Insurance Defense

Update on Recent Insurance Law Decisions

There have been a number of recent court decisions and developments which are of potential significance to the practice of insurance law. These involve the duty to defend, coverage for corporations in defamation matters, worker’s compensation, proof of the existence of specific types of insurance and expert testimony.

Always, each case involves different facts and law, and accordingly the following must be taken for general information purposes only, rather than for action upon any specific fact situation.

CGL Insurance- The Duty to Indemnify is Not Dependent on the Duty to Defend:

In D.R. Horton-Texas, Ltd. v. Markel International Insurance Co., Ltd., 06-1018 (Tex. 2009), the Supreme Court held that the duty to indemnify is not dependent on the duty to defend and that an insurer may have a duty to indemnify its insured even if the duty to defend never arises. Thus, even if there is no duty to defend under the pleadings, an insurer’s duty to indemnify may exist and will depend on the facts proven at trial and whether the damages caused by the insured’s acts or omissions proven are covered by the terms of the policy. In this case, the insurer settled the Plaintiff’s claim before trial of the liability issue. Nonetheless, the Supreme Court held that “In determining coverage, a matter dependent on the facts and circumstances of the alleged injury-causing event, parties may introduce evidence during coverage litigation to establish or refute the duty to indemnify,…” and especially in situations where, as in the case at issue, the underlying liability dispute is resolved before a trial on the merits and there was no opportunity to develop the coverage evidence in the underlying litigation.

Failure to Obtain Insurance- Proof of Causation Required:

In Metro Allied Insurance Agency, Inc. v. Lin, 07-1032 (Tex. 2009), the Supreme Court addressed proof of causation required to establish liability for a party’s failure to procure insurance, and held that under both negligence and Texas Deceptive Trade practices Act theories, a plaintiff must prove the availability of coverage which would have covered the plaintiff’s damages, through proof of existing policy terms, or by other evidence that the proposed insurance agreement was available in the market, or by expert testimony to that effect.

Products Liability- Sufficiency of Expert Testimony:

In Whirlpool Corporation v. Camacho, 08-0175 (Tex. 2009), the Supreme Court discussed in detail the plaintiff’s expert’s testimony, and reversed a judgment in favor of plaintiff, noting that the trial court must evaluate an expert’s testimony by considering both our Robinson-type factors and examining an expert’s testimony for analytical gaps in his testimony, since “in very few cases will the evidence be such that the trial court’s reliability determination can properly be based only on the experience of a qualified expert to the exclusion of factors such as those set out in Robinson, or, on the other hand, properly be based only on factors such as those set out in Robinson to the exclusion of considerations based on a qualified expert’s experience.”

Workers Compensation- Subscribing Employers- General Contractor- Owner Controlled Insurance Program (“OCIP”):

In HCBeck Ltd. v. Rice, 06-0418 (Tex. 2009), the Supreme Court dealt with the extent to which a general contractor must “provide” workers’ compensation insurance to qualify for statutory employer status and the resulting immunity from work-related claims of a subcontractor’s employee. Dealing with an “owner controlled insurance program” (“OCIP”) the Supreme Court held that a general contractor “provides” workers compensation insurance, and is thus statutorily insulated from liability, where the OCIP is incorporated into both the general contractor’s upstream contract with the owner and into the general contractors downstream subcontract, provided that the contract specifies that the general contractor is ultimately responsible for obtaining alternate workers compensation insurance in the event that the owner terminates the OCIP.

Such is the case even though the general contractor did not pay any workers compensation premiums for the injured subcontractor’s employee, those premiums having been paid by the owner under the OCIP.

Defamation- Coverage Excluded for Corporation Based Upon Knowledge of its Officers and Employees:

In Chrysler Insurance Company v.Greenspoint Dodge of Houston, Inc., 08-0780 (Tex. 2009), the Supreme Court dealt with an insurance policy’s exclusion of coverage for defamatory statements where made by an insured with knowledge of the statement’s falsity. The Supreme Court held that a corporation’s knowledge is not limited to what its officers know, but may include the knowledge of other employees, if those employees are corporate-vice principals. Thus, where corporate employees were found to be “vice-principals” of the corporation, the corporation thus “knew,” through its vice principals, that the defamatory remarks were false when made, and such knowledge by the corporation, as the named insured, was sufficient to invoke the “known-falsity exclusion.” Accordingly the policy in question did not provide liability coverage for the underlying defamation claim.

By H. Norman Kinzy and Oliver Krejs

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