Leak Evidence = Triable Fact Issue

leaky faucetIn a time of much furor about “leaks” to the media, the Fifth Court addressed a more traditional form of “leak” in Allen v. State Farm Lloyds, reversing a directed verdict for the insurer in a coverage dispute about a homeowners’ “Water Damage Endorsement.” In a detailed opinion, the Court found that the plaintiffs’ experts made legitimate, non-conclusory points about whether home damage was caused by plumbing leaks, and thus whether “deterioration” occurred within the meaning of the Endorsement. In a footnote, the Court also reminds of the importance of moving to strike allegedly improper expert testimony, and continuing to assert the original objection as the testimony unfolds at trial. No. 05-16-0018-CV (Aug. 1, 2017) (mem. op.)

No take backs: trial court reversed for initially allowing supplemental affidavit and then granting summary judgment before supplemental affidavit is filed

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In KLZ Diamond Tools, Inc. v. TKG General Agency, Inc. (July 18, 2016), the Dallas Court of Appeals considered an appeal of summary judgment granted in favor of TKG, the insurer defendant, against KLZ, the plaintiff insured. KLZ claimed that the insurer failed to pay the full amount owed under a policy relating to approximately $400,000 in stolen merchandise. The insurer advanced half, but requested additional documentation relating to the merchandise. KLZ contended that the request was just stalling, and after the insurer failed to pay the full amount of the claim, sued for breach of contract, insurance code violations, deceptive trade practices, among other claims. The insurer filed a motion for summary judgment. The district court struck KLZ’s responsive summary judgment evidence due to the failure to properly prove up the attached documents and said at the hearing that it had no choice but to grant summary judgment in the absence of responsive evidence. The district court did tell KLZ’s counsel that it would allow KLZ to supplement. But the district court entered an order granting summary judgment before the deadline it gave to KLZ for the supplement, which was timely filed.

The first issue on appeal was whether the trial court erred by orally stating that KLZ was permitted to supplement an affidavit but then granting summary judgment before the deadline given. Recognizing that the summary judgment rule anticipates a party’s summary judgment evidence may not initially be properly presented and allows supplementation, the Dallas Court of Appeals held that it was an abuse of discretion to grant summary judgment without waiting for the supplemental affidavit and without explaining its ruling after having initially granting leave to supplement. Considering the supplemental evidence, the Court further concluded that summary judgment was improper because KLZ had offered summary judgment evidence creating a question of fact as to whether the insurer had improperly refused to pay the entire claim.

KLZ Diamond Tools v TKG General Agency (July 18, 2016)

No “course and scope” for tragic accident

Pinkus, visiting Dallas on business, suffered fatal injuries in a car accident while driving to dinner with his son.  The Fifth Court affirmed summary judgment for his employer’s workers compensation carrier, finding (1) that the “continuous coverage” doctrine did not apply when his trip “merely placed him in a position to take advantage of an opportunity for a ‘distinct departure’ on a ‘personal errand,'” and (2) for the same reasons, the “dual purpose travel” doctrine did not apply either.  A concurrence would have analyzed the dual-purpose doctrine differently, but reached the same result. Pinkus v. Hartford Casualty, No. 05-14-00892-CV (Nov. 5, 2015).

Order to Produce Privileged Document Is Mandamus-Ebola

Almost a year after the Ebola virus and dozens of news crews arrived in Dallas, the Court of Appeals has conditionally granted mandamus to prevent Texas Health Resources’ insurer from being required to produce a privileged note regarding a plaintiff’s Ebola-related claims. Nina Pham, who contracted the disease while working as a nurse at Presbyterian Hospital, has sued THR on a variety of tort claims for the injuries she sustained from the disease. The single document at issue reflects a conversation among the insurer’s claims adjuster, THR’s associate general counsel, and its risk manager. Although the insurer and its claims adjuster were not parties to the lawsuit, the Court nevertheless held that the communications reflected in the document were privileged. Because the note was made in the course of investigating Pham’s claim, and because the insurer represents the employer rather than itself on claims involving the employer’s liability policy, the note reflected a confidential communication within the scope of the attorney-client privilege.

In re Texas Health Resources, No 05-15-00813-CV

Intrinsic vs. Inherent Value in an Insurance Dispute

Bruce Bernstein wrecked his Porsche, then sued his insurer for violations of the Insurance Code and DTPA. An appraiser valued the car at $4900, and Safeco had tendered a check for $5287.50. The trial court granted summary judgment for Safeco, and the Court of Appeals affirmed. Bernstein could not recover under the prompt payment provisions of the Insurance Code because Safeco had timely paid the appraisal award, nor could he recover for bad faith because he did not appeal the adverse judgment on his breach of contract claim. Bernstein also could not recover on his fraud claim because he could not identify any misrepresentation by Safeco that would have led him to believe the insurer would cover “the true value of the car,” which he apparently claimed to be “the investment he made to the Porsche beyond the basic value of the car.”

