Summary
noting that there were "multiple other circumstances when the Policy would apply," so coverage was not illusory
Summary of this case from Onebeacon Ins. Co. v. T. Wade Welch & Assocs.Opinion
No. 01-05-00135-CV
Opinion issued January 26, 2006.
On Appeal from the 157th District Court, Harris County, Texas, Trial Court Cause No. 2004-18761.
Panel consists of Justices NUCHIA, JENNINGS, and HIGLEY.
MEMORANDUM OPINION
We deny appellant's motion for rehearing. Tex.R.App.P. 49.3. We withdraw our November 17, 2005 opinion, substitute this opinion in its place, and vacate our November 17, 2005 judgment.
Appellant, Primary Plumbing Services, Inc. ("PPS"), challenges the trial court's rendition of summary judgment in favor of appellee, Certain Underwriters at Lloyd's London ("Lloyd's"), in Lloyd's suit seeking a declaratory judgment that it did not owe a duty to defend or a duty to indemnify PPS for claims arising out of PPS's alleged negligent installation of a lavatory. In its first three issues, PPS contends that the trial court erred in granting Lloyd's summary judgment motion on the grounds that the underlying petition did not allege an "accident" within the policy's coverage and did allege an "expected or intended injury" or loss or damage "involving a construction defect." In its fourth and fifth issues, PPS contends that the trial court erred in granting Lloyd's summary judgment motion on the grounds that Lloyd's did not owe PPS a duty to indemnify because Lloyd's did owe PPS a duty to defend and that genuine issues of material fact existed as to Lloyd's duty to defend. We affirm.
Factual and Procedural Background
Lloyd's issued a commercial general liability insurance policy (the "Policy") to PPS. Under the terms of the Policy, Lloyd's agreed to pay for any sums that PPS became "legally obligated to pay as damages because of `bodily injury' or `property damage' to which the insurance applies." The Policy applied to bodily injury and property damage only if the injury or damage was caused by an "occurrence" during the policy period. The Policy defined occurrence to mean "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." The Policy excluded coverage for "`bodily injury' or `property damage' expected or intended from the standpoint of the insured" or for "any claim for loss or damage, including defense cost, involving construction defect(s) caused or contributed by the insured, employees of the insured or subcontractors of the named insured."
The policy period was from June 4, 2002 to June 4, 2003. There is no dispute that PPS installed the lavatories and that the plaintiff in the underlying lawsuit was injured during the policy period.
The underlying lawsuit arose out of PPS's installation of six lavatories in the restrooms of Sam's Irish Pub. PPS and Lloyd's appear to agree that, although the project specifications called for the lavatories to be installed on built-in counters, at least one of the lavatories was installed as a "wall-hung" lavatory. On October 6, 2002, after PPS completed the installation of the lavatories, the wall-hung lavatory fell and injured Ronna Pangarakis. Pangarakis filed suit against PPS, alleging that she "was seriously and permanently injured as a result of the negligence of [PPS]." Specifically, Pangarakis alleged
[PPS], in the course of its plumbing duties was to install a wall hung lavatory on the premises. [PPS] did not install the wall hung lavatory properly and as a result Ms. Pangarakis was injured. This failure to follow proper plumbing practices in installing the lavatory constitutes negligence.
Pangarakis made claims for medical expenses, physical pain and suffering, mental anguish, disfigurement, impairment, lost wages, and lost earning capacity.
Lloyd's filed this action seeking a declaration that it did not owe a duty to defend or a duty to indemnify PPS in the underlying lawsuit because the Policy did not provide coverage for an "expected or intended injury." Subsequently, Lloyd's filed its summary judgment motion, asserting that (1) there was not an "accident," and therefore not an "occurrence," within the coverage of the Policy because PPS's installation of the lavatory was intentional and voluntary and because Pangarakis's injuries were a natural result of PPS's intentional and voluntary conduct, (2) the Policy did not provide coverage because Pangarakis's injuries were "expected or intended," and (3) the Policy did not provide coverage because PPS's installation of the wall-hung lavatory constituted a "construction defect." Lloyd's further asserted that it did not owe a duty to indemnify PPS in the underlying lawsuit because there was no coverage for Pangarakis's claims.
In its response, PPS asserted that the claims in the underlying lawsuit were based in negligence, that Pangarakis did not allege intentional conduct, and that whether Pangarakis's injuries were "expected or intended" or caused by a "construction defect" were questions for the trier of fact. The trial court granted Lloyd's summary judgment motion.
