Eight Corners Rule Concludes Policy and Suit Establish No Occurrence
Michelle Latray appealed the trial court’s rendition of summary judgment in favor of Colony Insurance Company d/b/a Colony Specialty Insurance Company (hereinafter “Colony”). In Michelle Latray As Receiver Of The Assets Of Clifton Boatright For The Benefit Of Judgment Creditors W.L. Roberts, Dana Roberts, Erin Leigh Roberts, And Katelyn Roberts Gonzales v. Colony Insurance Company D/B/A Colony Specialty Insurance Co., No. 07-19-00350-CV, Court of Appeals Seventh District of Texas at Amarillo (January 11, 2021) was asked to determine if an intentional act alleged in suit was sufficient to refuse both defense and indemnity to the bankrupt insured.
Boatright dumped debris onto property owned by W.L. Roberts and others. The City of Kosse hired Boatright to demolish the town’s old high school. Their agreement included Boatright’s removal and disposal of the debris resulting from the demolition. Their agreement also required Boatright to obtain a policy of liability insurance prior to the commencement of demolition. An agent for Colony issued a policy covering the planned operations.
David Garrett, a friend of Boatright’s and a long-time tenant on the Roberts’ property, asked Boatright if he could take some of the debris to use for purposes of erosion control. According to Boatright, he mistakenly believed the property on which Garrett wished to place the debris belonged to Garrett when, in fact, the property belonged to the Robertses. Neither Garrett nor Boatright sought the Roberts’ permission before placing the debris on the property.
Garrett and Boatright, without the consent of the property owner, took debris from the demolition site and placed it on the Roberts’ property. By the end of the project, Garrett and Boatright had placed forty tons of debris on the Roberts’ property. When W.L. Roberts discovered the debris on his property, he filed suit against Boatright and others for illegal dumping and damage to his land. Roberts subsequently obtained a judgment against Boatright for $50,000, plus $309 in court costs.
Latray sought relief under the insurance policy issued to Boatright by Colony. When Colony denied that coverage, Latray sued Colony for breach of contract, violation of the Deceptive Trade Practices Act (“DTPA”), violation of section 541 of the Texas Insurance Code, and breach of the common law duty of good faith and fair dealing. Colony argued that because Boatright’s actions were intentional, the policy did not cover Boatright’s acts and thus, it had no duty to defend nor indemnify.
The trial court granted Colony’s motion for summary judgment and denied Latray’s motion for partial summary judgment.
ISSUE ONE—DUTY TO DEFEND
Whether an insurance carrier owes a duty to defend a claim being made against an insured under an insurance policy is a question of law. Initially, the insured bears the burden of establishing coverage under the terms of the insurance policy in question. To avoid liability and a duty to defend, the insurer then has the burden to plead and prove that the loss falls within an exclusion to the policy’s coverage.
Specifically, the acts sued upon must fall within the policy coverage before a duty to defend arises. An insurer does not owe a duty to defend an insured unless the suit contains allegations of fact which fall within the scope of coverage provided for in the policy of insurance.
Texas appellate courts apply the “eight corners rule,” also known as the “complaint allegation rule” to determine the existence of a duty to defend. The court considers the allegations in the suit in light of the policy terms without considering either the truth or falsity of the allegations or what the parties know or believe the true facts to be. An appellate court may not look outside the pleadings and the policy of insurance in its assessment of whether there is a duty to defend.
Generally, the insurer is obligated to defend if there is, potentially, an action alleged within the policy coverage, even if the allegations do not clearly show there is coverage.
The policy in question defines an “occurrence” as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” “Accident” is not defined in the policy. However, the Texas Supreme Court has stated that an injury is accidental if “from the viewpoint of the insured, [it is] not the natural and probable consequence of the action or occurrence which produced the injury; or in other words, if the injury could not reasonably be anticipated by insured, or would not ordinarily follow from the action or occurrence which caused the injury.” [Lennar Corp. v. Great Am. Ins. Co., 200 S.W.3d 651, 663 (Tex. App.—Houston [14th Dist.] 2006, pet. denied) (citing Mid-Century Ins. Co. v. Lindsey, 997 S.W.2d 153, 155 (Tex. 1999) (quoting Republic Nat’l Life Ins. Co. v. Heyward, 536 S.W.2d 549, 557 (Tex.1976)).]
The terms of the policy establish that it does not cover intentional acts. Because there was no occurrence, there was no coverage. And because there was no coverage, Colony was under no duty to defend Boatright in the claims brought by Latray.
ISSUE TWO—DUTY TO INDEMNIFY
The damage was not an accident or occurrence within the meaning of the policy. There is not an accident when the action is intentionally taken and performed in such a manner that it is an intentional tort, regardless of whether the effect was unintended or unexpected. However, there is an accident when the action is intentionally taken but is performed negligently and the effect is not what would have been intended or expected had the deliberate action been performed non-negligently.
The undisputed evidence in the record shows Boatright intended to move the debris onto the Roberts’ property and he intended to leave it there. Furthermore, there were no allegations that Boatright was negligent in the performance of those acts. The damage sustained was the consequence of the simple presence of the debris on the Roberts’ land. Boatright intentionally removed the debris and placed it on the Roberts’ property—under the mistaken belief he had permission to do so—resulting in damage to the property from the mere presence of the debris itself, not some unintended consequence of Boatright’s intentional act.
The Court of Appeal concluded that Boatright acted intentionally even if he did not intend the result, i.e., to injure the Robertses. But Boatright’s error is not relevant to whether Boatright’s actions were intentional and thus not covered by the terms of the policy. On the contrary his erroneous conclusion did not change the fact that he intended to dump the debris on the Robert’s property.
Therefore, the trial court did not err in granting summary judgment in favor of Colony because there was no duty to indemnify under these facts. Under the express terms of the policy there was no coverage.
The Eight Corners rule, that I have never liked, limits the court to the allegations of the suit and the wording of the policy, when deciding to defend an insured. The suit alleged the intent to dump and the policy refused to defend anyone whose intentional acts caused damage. There was no question Boatright intended to dump the debris on Roberts’ property and, therefore, there was no “occurrence” and no duty to defend or indemnify.
© 2020 – Barry Zalma
Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and email@example.com.
Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.
Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.
Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921
Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts
Listen to the Podcast: Zalma on Insurance https://anchor.fm/dashboard/episodes Zalma on Insurance
Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg/
Go to the Insurance Claims Library –https://zalma.com/blog/insurance-claims-library/