Construction-Defect Suits, Texas

[David Banks]

This from recent JLC article.
Insurers Can't Duck Construction-Defect Suits, Texas Court Rules
Texas builders are hailing a ruling by the state Supreme Court that insurance companies must defend commercial general liability (CGL) policyholders against homeowner lawsuits for alleged construction defects.

The ruling came in the case of Lamar Homes vs. Mid-Continent Casualty Co., which originated with a lawsuit filed against the builder by two homeowners who sought to recover damages for foundation and wall cracks. Lamar's insurer refused to defend the builder in court, arguing that its policy did not cover the defects at issue because they resulted from work performed by a subcontractor.

A lower court issued a judgment in favor of the insurance company, but in August the Supreme Court overturned the verdict, rejecting the insurance company's claim that language in the standard CGL policy, which appeared to extend coverage to the work of subs, did not apply. "Texas law," the court noted, "... requires that insurance policies be written in English, preferably plain English, not code." Under the court's interpretation of the law, insurers that fail to provide a defense when required are subject to an 18 percent annual penalty plus attorney's fees.

On the face of it, the ruling appears to be a significant victory for Texas builders. But Scott Norman, vice president and general counsel for the Austin-based Texas Association of Builders, expects most insurers to reword their policies to exclude defective work by subs. It's also possible, he says, that the premiums builders pay for CGL policies will increase.

Still, Norman says, "We applaud the court for saying that the policy means what it says. We know that insurers have to price their policies based on risk, but we think they should be clear on what those policies really cover." — J.V.

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[Richard Rushing]

You can bet your sweet bippie that the insurance carriers will change the wording of their policies.

They have the option of policy change at any-time and for any-reason, with or without notice.

rr

[Jerry Peck]

GL does not cover "defects", it covers the builder for when is crane topples over onto his clients Mercedes.

Or when the house falls in on the Porsche ... not because the house fell in, but because it damaged the Porsche.

Right?