Huffhines v. State Farm Lloyds
| Decision Date | 02 June 2005 |
| Docket Number | No. 14-04-00681-CV.,14-04-00681-CV. |
| Citation | 167 S.W.3d 493 |
| Parties | Jimmie W. HUFFHINES and Judith Ann Huffhines, Appellants, v. STATE FARM LLOYDS and State Farm Fire and Casualty Co., Appellees. |
| Court | Texas Supreme Court |
Michael S. Hays, Susan C. Stevenson, Houston, for appellants.
Jack McKinley, Houston, for appellees.
Panel consists of Justices EDELMAN, SEYMORE, and GUZMAN.
In this appeal, we must resolve duty-to-defend issues regarding a Homeowners' Policy and a Personal Liability Umbrella Policy. Specifically, we are asked to determine whether appellees, State Farm Lloyds and State Farm Fire and Casualty Company ("State Farm"), had a duty to defend appellants, Jimmie W. Huffhines and Judith Ann Huffhines, against an original third-party petition filed in an underlying lawsuit when, in that original petition, the plaintiffs alleged appellants knowingly failed to disclose defects in a townhouse they sold to the plaintiffs. Because we conclude State Farm had no duty to defend appellants against this original third party petition, we affirm the trial court's judgment.
Appellants sold their townhouse to George and Sharon Heaton in March 1998. Up to the time of sale, State Farm insured the townhouse under a Homeowners Policy. State Farm also insured appellants' subsequent residence and insured appellants under an Umbrella Policy.
The owner of the townhouse adjoining the Heatons', Mary L. Piper, initiated the underlying lawsuit against the Heatons alleging that various defects in the Heatons' property caused water to encroach on and damage her residence. As part of her factual allegations, Piper asserted the Heatons "failed to properly repair and maintain the common wall, patio, drainage system, and adjoining land in general in such a fashion so as to prevent water from intruding into [Piper's] townhome." In a claim of negligence, Piper alleged the Heatons breached their duty to Piper to maintain and repair their property in a reasonably prudent manner in order to avoid water intruding onto Piper's adjacent premises.
The Heatons then sued appellants. In their Original Third Party Petition, the Heatons alleged the following facts:
George Heaton purchased the Property from the Huffhines [sic] in March of 1998. In the course of this litigation, the Heatons received a copy of a letter and an engineering report sent to the Huffhines[sic] before they sold the Property to the Heatons, detailing various alleged defects of the Property and/or the common wall with Mrs. Piper related to water encroachment from the Property to Mrs. Piper's residence. In connection with the purchase of the Property, the Huffhines [sic] made certain disclosures to the Heatons regarding the Property in a document entitled Seller's Disclosure of Property Condition. In this Disclosure, the Huffhines [sic] assured the Heatons that, they were unaware of anything on the Property in need of repair, water penetration (other than a roof leak), improper drainage, or defects of the interior walls, exterior walls, roof, walls, fences, or plumbing. In summary, the Huffhines [sic] were on notice of the alleged problems made the basis of this suit, and failed to disclose same to the Heatons.
The Heatons' petition alleged common law fraud, statutory fraud, violation of the Deceptive Trade Practices Act (DTPA), and negligence, and sought contribution, damages, and attorney's fees. In the negligence paragraph, the Heatons pleaded, "In the alternative, Third-Party Defendants' misconduct as described above, constituted negligence which was the proximate cause of the Heatons' damages, for which they sue herein."
Appellants, in turn, sued State Farm, seeking a declaratory judgment that State Farm owed them a duty to defend in the underlying suit and to pay any adverse judgment rendered against them. The Heatons subsequently amended their petition, modifying the factual allegation set forth above to read:
George Heaton purchased the Property from the Huffhines [sic] in March of 1998. Plaintiff is alleging that water began entering her home prior to the Heatons [sic] purchase of the Property in 1998. Moreover, in the course of this litigation, the Heatons received a copy of a letter and an engineering report sent to the Huffhines [sic] before they sold the Property to the Heatons, detailing various alleged defects of the Property and/or the common wall with Mrs. Piper related to water encroachment from the Property to Mrs. Piper's residence. However, the Huffhines [sic] failed to adequately repair and remediate the various alleged defects. The Huffhines [sic] also failed to advise the Heatons of the alleged defects and complaints of Mrs. Piper.