Standard of Review
The well-settled standard of review for summary judgments applies to insurance coverage disputes. State Farm Fire Cas. Co. v. Vaughan, 968 S.W.2d 931, 933 (Tex. 1998). To prevail on a summary judgment motion, a movant has the burden of proving that it is entitled to judgment as a matter of law and that there is no genuine issue of material fact. Tex. R. Civ. P. 166a(c); Black v. Victoria Lloyds Ins. Co., 797 S.W.2d 20, 23 (Tex. 1990); Farah v. Mafrige Kormanik, P.C., 927 S.W.2d 663, 670 (Tex.App.-Houston [1st Dist.] 1996, no writ). We may affirm a summary judgment only when the record shows that a movant has disproved at least one element of each of the plaintiff's claims or has established all of the elements of an affirmative defense as to each claim. Farah, 927 S.W.2d at 670. When a summary judgment does not specify the grounds on which the trial court granted it, the reviewing court will affirm the judgment if any theory included in the motion is meritorious. Harwell v. State Farm Mut. Auto. Ins. Co., 896 S.W.2d 170, 173 (Tex. 1995); Summers v. Fort Crockett Hotel, Ltd., 902 S.W.2d 20, 25 (Tex.App.-Houston [1st Dist.] 1995, writ denied).
Duty to Defend
In construing the terms of an insurance contract, we apply the same rules of construction that we apply in interpreting any contract. Trinity Universal Ins. Co. v. Cowan, 945 S.W.2d 819, 823 (Tex. 1997); Grain Dealers Mut. Ins. Co. v. McKee, 943 S.W.2d 455, 458 (Tex. 1997). We must strive to give effect to the written expression of the parties' intent. State Farm Life Ins. Co. v. Beaston, 907 S.W.2d 430, 433 (Tex. 1995). When the terms of a policy to be construed are unambiguous, it is a court's duty to enforce the policy according to its plain meaning. See Grain Dealers Mut. Ins. Co., 943 S.W.2d at 458; Puckett v. U.S. Fire Ins. Co., 678 S.W.2d 936, 938 (Tex. 1984); Devoe v. Great Am. Ins., 50 S.W.3d 567, 571 (Tex.App.-Austin 2001, no pet.). The fact that the parties disagree as to the extent of coverage afforded under a policy does not create an ambiguity, McKee, 943 S.W.2d at 458, and extrinsic evidence may not be considered for the purpose of creating an ambiguity. Nat'l Union Fire Ins. Co. v. CBI Indus., Inc., 907 S.W.2d 517, 520 (Tex. 1995).
If a petition does not allege facts within the scope of coverage of an insurance policy, an insurer is not obligated to defend a suit against its insured. Am. Physicians Ins. Exch. v. Garcia, 876 S.W.2d 842, 847-48 (Tex. 1994). Generally, the insurer owes a duty to defend if there are allegations in the petition that potentially state a cause of action within the coverage of the policy. Nat'l Union Fire Ins. Co. v. Merchants Fast Motor Lines, Inc., 939 S.W.2d 139, 141 (Tex. 1997). In determining whether an insurer has a duty to defend its insured, Texas courts apply the "eight corners rule," which compares the allegations in the petition to the terms of the insurance policy. Nat'l Union, 939 S.W.2d at 141. We interpret the allegations liberally in favor of the insured, and any doubt as to whether the insurer has a duty to defend is resolved in favor of the insured. Id.; King v. Dallas Fire Ins. Co., 85 S.W.3d 185, 187 (Tex. 2002). "When an alleged contract ambiguity involves an exclusionary provision of an insurance policy, then we `must adopt the construction . . . urged by the insured as long as that construction is not unreasonable, even if the construction urged by the insurer appears to be more reasonable or a more accurate reflection of the parties' intent.'" Balandran v. Safeco Ins. Co. of Am., 972 S.W.2d 738, 741 (Tex. 1998) (quoting Nat'l Union Fire Ins. Co. of Pittsburgh, Pa. v. Hudson Energy Co., 811 S.W.2d 552, 555 (Tex. 1991)).
A court should focus on the underlying facts alleged rather than the legal theories asserted. Nat'l Union, 939 S.W.2d at 141. Furthermore, the allegations should be considered without reference to their truth or falsity, to what the parties know or believe to be true, or to a legal determination of those facts. See Argonaut Southwest Ins. Co. v. Maupin, 500 S.W.2d 633, 635 (Tex. 1973); Heyden Newport Chem. Corp. v. S. Gen. Ins. Co., 387 S.W.2d 22, 24 (Tex. 1965). A court may not consider evidence extrinsic to the allegations when deciding whether the insurer owes a duty to defend. Houston Petroleum Co. v. Highlands Ins. Co., 830 S.W.2d 153, 155 (Tex.App.-Houston [1st Dist.] 1990, writ denied). Neither facts ascertained before suit or in the process of litigation nor the ultimate outcome of the suit affects the duty to defend. Butler Binion v. Hartford Lloyd's Ins. Co., 957 S.W.2d 566, 568 (Tex.App.-Houston [14th Dist.] 1995, writ denied). Finally, a court may not read facts into the pleadings, look outside the pleadings, or imagine factual scenarios that might trigger coverage. Gehan Homes, Ltd. v. Employers Mut. Cas. Co., 146 S.W.3d 833, 838 (Tex.App.-Dallas 2004, pet. filed) (citing Nat'l Union, 939 S.W.2d at 142)).
