Hallman v. All State Insurance Company

• Decision Date: 30 July 2003
• Docket Number: No. 05-02-00962-CV.,05-02-00962-CV.
• Citation: 114 S.W.3d 656
• Parties: RUTH HALLMAN, Appellant v. ALLSTATE INSURANCE COMPANY, Appellee.
• Court: Texas Supreme Court

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114 S.W.3d 656

RUTH HALLMAN, Appellant v. ALLSTATE INSURANCE COMPANY, Appellee.

No. 05-02-00962-CV.

Court of Appeals of Texas, Fifth District at Dallas.

Opinion filed July 30, 2003.

On Appeal from the 86^th Judicial District Court, Kaufman County, Texas, Trial Court Cause No. 58787.

REVERSED AND RENDERED IN PART AND REMANDED IN PART.

Before Justices James, Wright, and Lang.

OPINION

CAROLYN WRIGHT JUSTICE

Ruth Hallman appeals the trial court's summary judgment in favor of Allstate Insurance Company on the issues of duty to defend and the potential duty to indemnify. She also contends that she is entitled to reasonable and necessary attorney's fees incurred in defending against Allstate's claim for declaratory judgment and prosecuting her declaratory judgment claim against Allstate. Because we conclude the trial court's grant of summary judgment was improper, we reverse the trial court's judgment, render judgment on the coverage issue, and remand this case for further proceedings on the attorney's fees and costs issues.

BACKGROUND

Hallman owns property in Kaufman County, Texas. In 1995, she leased her property to certain companies to mine for limestone. In 1996, neighboring property owners sued Hallman and others for damages related to blasting and transporting the stone. Hallman made a claim to Allstate under her homeowner's insurance policy, requesting that Allstate defend and indemnify her in the mining litigation. Allstate agreed to defend Hallman, but then filed suit seeking a declaration of its rights under the insurance policy and seeking attorney's fees. Hallman responded and filed a counterclaim for declaratory judgment on the defense and indemnity issues and for attorney's fees. Allstate moved for summary judgment, asserting that the allegations in the underlying lawsuit were not covered because those allegations did not state a claim for bodily injury or property damage caused by an "occurrence" as defined by the policy. Further, even if coverage were triggered, Allstate asserted coverage was barred by the "business pursuits" exclusion. Hallman filed a motion for partial summary judgment and for attorney's fees, contending that she was entitled to a defense because the allegations came within the policy's definition of "occurrence"as an "accident." The trial court granted Allstate's motion for summary judgment, denied Hallman's motion, and subsequently signed a final order denying the attorney's fees requests. On appeal, Hallman contends that the trial court erred in granting Allstate's motion for summary judgment and in denying her motion for summary judgment. According to Hallman, Allstate has a duty to defend her in the underlying litigation as a matter of law and requests a ruling that she is entitled to attorney's fees incurred in defending against Allstate's claim for declaratory judgment and in prosecuting her declaratory judgment claim.

STANDARD OF REVIEW

The standard for reviewing a summary judgment is well established. See Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 548-49 (Tex. 1985). A party moving for summary judgment has the burden of showing no genuine issue of material fact exists and it is entitled to judgment as a matter of law. See Tex. R. Civ. P. 166a(c); Swilley v. Hughes, 488 S.W.2d 64, 67 (Tex. 1972). A matter is conclusively established if ordinary minds could not 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). When both parties move for summary judgment and the trial court grants one motion and denies the other, we review the summary judgment evidence presented by both sides, determine all questions presented, and render such judgment as the trial court should have rendered. Comm'rs Court v. Agan, 940 S.W.2d 77, 81 (Tex. 1997).

Coverage

Applicable Law

The duty to defend arises when a third party sues the insured on allegations that, if taken as true, potentially state a cause of action within the terms of the policy. Houston Petroleum Co. v. Highlands Ins. Co., 830 S.W.2d 153, 155 (Tex. App.-Houston [1^st Dist.] 1990, writ denied). The duty to defend the lawsuit is determined solely from the allegations and the third party's complaints, in light of the policy provisions, and without reference to the truth or falsity of the allegations. Am. Physicians Ins. Exch. v. Garcia, 876 S.W.2d 842, 847-48 (Tex. 1994); Heyden Newport Chem. Corp. v. S. Gen. Ins. Co., 387 S.W.2d 22, 24 (Tex. 1965). In construing the allegations of the underlying suit, the pleadings are strictly construed against the insurer, and any doubt is resolved in favor of coverage. Pro-Tech Coatings, Inc. v. Union Standard Ins. Co., 897 S.W.2d 885, 887 (Tex. App.-Dallas 1995, no writ); Cluett v. Med. Protective Co., 829 S.W.2d 822, 829 (Tex. App.-Dallas 1992, writ denied). In considering the allegations to determine whether a liability insurer is obligated under its policy to defend, a liberal interpretation of the meaning of those allegations should be indulged. Heyden Newport Chem. Corp., 387 S.W.2d at 26.