In this amended petition, the Heatons set forth negligence as their first cause of action. The Heatons alleged appellants (1) failed to effectively repair the water problems and (2) negligently failed to disclose the alleged defects of the property. The Heatons again alleged common law fraud, statutory fraud, and DTPA violations, and sought contribution, damages, and attorney's fees. State Farm agreed to defend against this amended petition.
After both sides moved for summary judgment, the trial court granted State Farm's motion, denied appellants' motion, and rendered judgment declaring State Farm had no duty to defend appellants against the allegations in the Heatons' Original Third Party Petition or to indemnify appellants against a judgment based on those allegations.
In a single issue, appellants challenge the trial court's declaratory judgment that State Farm had no duty to defend appellants against Defendants' (Heatons') Original Third Party Petition in the underlying lawsuit. Whether an insurance carrier owes a duty to defend under an insurance policy is a question of law, which we review de novo. State Farm Gen. Ins. Co. v. White, 955 S.W.2d 474, 475 (Tex.App.—Austin 1997, no pet.). Additionally, de novo review is appropriately applied to the trial court's declaratory judgment in this case because the trial court resolved the case on competing motions for summary judgment in the face of undisputed facts. See Guthery v. Taylor, 112 S.W.3d 715, 720 (Tex.App.—Houston [14th Dist.] 2003, no pet.) (regarding standards applied to declaratory judgments); Taub v. Aquila Southwest Pipeline Corp., 93 S.W.3d 451, 462 (Tex.App.—Houston [14th Dist.] 2002, no pet.) (regarding de novo review in summary judgment context).
A liability insurer is obligated to defend a suit if the facts alleged in the pleadings would give rise to any claim within the coverage of the policy. Utica Nat'l Ins. Co. of Tex. v. Am. Indem. Co., 141 S.W.3d 198, 201 (Tex.2004). If, however, a petition does not allege facts within the scope of coverage, an insurer is not legally required to defend a suit against its insured. Nat'l Union Fire Ins. Co. v. Merchs. Fast Motor Lines, Inc., 939 S.W.2d 139, 141 (Tex.1997) (per curiam).
We determine State Farm's duty to defend based on the allegations contained in the Heatons' Original Third Party Petition and the language of appellants' insurance policies. See id. Courts refer to this standard for determining coverage from the four corners of the pleading and the four corners of the insurance policy as the "eight corners" rule. Id. In applying the "eight corners" rule, we give the allegations in the Original Third Party Petition a liberal interpretation. See id. Thus, in construing the allegations of the underlying suit, we strictly construe the pleadings against the insurer, and resolve any doubt in favor of coverage. See Heyden Newport Chem. Corp. v. S. Gen. Ins. Co., 387 S.W.2d 22, 26 (Tex.1965).
If the Heatons' Original Third Party Petition does not state facts sufficient to bring the case clearly within or outside appellants' coverage, State Farm is obligated to defend if potentially there is a case under the complaint within the coverage of appellant's policy. See Merchs. Fast Motor Lines, Inc., 939 S.W.2d at 141. In making this determination, we must focus on the petition's factual allegations showing the origin of the damages rather than on the legal theories alleged. Id. We will not read facts into the petition, nor will we look outside of the petition, or imagine factual scenarios which might trigger coverage. Id. at 142. In the context of this case, if State Farm has a duty to defend against any claim pleaded in the Original Third Party Petition, it is required to defend against all claims in that petition. See Stumph v. Dallas Fire Ins. Co., 34 S.W.3d 722, 728 (Tex.App.—Austin 2000, no pet.).
In their Original Third Party Petition, the Heatons alleged that, at the time appellants sold their townhouse to the Heatons, appellants knew of various defects of their townhouse and its common wall with Piper's property, including water encroachment. The Heatons also alleged appellants assured them they were unaware of (1) anything in need of repair, (2) water penetration other than a roof leak, (3) improper drainage, or (4) defects of the interior walls, exterior walls, roof, walls, fences, or plumbing. As summarized by the Heatons: Appellants "were on notice of the alleged problems made the basis of this suit, and failed to disclose same to the Heatons."
Appellants' Homeowner's Policy states that State Farm will provide a defense "[i]f a claim is made or a suit is brought against an insured for damages because of bodily injury or property damage caused by an occurrence to which this coverage applies." An occurrence is defined as "an accident, including exposure to conditions, which results in bodily injury or property damage during the policy period."1
Appellants' Umbrella Policy provides State Farm will "defend the suit against" the insured "[w]hen the claim or suit is...
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