Farmers had no duty to defend or … Continue reading

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The Fifth Circuit tested the mettle of the Supreme Court’s ruling in Ewing Construction Co. v. Amerisure Ins. Co., 420 S.W.3d 30 (Tex. 2014), which had held, in a landmark ruling, that a general contractor that agreed to perform its work in a good and workmanlike manner did not “assume liability” such that the contractual liability exclusion in a CGL policy was triggered. In Crownover v. Mid-Continent Cas. Co., 2014 U.S. App. LEXIS 12158 (5th Cir. 2014), the Fifth Circuit put Ewing to the test, and, surprisingly, revealed some limitations to Ewing. In Crownover, the Crownovers entered into a construction contract with Arrow to construct a home. The contract contained a warranty-to-repair clause, which held Arrow would properly correct work failing to conform to the requirements of the contract documents. The work was completed, but construction defects began to appear in the home one year after the completion. The Crownovers filed a claim for breach of the express warranty to repair; and subsequently, the Crownovers demanded that Arrow’s insurer Mid-Continent pay an arbitration award that … Continue reading

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The Supreme Court of Texas recently issued a new opinion about what does not constitute a payment to a hospital with a statutory lien for medical expenses incurred within 72 hours of an accident. McAllen Hosp., L.P. v. State Farm County Mut. Ins. Co. of Texas. State Farm, a liability insurer, settled a bodily injury case when there was a valid hospital lien on file. The insurer paid the claimant with a check made payable to both the claimant and the hospital with a lien and sent the check to the claimant. The claimant cashed the check without the hospital’s endorsement of the hospital, and the hospital never got paid. The hospital sued the insurer under Chapter 55 of the Texas Property Code to recoup its lien amount. The insurer obtained summary judgment in the trial court on the grounds that the hospital had been “paid”, and therefore the lien had been satisfied. The Texas Supreme Court held that summary judgment in favor of the insurer was improper because the hospital was not “paid” for purposes … Continue reading

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TEXAS SUPREME COURT TO DECIDE SEAT BELT ISSUE Can a Texas defendant offer evidence to the jury to prove that a plaintiff’s failure to wear a seat belt was a proximate cause of her injuries?  The Supreme Court of Texas will decide this issue in Nabors Well Services, Ltd. V. Romero. The El Paso Court of Appeals decided that the trial court properly excluded evidence that the plaintiff’s failure to wear a seat belt was a contributing cause of the damages sought by the plaintiff.  The Court of Appeals reasoned that because the plaintiff’s failure to wear a seatbelt is not a contributing cause of the accident, then the evidence cannot be used to prove contributory negligence.  The Court further reasoned that because the failure to wear a seat belt occurs before the injury, such failure does not fit within the failure to mitigate damages defense.  Consequently, the evidence is not relevant to any particular defenses and is not admissible.  On March 21, 2014, the Court granted the defendant’s petition for review, which means the … Continue reading

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