In its third issue, PPS contends that the trial court erred in granting Lloyd's summary judgment motion on the grounds that Pangarakis's petition alleged a loss or damage involving a construction defect. PPS argues that the construction defect exclusion did not apply because Pangarakis's claims are for bodily injury and not for a construction defect, "the pleadings do not claim that the improper installation is a construction defect," and "an installation has nothing to do with a construction." PPS further asserts that characterizing the installation of a plumbing fixture as a construction defect would render the Policy illusory because it would negate coverage "for most of the work done by [PPS]." PPS also asserts that the construction defect exclusion applies only to contract claims and that applying the exclusion to the underlying claims would render the other exclusions in the Policy that apply to bodily injury or property damage surplusage.
PPS does not directly cite any specific other provisions that it contends are rendered surplusage by Lloyd's application of the construction defect exclusion.
First, we note that PPS's and Lloyd's disagreement as to the meaning of the construction defect exclusion does not in itself create an ambiguity. Mckee, 943 S.W.2d at 958. Rather, we look to the terms of the Policy as the written expression of the parties' intent. Beaston, 907 S.W.2d at 433. The Policy provides that coverage is excluded for "any claim for loss or damage, including defense cost, involving construction defect(s) caused or contributed by the insured, employees of the insured or subcontractors of the named insured." (Emphasis added.)
Pangarakis alleged that she was injured as a result of PPS's negligence in installing a lavatory. The construction defect exclusion contains no language limiting its application to certain types of claims, i.e. contract claims, or certain types of damages, i.e. property damage. Rather, the exclusion broadly applies to "any claim for loss or damage." Thus, Pangarakis's claim seeking recovery for bodily injury allegedly caused by PPS's negligent installation is a claim for "damage" to which the exclusion applies. PPS's argument that the exclusion does not apply because "installation has nothing to do with construction" necessarily fails. The Policy provides no definition for the term "construction defect," and we must give the term its plain meaning. Tumlinson v. St. Paul Ins. Co., 786 S.W.2d 406, 408 (Tex.App.-Houston [1st Dist.] 1990, writ denied). "Construction" is defined as "the act of constructing." The [Compact] Oxford English Dictionary 322 (2d ed. 1993). "Construct" is defined as "make by fitting parts together; build, erect." Id. While Pangarakis's petition alleges negligence in regard to PPS's installation of the lavatory, Pangarakis's use of the word "installation" is not so restrictive as to except her claims from the application of the construction defect exclusion. Regardless of the specific word used by Pangarakis, the factual allegations in her petition establish that she is essentially alleging that PPS negligently constructed, built, or assembled the lavatory in question. By including within the Policy a construction defect exclusion, which by its terms applies to any claim for loss or damage involving a construction defect caused by the insured, the insured's employees, or the insured's subcontractors, the parties intended to exclude from coverage any claims for loss or damage arising out of PPS's construction, assembly, or installation of plumbing fixtures. There is nothing in the construction defect exclusion suggesting that the exclusion does not apply to a claim for bodily injury as a result of PPS's negligent or substandard "installation" of a lavatory. While we recognize that we must adopt the construction urged by the insured as long as that construction is not unreasonable, we conclude that the the construction proffered by PPS is unreasonable.
We note that the Texas Residential Construction Liability Act defines "construction defect" as "a matter concerning the design, construction, or repair of a new residence, of an alteration or repair or addition to an existing residence, or of an appurtenance to a residence, on which a person has a complaint against a contractor. The term may include any physical damage to the residence, any appurtenance, or the real property on which the residence and appurtenance are affixed proximately caused by a construction defect." Tex. Prop. Code Ann. § 27.001(4) (Vernon Supp. 2004-2005). We also note that the Texas Residential Construction Commission Act defines "construction defect" as "(1) the failure of the design, construction, or repair of a home, an alteration of or a repair, addition, or improvement to an existing home, or an appurtenance to a home to meet the applicable warranty and building and performance standards during the applicable warranty period; and (2) any physical damage to the home, an appurtenance to the home, or real property on which the home or appurtenance is affixed that is proximately caused by that failure." Id. § 401.004(a).