Bernstein v. Safeco Ins. Co. of Ill., No. 05-13-01533-CV

Loaned and Operated

A car fell on David Fusaro at the house of his friend, Christopher Becherer. The car was owned by Becherer’s mother, and the pair were working on her brakes. Becherer’s homeowner’s insurer denied coverage, relying on an exclusion for injuries “arising out of the ownership, maintenance, operation, use, loading or unloading of: Motor or engine propelled vehicles or machines designed for movement on land . . . which are owned or operated by or rented or loaned to an insured.” After Fusaro obtained a $1.1 million judgment, Becherer assigned his coverage claim to Fusaro, who lost the coverage case on summary judgment. Fusaro argued that Becherer’s mother’s case was not “owned or operated by or rented or loaned to” Becherer, but the Court of Appeals affirmed. Construing the words in light of their ordinary meaning, Becherer’s mother had loaned the vehicle to her son, and he was operating the vehicle by performing ordinary acts of maintenance on it.

Fusaro v. Trinity Universal Ins. Co., No. 05-14-00481-CV

Business Risk Exclusion Precludes Water Damage Coverage

In this insurance coverage case, the Court of Appeals construed the “business risk exclusion” to preclude coverage for water damage to a townhome complex that the insured was building.  A business risk exclusion is a typical provision in commercial general liability insurance policies that is used to exclude coverage for “certain risks relating to the repair or replacement of the insured’s faulty work or products or defects in the insured’s work or product itself.”  The reason behind including such exclusion is simple:  the insured should be able to control the quality of the goods and services it supplies.  In this case, the Court found that the exclusion precluded coverage because the evidence established that property damage at issue occurred during the construction of the townhome complex.

Dallas Nat’l Ins. Co. v. Calitex Corp.

Selling Personal Property at a Garage Sale is not an Accident

In this insurance coverage lawsuit, the Court of Appeals held that the insurer had no duty to defend the appellant in the lawsuit brought against them for conversion under  when the appellant sold their home’s former (foreclosed-upon) owner’s personal property at a garage sale.  According to the Court, the removal and purported sale of the personal property was “intentional and deliberate,” and thus failed to qualify as an “occurrence” covered by the policy.

Drew v. Texas Farm Bureau Mut. Ins. Co.

Eight Corners Say No Defense and No Indemnity

The Court of Appeals has reversed a trial court’s judgment awarding approximately $46,000 in attorney fees in a denial of coverage dispute. The case was brought by a homebuyer who sued his builders for a number of defects.  The buyer obtained a judgment against the builders in arbitration. The builders had tendered the buyer’s claim to their insurer, Oklahoma Surety Co., but OSC denied coverage for both the defense of the case and ultimate liability. After arbitration, the builders assigned their coverage claim to the buyer, who then sued OSC for the builders’ defense costs and for indemnification under the policy. The trial court ruled that OSC had a duty to the defend the case, but had no duty to indemnify for damages. The Court of Appeals disagreed, holding that an exclusion for property damage to “your work” applied under the “eight corners” rule, thereby barring both coverage and the duty to defend.

Oklahoma Surety Co. v. Novielo, No. 05-13-01546-CV

No Forum Shopping for a Favorable Appraisal

The Court of Appeals has dissolved a temporary injunction that would have prevented a court in Bastrop County from continuing to oversee a homeowner’s insurance appraisal process. James and Patricia Barrentines’ home in Bastrop was damaged by one the wildfires that plagued that area in 2011. Their insurer, Safeco, demanded an appraisal of the loss, and both parties appointed their own appraisers pursuant to the policy. When the two party-appointed appraisers were unable to agree on an umpire, Safeco went to court in Bastrop County to have one appointed. The court-appointed umpire issued an appraisal favorable to the homeowners, but the Bastrop County court then appointed a different umpire. The Barrentines then refiled in Dallas and obtained a temporary injunction forbidding any reappraisal. The Dallas Court of Appeals reversed that ruling, holding that it disturbed — rather than preserved — the status quo by interfering with the Bastrop County court’s authority to conduct the appraisal under the insurance contract.

Safeco Lloyds Ins. Co. v. Barrentine, No. 05-13-01011