Texas Causes of Action & Affirmative Defenses

Texas Causes of Action & Affirmative Defenses

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Wednesday, January 11, 2012

Litigating insurer's duty to defend policy-holder


An insurer has a duty to defend when a third party sues the insured on allegations that, if taken as true, potentially state a cause of action within the coverage terms of the policy. GuideOne Elite Ins. Co. v. Fielder Rd. Baptist Church, 197 S.W.3d 305, 310 (Tex. 2006). Even if the allegations are groundless, false, or fraudulent, the insurer is obligated to defend. Zurich Am. Ins. Co. v. Nokia, Inc., 268 S.W.3d 487, 491 (Tex. 2008). The duty to defend is independent from the duty to indemnify and can exist even when no obligation to indemnify is ultimately found. Farmers Tex. County Mut. Ins. Co. v. Griffin, 955 S.W.2d 81, 82 (Tex. 1997).

THE EIGHT CORNERS RULE: Pleadings and Policy - Four corners each  
In determining whether an insurer has a duty to defend, we follow the eight-corners rule, also known as the complaint-allegation rule: ―an insurer’s duty to defend is determined by the third-party plaintiff’s pleadings, considered in light of the policy provisions, without regard to the truth or falsity of those allegations.‖ Zurich, 268 S.W.3d at 491 (quoting GuideOne, 197 S.W.3d at 308). When applying the eight-corners rule, we  construe the allegations in the pleadings liberally. Nat’l Union Fire Ins. Co. v. Merchs. Fast Motor Lines, Inc., 939 S.W.2d 139, 141 (Tex. 1997). We resolve all doubts regarding the duty to defend in favor of the insured. King v. Dallas Fire Ins. Co., 85 S.W.3d 185, 187 (Tex. 2002). If the pleadings do not contain factual allegations sufficient to bring the case clearly within or without the coverage terms, the general rule is that the insurer is obligated to defend if there is any potential claim under the pleadings that falls within the coverage of the policy. Merchs. Fast Motor Lines, Inc., 939 S.W.2d at 141 (citing Heyden Newport Chem. Corp. v. S. Gen. Ins. Co., 387 S.W.2d 22, 26 (Tex. 1965)); Am. Physicians Ins. Exch. v. Garcia, 876 S.W.2d 842, 848 (Tex. 1994). In the case of ambiguity in the underlying petition, the court may not read facts into the pleadings, look outside the pleadings, or ―imagine factual scenarios which might trigger coverage.‖ Merchs. Fast Motor Lines, Inc., 939 S.W.2d at 142. However, the eight-corners rule does not require us to ignore those inferences logically flowing from the facts alleged in the petition. Gen. Star Indem. Co. v. Gulf Coast Marine Assocs., Inc., 252 S.W.3d 450, 456 (Tex. App.—Houston [14th Dist.] 2008, pet. denied) (citing Allstate Ins. Co. v. Hallman, 159 S.W.3d 640, 645 (Tex. 2005) (inferring a profit motive from the insured’s leasing of her property for limestone mining even though the pleadings made no reference to any pecuniary interest)). A liability policy obligates the insurer to defend the insured  against any claim that potentially could be covered. Heyden Newport Chem. Corp., 387 S.W.2d at 26.

Appellant GEICO General Insurance Company challenges the trial court’s summary judgment in favor of Austin Power on a breach of contract claim relating to an insurer’s duty to defend. Because we find that the pleadings in the underlying lawsuit allege claims that potentially fall within coverage under the insurance policy, we affirm the judgment of the trial court.


Unlike the insured in Pine Oak and in the other cases on which GEICO relies, Austin Power’s coverage claim does not depend upon extrinsic evidence or on facts that are not encompassed within the factual allegations in the underlying suit.  Here, the allegations themselves, when construed liberally in favor of the insured, are sufficient to state a claim that is potentially within coverage. The plaintiffs in the underlying suit alleged facts that supported an inference of coverage and that were ―sufficient to permit proof on a trial‖ of the truth of the inference. See Heyden Newport Chem. Corp., 387 S.W.2d at 26. The allegations in the Bradley petition, when construed liberally in favor of Austin Power, support the inference that Weldon’s injury potentially occurred during the policy period, and therefore the claim is potentially covered. This is sufficient to trigger GEICO’s duty to defend the suit. See Gen. Star Indem. Co., 252 S.W.3d at 456.

We accordingly overrule the sole issue presented on appeal and affirm the trial court’s judgment.