The parties do not cite to any cases interpreting a similar construction defect exclusion, and it appears that no other Texas court has specifically addressed the scope of claims covered by such an exclusion.
"Install" is defined as "to place in position for service or use." The [Compact] Oxford English Dictionary 857 (2d ed. 1993).
In regard to PPS's argument that the application of the construction defect exclusion to Pangarakis's claim renders the Policy illusory, Lloyd's notes multiple other circumstances when the Policy would likely apply. For example, Lloyd's concedes that if a person was injured while on PPS's premises or if a PPS employee dropped a piece of equipment on a third party while performing work, the Policy would likely provide coverage.
We hold, as a matter of law, that Pangarakis's alleged injuries constitute a loss or damage involving a construction defect caused or contributed by PPS or its employees and that, consequently, the construction defect exclusion unambiguously applies to the underlying claims. Accordingly, we further hold that the trial court did not err in granting Lloyd's summary judgment motion on the grounds that Lloyd's did not owe PPS a duty to defend. See Clemons v. State Farm Fire Cas. Co., 879 S.W.2d 385, 391 (Tex.App.-Houston [14th Dist.] 1994, no writ) ("if the petition only alleges facts excluded by the policy, then the insurer is not required to defend").
PPS also argues that "fairness demands that Lloyd's defend this action," and emphasizes that in determining the duty to defend, an insurance policy must be liberally interpreted in favor of the insured. PPS notes that interpreting policies in favor of insurers would "render insurance coverage illusory for many of the things for which insureds commonly purchase insurance." See Trinity Universal Ins. Co. v. Cowan, 945 S.W.2d 819, 828 (Tex. 1997). However, we have held that the "construction defect" exclusion unambiguously applies to the underlying suit, and we conclude that the allegations contained in Pangarakis's petition "do not create that degree of doubt which compels resolution of the issue for the insured." Nat'l Union Fire Ins. Co. v. Merchants Fast Motor Lines, Inc., 939 S.W.2d 139, 142 (Tex. 1997).
We overrule PPS's third issue.
Duty to Indemnify
In its fourth and fifth issues, PPS argues that the trial court erred in granting Lloyd's summary judgment motion on the grounds that it did not owe a duty to indemnify PPS because the trial court's ruling that there was no duty to indemnify was premature and that genuine issues of material fact existed as to Lloyd's duty to indemnify.
A duty to indemnify is separate and distinct from a duty to defend. Archon Invs., Inc. v. Great Am. Lloyds Ins. Co., No. 01-03-01299-CV, 2005 WL 2037177, at *4 (Tex.App.-Houston [1st Dist.] Aug. 25, 2005, no pet.) (citing Great Am. Ins. Co. v. Calli Homes, 236 F. Supp. 2d 693, 697 (S.D. Tex. 2002)). The duty to indemnify is not based on the pleadings, but on the facts that establish liability. Id. The duty arises only after the insured has been adjudicated legally responsible for damages in a lawsuit by judgment or settlement. Id.; see also Hartrick v. Great Am. Lloyds Ins. Co., 62 S.W.3d 270, 275 (Tex.App.-Houston [1st Dist.] 2001, no pet.) (noting that duty to indemnify arises from proven, adjudicated facts). When a court determines that there is a duty to defend, a ruling on the duty to indemnify is premature. Gehan Homes, Ltd., 146 S.W.3d at 846. However, the duty to indemnify is justiciable before the insured's liability is determined when the insurer has no duty to defend and the same reasons that negate the duty to defend likewise negate any possibility the insurer will ever have a duty to indemnify. Farmers Tex. County Mut. Ins. Co. v. Griffin, 955 S.W.2d 81, 84 (Tex. 1997). If a court determines an insurer has no duty to defend, then the insurer has no duty to indemnify. Archon Invs., Inc., 2005 WL 2037177, at *4.
Having held that Lloyd's did not owe PPS a duty to defend PPS in the underlying lawsuit, and because the same reasons that negate Lloyd's duty to defend likewise negate any possibility that Lloyd's will ever have a duty to indemnify PPS for the underlying claims, we further hold that the trial court did not err in granting Lloyd's summary judgment motion on the grounds that it did not owe PPS a duty to indemnify.
We overrule PPS's fourth and fifth issues.
Conclusion
Having held that the trial court did not err in granting Lloyd's summary judgment motion on the grounds that it did not owe a duty to defend or a duty to indemnify PPS from the underlying claims because the construction defect exclusion unambiguously applies to the underlying claims, we need not address PPS's first and second issues.
We affirm the judgment of the trial court.