In construing the language of the insurance policy, if a policy is susceptible to more than one reasonable interpretation, the construction that most favors the insured must be adopted. Nat'l Union Fire Ins. Co. v. Hudson Energy Co., 811 S.W.2d 552, 555 (Tex. 1991). Exceptions or limitations to coverage are strictly construed against the insurer and in favor of the insured. The construction of an exclusionary clause urged by the insured must be adopted as long as that construction is not unreasonable, even if the construction urged by the insurer appears to be more reasonable or a more accurate reflection of the parties' intent. Id. Even if only one claim in a multiple-claim complaint potentially falls within the coverage of the policy, the insurer must defend the entire suit. Pro-Tech Coatings, Inc., 897 S.W.2d at 891.

Discussion

In its motion for summary judgment, Allstate argued that there was no coverage because the allegations in the underlying lawsuit did not state a claim for bodily injury or property damage that was caused by an occurrence within the meaning of the policy. Specifically, Allstate contended that there was no occurrence because Hallman voluntarily leased her property for limestone mining operations and the alleged injuries, including damage to land and buildings from blasting and personal injuries from dust, were the natural and probable consequences of Hallman's conduct.

Hallman responds that the alleged damages from the mining operations-blasting and dust-are not the natural and probable consequences of leasing one's property. Hallman argues that the allegations in the underlying suit state an occurrence because the plaintiffs alleged that, had Hallman's intentional act of leasing her property been performed non-negligently, the damages would not have resulted.

The Allstate homeowner's policy provides that Allstate has a duty to defend Hallman against a suit alleging bodily injury or property damage caused by an occurrence. The policy defines "occurrence" as "an accident, including exposure to conditions, which results in 'bodily injury' or 'property damage' during the policy period." An accident has two elements: (1) an action, and (2) that action's effect, that is, the resulting damage. Harken Exploration Co. v. Sphere Drake Ins. PLC, 261 F.3d 466, 472 (5^th Cir. 2001). Two factors influence both elements: (1) intent or design, and (2) "expectability" or foreseeability. Id. 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. Id. (citing Argonaut Southwest Ins. Co. v. Maupin, 500 S.W.2d 633, 635 (Tex. 1973)). 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. Id. (citing Trinity Universal Ins. Co. v. Cowan, 945 S.W.2d 819, 828 (Tex. 1997), and Mass. Bonding & Ins. Co. v. Orkin Exterminating Co., 416 S.W.2d 396, 400 (Tex. 1967)).

The plaintiffs in the underlying lawsuit alleged that Hallman acted intentionally by leasing her property to the mining companies. They also alleged that Hallman knew or should have known that the mining companies failed to follow normal blasting procedures, damaging the neighbors' land and buildings, and failed to prevent dust from escaping into the atmosphere while the stone was transported from the pits, causing personal injury to the neighbors. They alleged that Hallman "should have prevented her property from being used in a manner that was harmful to Plaintiffs." Thus, the allegations are that Hallman negligently leased her property. The intentional act on Hallman's part was to lease her property for mining operations. The allegations are that the lease was performed negligently. But the effect of the lease, that is, the alleged damage to neighboring property from blasting and dust, was not the intended result had the lease been performed non- negligently.

Allstate relies on Meridian Oil Production Inc. v. Hartford Accident & Indemnity Co., 27 F.3d 150, 151-52 (5^th Cir. 1994), and Martin Marietta Materials Southwest, Ltd. v. St. Paul Guardian Insurance Co., 145 F. Supp. 2d 794, 797-99 (N.D. Tex. 2001), to support its argument that no occurrence was stated. In Meridian Oil Production, Inc., an oil and gas well operator drilled through an aquifer without adequate protection of the water, polluting the aquifer, and dumped contaminants onto sandy soil without an adequate lining, polluting the subsurface. The court found no occurrence because the damage was "a necessary companion event" to the operator's conduct. There, the operator's deliberate conduct inevitably and predictably caused the pollution, a result that an operator...