Employers Cas. Co. v. Block
| Decision Date | 24 February 1988 |
| Docket Number | No. C-6224,C-6224 |
| Parties | EMPLOYERS CASUALTY COMPANY, Petitioner, v. George BLOCK, et ux., Respondents. |
| Court | Texas Supreme Court |
Our opinion of January 6, 1988 is withdrawn and the following is substituted.
This case involves a claim for insurance proceeds resulting from an alleged breach of an insurance contract. The trial court granted the homeowners' motion for directed verdict in regard to the insurer's wrongful failure to defend, but granted the insurer's motion for judgment notwithstanding the verdict and rendered a take-nothing judgment against the homeowners. A divided court of appeals reversed and rendered, holding that once the issue of wrongful failure to defend was determined against the insurer, the agreed judgment between the insured and the homeowners could not be collaterally attacked. Further, the court of appeals held that the insurer was precluded from contesting liability based upon a coverage question because it failed to affirmatively plead that the damaging event did not occur during the policy period. 723 S.W.2d 173. For reasons different from those expressed by the court of appeals, we affirm.
In 1977, Coating Specialists Inc. (CSI) installed a monoflex roof on a house in San Antonio, Texas. George and Margie Block purchased the home in February 1978. In August of 1979, the Blocks discovered that the roof was leaking. CSI repaired the roof and resprayed it with plastic coating between September and November of 1979. No further leaking problems occurred until August 1980 when hurricane Allen caused heavy rainfall in the San Antonio area. Although the Blocks subsequently had their roof inspected and tried to have the leaking stopped, they were unsuccessful. In August of 1981, an inspector informed them that the roof needed to be repaired due to leaks which had allowed water to collect in the insulation and exterior walls of their house.
In June of 1982, the Blocks brought an action against CSI under the Deceptive Trade Practices Act and for breach of express and implied warranties. CSI had a Texas multi-peril policy of insurance issued by Employers Casualty Company (Employers Casualty). The policy insured CSI for property damage occurring between August 1, 1980 and August 1, 1981. CSI notified Employers Casualty of the suit, but Employers Casualty refused to defend on the ground that the damaging event had not occurred during the policy period.
The Blocks and CSI subsequently entered into a settlement agreement whereby an agreed judgment for $47,500 plus interest and attorneys' fees was rendered in favor of the Blocks. The agreed judgment also recited that the Blocks' house was damaged as a result of an occurrence on August 6, 1980, and that the damages were sustained as a result of the breach of warranties by CSI.
CSI then filed this suit against Employers Casualty, with the Blocks intervening as judgment creditors, for breach of the insurance contract alleging a wrongful failure to defend. Following a bench trial, the trial court held that Employers Casualty was liable for the costs CSI incurred in defending the Blocks' suit and for the damages sustained by the Blocks. However, at a subsequent hearing on a Motion for Judgment, the trial court decided that CSI was required to prove the reasonableness of the agreed judgment, and rendered judgment that the Blocks should take nothing. The trial court granted both parties' motion for new trial.
Thereafter, CSI settled its claim against Employers Casualty for wrongful refusal to defend, and the Blocks proceeded to trial against Employers Casualty as judgment creditors and assignees of CSI. The basic issue before the trial court was the reasonableness of the damages recited in the agreed judgment. The jury answered issues finding the amounts reasonable. Employers Casualty filed a motion for judgment non obstante veredicto alleging that there was no jury finding that the damages in the agreed judgment were covered by the insurance policy. After notice and hearing, the trial court granted the motion and rendered judgment for Employers Casualty and that the Blocks take nothing. The Blocks timely appealed to the court of appeals.
With one justice dissenting, the court of appeals concluded that once it was determined that Employers Casualty wrongfully failed to defend its insured, Employers Casualty was barred from collaterally attacking the final agreed judgment. The court further held that those matters recited in the agreed judgment were binding and conclusive as against Employers Casualty in the present suit. Therefore, because the agreed judgment recited that the damage occurred on August 6, 1980, the court of appeals held that Employers Casualty could not contest that fact in this proceeding.
Additionally, the court of appeals held that the Blocks were not required to obtain a jury finding that their damage occurred during the policy period because Employers Casualty failed to affirmatively plead, as required by Tex.R.Civ.P. 94, that the damage did not occur during the policy period. The court of appeals further held that there was sufficient evidence to support an implied finding that the damaging event occurred within the coverage period.
While we agree with the court of appeals' conclusion that Employers Casualty was barred from collaterally attacking the agreed judgment by litigating the reasonableness of the damages recited therein, Ranger Insurance Co. v. Rogers, 530 S.W.2d 162 (Tex.Civ.App.--Austin 1975, writ ref'd n.r.e.), and St. Paul Insurance Co. v. Rahn, 641 S.W.2d 276 (Tex.App.--Corpus Christi 1982, no writ), we do not agree with its conclusion that the recitation in the agreed judgment that the damage resulted from an occurrence on August 6, 1980 is binding and conclusive against Employers Casualty in the present suit. The court of appeals' position is not consistent with existing case law. See Hargis v. Maryland American General Ins. Co., 567 S.W.2d 923 (Tex.Civ.App.--Eastland 1978, writ ref'd n.r.e.).
In Hargis, two employees sued Hermetic Company, Inc. for damages they sustained, and Hermetic's insurer, Maryland...
To continue reading
Request your trial
-
Simco Enterprises, Ltd. v. James River Ins. Co.
...it proves its damages are covered by the policy." Comsys Info. Tech. Servs., Inc., 130 S.W.3d at 198 (citing Employers Cas. Co. v. Block, 744 S.W.2d 940, 944 (Tex.1988), overruled in part on other grounds by Gandy, 925 S.W.2d at 714); accord Lambrecht & Assoc., Inc. v. State Farm Lloyds, 11......
-
Eagle Properties, Ltd. v. Scharbauer
...cannot be asserted against a party who was not a party or in privity with a party in the prior litigation. See Employers Casualty Co. v. Block, 744 S.W.2d 940 (Tex.1988); Bonniwell, 663 S.W.2d 816; Wilhite v. Adams, 640 S.W.2d 875 (Tex.1982); Benson, 468 S.W.2d 361. Similarly, the U.S. Supr......
-
In re Eastern Transmission Corp.
...law, the insured bears the burden of establishing that the claimed loss is within the coverage of the policy. Employers Casualty Co. v. Block, 744 S.W.2d 940, 944 (Tex.1988). The insured also bears the burden of proving that it complied with all conditions precedent to coverage. Trevino v. ......
-
Avila v. St. Luke's Lutheran Hosp.
...255 (Tex.App.--San Antonio 1995, writ denied); Block v. Employers Cas. Co., 723 S.W.2d 173, 177 (Tex.App.--San Antonio 1986), aff'd 744 S.W.2d 940 (1988). She further states that the prior consent judgment is conclusive as to the matters adjudicated and entitled to full effect. Avila howeve......