Cullen/Frost Bank of Dallas, N.A. v. Commonwealth Lloyd's Ins. Co.

• Decision Date: 19 February 1993
• Docket Number: No. 05-91-00755-CV,05-91-00755-CV
• Citation: 852 S.W.2d 252
• Parties: CULLEN/FROST BANK OF DALLAS, N.A., Appellant, v. COMMONWEALTH LLOYD'S INSURANCE COMPANY and United States Fire Insurance Company, Appellees.
• Court: Texas Court of Appeals

Page 252

852 S.W.2d 252

CULLEN/FROST BANK OF DALLAS, N.A., Appellant, v. COMMONWEALTH LLOYD'S INSURANCE COMPANY and United States Fire Insurance Company, Appellees.

No. 05-91-00755-CV.

Court of Appeals of Texas Dallas.

Feb. 19, 1993.

Rehearing Denied April 14, 1993.

Joseph E. Burns, Jerome B. Ferguson, III, Dallas, for appellant.

Kevin J. Cook, James D. Stanton, DeHay & Blanchard, L.L.P., Dallas, for State.

Before THOMAS, OVARD and MALONEY, JJ.

OPINION

THOMAS, Justice.

This is a declaratory-judgment action concerning an insurer's duty to defend an insured. The trial court granted summary judgment in favor of Commonwealth Lloyd's Insurance Company (Commonwealth) and United States Fire Insurance Company (U.S. Fire), ¹ finding that they had no duty to defend Cullen/Frost Bank of Dallas (Bank). Bank asserts nine points of error generally complaining that the trial court erred by granting the summary judgment, entering a take-nothing judgment against Bank on its counterclaim, and overruling its motion for new trial. We agree that the trial court erred in granting Insurers' motion for summary judgment and in rendering a take-nothing judgment against Bank on its counterclaim for a defense. Accordingly, we reverse the trial court's judgment and remand the cause for further proceedings consistent with this opinion.

FACTUAL BACKGROUND

In October 1982, Bank foreclosed on nine units of a ten-unit condominium project known as 3710 Holland Condominiums (the property). Bank began selling individual units in May 1983. On September 23, 1987, various condominium owners who had purchased their units from Bank in 1984 and 1985 filed a lawsuit styled Norman T. and Carolyn H. Tompkins, Darrell and Dixie Wright, Jordan Thomas, Douglas Crowder and Robert Peinado, Jr. v. Cullen/Frost Bank of Dallas, N.A., Cause No. 87-12836-F, in the 116th District Court of Dallas County, Texas (the Tompkins suit). The second amended petition ² in the Tompkins suit asserted the following claims: (1) section 17.50(a) of the Deceptive Trade Practices-Consumer Protection Act (DTPA) for false, misleading, or deceptive representations because the quality of the property sold to them did not conform to the quality represented; (2) breach of express or implied warranties because the condominiums delivered did not conform to the representations made; (3) rescission; and (4) negligence in disbursing funds for construction of the property and in failing to correct the alleged defects in the property. The Tompkins plaintiffs sought to recover the cost to repair the defects or, alternatively, the difference in market value between the condominiums as represented and as delivered, plus treble damages under DTPA, and attorney's fees. Robert D. Armstrong subsequently intervened as a plaintiff in the Tompkins suit. He alleged essentially the same claims and damages.

Bank notified Insurers of the Tompkins suit and demanded a defense and indemnity under three Commonwealth policies and two U.S. Fire policies. Insurers notified Bank that, in their opinion, the allegations in the Tompkins suit were not within the coverage of the policies or, alternatively, were excluded from coverage. Insurers then filed this action for a declaratory judgment that they had no duty to defend Bank in the Tompkins suit. Bank counterclaimed for a defense and indemnity. The trial court granted Insurers' motion for summary judgment finding that, as a matter of law, Insurers had no duty to defend Bank in the Tompkins suit.

DUTY TO DEFEND

In the first five points of error, Bank argues that the trial court erred in granting Insurers' motion for summary judgment. In reviewing a summary-judgment record, this Court applies the following standards:

1. The movant for summary judgment has the burden of showing that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law.

2. In deciding whether there is a disputed material fact issue precluding summary judgment, evidence favorable to the non-movant will be taken as true.

3. Every reasonable inference must be indulged in favor of the non-movant and any doubts resolved in his favor.

Nixon v. Mr. Property Management Co., 690 S.W.2d 546, 548-49 (Tex.1985). For the plaintiff as movant to prevail on summary judgment, it conclusively must prove all of the elements of its cause of action as a matter of law. Cluett v. Medical Protective Co., 829 S.W.2d 822, 825 (Tex.App.--Dallas 1992, writ denied). A matter is conclusively established if ordinary minds cannot differ as to the conclusion to be drawn from the evidence. Triton Oil & Gas Corp. v. Marine Contractors & Supply, Inc., 644 S.W.2d 443, 446 (Tex.1982). In a summary-judgment case, the question on appeal is whether the summary-judgment proof establishes, as a matter of law, that there is no genuine issue of material fact as to one or more of the essential elements of the cause of action. Gibbs v. General Motors Corp., 450 S.W.2d 827, 828 (Tex.1970).

