TEXAS UPDATE!

 

By Chamberlain♦McHaney

 

TEXAS LAWYERS

 

 

Lately, we have been more stressed out than Lindsey Lohan’s car insurance company.  But finally, the Texas Supreme Court returned from a long summer recess and provided us with a much needed distraction.   

 

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Texas Supreme Court Holds General Liability Policy Covers Homebuilder in Suit over Construction Defects:  This opinion answers the questions whether allegations of construction defects can constitute an “occurrence” and whether damage to a structure built and sold by the defendant can constitute “property damage” under the terms of a CGL policy.  In a 6-3 decision, the majority answered both questions “yes.”  The court also determined that an insured defendant’s claim for a defense is subject to Art. 21.55 penalties [18% interest] if wrongly denied.

 

In its ruling, the court may have broadened the initial grant of coverage.  The court primarily reasoned that the terms “occurrence” and “property damage” do not foreclose coverage for defective building.  Breaking new ground, the court rejected the general contention that “breach of contract isn’t covered,” because no language in the terms “occurrence” and “property damage” distinguish between torts and breaches of contract. 

 

The court reasoned that a party may breach a contract negligently, as when, for example, the wrong number of boxes was shipped because a shipping clerk made an honest mistake in the counting of boxes before shipment.  Consequently, allegations relating to the negligent performance of a building contract can trigger a duty to defend.  The majority refused to apply the economic loss rule, characterizing that as a liability defense or remedies doctrine rather than a test for insurance coverage.  

 

Addressing Art. 21.55 of the Texas Insurance Code, the court held that the statute did not limit its application to first party policies and distinguished between those and “first party claims.”  Since the payee is either the insured or the insured’s attorney—and there is no basis for distinguishing between them in this context—a violation of 21.55 occurs when a carrier wrongly denies a defense and the insured incurs attorney fees.  Lamar Homes v. Mid-Continent Casualty Company, (Tex. 2007).

 

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Mattel recently announced it is recalling its Michael Vick Action Figure.  What a shame.  It’s our dog’s favorite chew toy.

 

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Texas Supreme Court Upholds Contractual Statutory Employer Defense for Premises Owner:  Typically, only the employer enjoys immunity from suit by an employee injured in the course and scope of employment.  The employee is free to sue others who may have contributed to causing the injury.  Now we learn that employer immunity can be contractually expanded to protect the premises owner as well. 

 

The premises owner (Entergy) contracted with IMC for IMC to perform construction services on its premises.  The contract provided that the owner would pay for workers compensation insurance to cover IMC’s workers and further provided that the owner would be the “statutory employer” for workers compensation purposes.  One of IMC’s workers was subsequently injured on the premises and collected benefits from the WC carrier.  The worker then sued the owner for personal injury damages.  The owner claimed immunity under the contract and the Texas Labor Code arguing that it was the statutory employer of the plaintiff and therefore not liable for personal injury damages.  The lower appellate court disagreed and held for the worker.

 

Quicker than gossip in a small town, the Texas Supreme Court reversed the lower court and sided with the owner.  The court stated that the labor code permits an owner, who procures services from a subcontractor, to contract to provide WC insurance for the subcontractor’s employees and thereby reap the protections of the labor code.  Those protections include statutory immunity from suit.  The injured workers sole remedy is WC benefits.  Entergy Gulf States, Inc. v Summers (Tex. 2007).

 

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Learn about these and other significant cases at our full day, fully accredited, Ultimate Claims Handling Seminar on October 5, 2007 at CityPlace Conference Center, Dallas, Texas.  Among many other topics, we will cover updates on construction law (Lamar Homes and Lennar Homes), auto insurance coverage, the duties and liability of insurance adjusters, premises liability, products liability, dram shop liability, deciphering medical records, “paid or incurred,” subrogation and liens, new cases from the Texas Supreme Court and significant new legislation passed by this year’s Texas Legislature impacting our tort, insurance and civil justice system.  Seats are going fast so register now at www.chmc-law.com.  

 

U.S. Senator Larry Craig missed last year’s seminar and you see what happened to him.

 

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Chamberlain♦McHaney is A-V (highest peer review) Rated by Martindale-Hubbell and is listed in A.M. Best’s Directory of Recommended Attorneys.

 

 

David E. Chamberlain

Chamberlain♦McHaney

Texas Lawyers

Austin and San Antonio

512-474-9124

visit us at  www.chmc-law.com.