When determining an insurer's duty to defend its insured, Texas courts follow the "eight corners" rule. Under this rule, we look only to the pleadings and the insurance policy to determine whether the duty to defend exists. Cluett, 829 S.W.2d at 829. The duty to defend is not affected by the facts of the case ascertained before, during, or after the suit. Cluett, 829 S.W.2d at 829 (citing American Alliance Ins. Co. v. Frito-Lay, Inc., 788 S.W.2d 152, 154 (Tex.App.--Dallas 1990, writ dism'd)). We do not consider the truth or falsity of the allegations in the underlying pleadings. Argonaut S.W. Ins. Co. v. Maupin, 500 S.W.2d 633, 635 (Tex.1973). The duty to defend arises if the factual allegations against the insured, when fairly and reasonably construed, state a cause of action potentially covered by the policy. Norvell Wilder Supply Co. v. Employers Casualty Co., 640 S.W.2d 338, 339, 340 (Tex.App.--Beaumont 1982, writ dism'd). In determining the applicability of provisions of the policy, we focus on the facts that show the origin of the damages, not the legal theories asserted for recovery. Continental Casualty Co. v. Hall, 761 S.W.2d 54, 56 (Tex.App.--Houston [14th Dist.] 1988, writ denied), cert. denied, 495 U.S. 932, 110 S.Ct. 2174, 109 L.Ed.2d 503 (1990). If a petition against an insured alleges only facts that are not covered by the policy, the insurer is not required to defend. Fidelity & Guar. Ins. Underwriters v. McManus, 633 S.W.2d 787, 788 (Tex.1982). In determining whether the allegations in the underlying petition fall within the provisions of the insurance policy, we indulge a liberal interpretation of the meaning of those allegations. Mary Kay Cosmetics, Inc. v. North River Ins. Co., 739 S.W.2d 608, 612 (Tex.App.--Dallas 1987, no writ). Any doubt as to whether the complaint states a covered cause of action is resolved in the insured's favor. Cluett, 829 S.W.2d at 829.

Insurers alleged that they were entitled to summary judgment because the allegations in the Tompkins suit: (1) fail to allege "property damage" or an "occurrence" as the terms are defined in the policies; (2) fall within the exclusions for alienated property and completed operations; and (3) fail to come within the policy periods of three of the five policies at issue. Because the trial court's judgment does not state the grounds upon which the summary-judgment motion was granted, Bank must show that each ground alleged in the motion is insufficient to support summary judgment. International Union UAW Local 119 v. Johnson Controls, Inc., 813 S.W.2d 558, 565 (Tex.App.--Dallas 1991, writ denied). In points of error two through five, Bank separately challenges the granting of summary judgment on each of the grounds raised by Insurers' motion for summary judgment. ³

A. The Policies

Five policies are at issue. Commonwealth issued three policies for the period beginning February 15, 1983 through November 6, 1987. U.S. Fire issued two policies for the period beginning November 6, 1987 through November 6, 1989. Commonwealth's policies are the older, comprehensive-general-liability forms, while the U.S. Fire policies are new forms. Although there are differences in language between the old and new forms, for purposes of this appeal, both parties essentially treat the relevant provisions the same.

The insuring agreements in all of the policies provide, in pertinent part, that Insurers will pay for property damage caused by an occurrence. The policies define "property damage" and "occurrence." All of the policies exclude liability for property damage arising out of property alienated by Bank. With the exception of the period from April 9 to November 6, 1987, the policies also exclude coverage for property damage occurring after the insured's operations have been completed or abandoned and away from the insured's premises. The property is listed as an insured premises.

B. Property Damage

In the second point of error, Bank contends that the trial court erred in granting summary judgment on the ground that the petition in the Tompkins suit failed to allege property damage. It argues that the Tompkins plaintiffs alleged recurring and continuous injury to their property.

"Property damage" is defined under the three Commonwealth policies as follows:

(1) Physical injury to or destruction of tangible property which occurs during the policy period, including the loss of use thereof at any time resulting therefrom, or (2) loss of the use of tangible property which has not been physically injured or destroyed provided such loss of use is caused by an occurrence during the policy period.

Under the U.S. Fire policies, "property damage" means: "a. Physical injury to tangible property, including all resulting loss of use of that property; or b. Loss of use of tangible property that is not physically injured."

The Tompkins plaintiffs alleged, among other things, drainage problems in the garage floor, excessive floor displacement, warped and...