State Farm Lloyds v. Kessler
| Decision Date | 31 October 1996 |
| Docket Number | No. 2-96-024-CV,2-96-024-CV |
| Citation | 932 S.W.2d 732 |
| Parties | STATE FARM LLOYDS and State Farm Fire and Casualty Company, Appellants, v. Paul and Mary KESSLER, Appellees. |
| Court | Texas Court of Appeals |
Shannon, Gracey, Ratliff & Miller, L.L.P., Anne Gardner, Julia A. Dobbins and J. Wade Birdwell, Fort Worth, for Appellant.
David R. Casey, Hurst, for Appellee.
Before DAUPHINOT, RICHARDS and HOLMAN, JJ.
Appellants State Farm Lloyds and State Farm Fire and Casualty Company ("State Farm") bring this appeal of a judgment declaring that they have a duty to defend Appellees Paul and Mary Kessler ("The Kesslers") in a suit pending against them. In two points of error, State Farm alleges that the trial court erred "because, as a matter of law, appellants owe no duty to defend since the pleadings in the suit against the Kesslers allege no claim for 'property damage' [or] ... for damages caused by an 'occurrence' or 'loss.' "
We hold that State Farm has no duty to defend the Kesslers because (1) the Fannings' petition does not allege property damage as defined by the policy and (2) it does not allege damages deriving from an occurrence or loss as defined by the policy. Therefore, we affirm State Farm's points of error, reverse the judgment of the trial court, and render judgment for State Farm.
John and Alison Fanning ("The Fannings") sued the Kesslers for breach of contract, breach of warranty, and DTPA violations. They alleged that the Kesslers made oral and written misrepresentations about their home at 417 Elisha Drive in Bedford, Texas to induce the Fannings to buy it. Specifically, the Fannings allege that the Kesslers told them the property had no drainage or foundation problems when in reality it had severe drainage and foundation problems. The Fannings further allege that the Kesslers knew these statements were false when made and that they knew the statements would induce the Fannings to buy a property they would not have bought had they known the truth about its condition.
The Kesslers have a standard homeowner's policy and a personal liability umbrella policy with State Farm, so State Farm defended the Kesslers in the Fanning suit, subject to the right to assert certain grounds for noncoverage and to obtain a declaration of the parties' rights. State Farm continues to defend the Kesslers, subject to its right to assert grounds for noncoverage.
The relevant portion of the homeowner's policy states:
COVERAGE C (Personal Liability)
If 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, we will:
1. pay up to our limit of liability for the damages for which the insured is legally liable.
....
DEFINITIONS
....
5. "Occurrence " means an accident including exposure to conditions, which results in bodily injury or property damage during the policy period.
6. "Property damage " means injury to, destruction of, or loss of use of property.
The relevant portion of the policy states:
Coverage L--Personal Liability. If you are legally obligated to pay damages for a loss, we will pay your net loss minus the retained limit.
....
DEFINITIONS
....
6. "loss" means an accident that results in personal injury or property damage during the policy period. This includes injurious exposure to conditions.
....
11. "property damage" means physical injury to or destruction of tangible property. This includes the loss of use caused by the injury or destruction.
State Farm argues that its appeal is based on an agreed statement of facts under Texas Rule of Civil Procedure 263 and that therefore we should not presume findings in favor of the judgment. The Kesslers argue that the appeal is not based on an agreed statement of facts under that rule and that therefore we should presume findings in favor of the judgment and construe the record in the light most favorable to that judgment.
An agreed statement of facts under rule 263 is similar to a special verdict; it is the parties' request for judgment under the applicable law. 1 The only issue on appeal is whether the trial court properly applied the law to the agreed facts. 2 The appellate court is limited to those facts unless other facts are necessarily implied from the express facts in the statement. 3 In an appeal of an "agreed" case, there are no presumed findings in favor of the judgment, 4 and the pleadings are immaterial. 5
Because the issue on appeal is a pure question of law, the appellate court performs a de novo review. 6 A de novo review is less deferential than ordinary reviews because a trial court has no discretion in deciding what the law is or in properly applying it. 7
Rule 263 requires that the parties submit the agreed statement to the clerk and that the court certify it. 8 Certification shows the appellate court the facts upon which the trial court based its judgment. 9 But even when the parties fail to conform to the technical requirements of the rule, an appellate court may treat the case as a case involving an agreed statement of facts under rule 263 if the record indicates that the trial court heard the case on stipulated facts. 10
In Lambda Constr. Co., no agreed statement of facts existed, but the order discussed a telephone hearing during which the court verified with the parties that no material issue of fact existed and that the only issue was liability. 11 No one objected to the order. 12 The Austin Court of Appeals held that the parties had "stipulated to all of the material facts of the case" and found that the trial court had "apparently treated the telephone stipulation" as an agreed statement of facts. 13
In the case at bar, the agreed statement, signed by counsel for both parties, was not submitted until after the judgment was signed. But it indicates that the parties had stipulated to the facts before the court signed the judgment:
After timely notice, the district court conducted a hearing on State Farm's Motion for Summary Judgment on November 17, 1995. The parties informed the court that a record would not be necessary, so the court considered only the motion for summary judgment, the attached exhibits, the brief in response, and the argument of counsel in reaching its decision. In open court, the district court denied State Farm's motion.
Agreeing that the 'eight corners' doctrine similarly limited the scope of the district court's evidentiary review to the same evidence, i.e., the pleadings in the Fanning litigation and the terms of the homeowners and umbrella policies, and further agreeing that no issue of material fact existed for determination by a finder of fact and that the only question presented for determination was a question of law for the court, State Farm and the Kesslers immediately submitted the case to the district court for final determination at this hearing....
In reaching this final decision the district court considered only the [homeowners policy, the umbrella policy, and the live petition of the Fannings]. [Emphasis added.]
Because the record shows the case was tried on stipulated facts, we will review it under the standard for agreed cases. 14
An insurer's duty to defend is usually determined by looking solely at the allegations in the pleadings of the underlying suit in the light of the policy provisions, regardless of the truth of the allegations. 15 Texas courts follow this "eight corners" rule, examining only the allegations in the pleadings and the language of the policy in their determination of the insurer's duty to defend. 16 Interpretation of insurance policies is governed by the rules of contract interpretation. 17 The words in an insurance policy are given their ordinary meaning unless the policy clearly gives them a different meaning. 18 When there are no ambiguities, the policy alone expresses the parties' intent, and its language must be enforced as written. 19
The inquiry into an insurer's duty to defend focuses on facts pled, not legal theories. 20 If the pleadings allege facts within coverage or would allow evidence to be introduced on a claim within coverage, the insurer must defend. 21 The pleadings must be liberally construed in the insured's favor, 22 but the interpretation must be fair and reasonable. 23 The insurer may rely on the allegations in the petition against the insured in deciding whether it should defend the suit; 24 it has no duty to look beyond the policy and pleadings to determine if facts within coverage could have been pled. 25 If the pleadings do not allege facts within coverage, the insurer has no duty to defend. 26
In its first point of error, State Farm argues that the trial court erred in granting the declaratory judgment because State Farm has no duty to defend, given that the Fannings' petition alleges no claim for "property damage." We sustain this point of error.
In both policies, property damage is defined as the injury to or destruction of tangible property, including loss of use.
The Fannings' petition, as the Kesslers point out, does describe drainage and foundation problems. But those problems are not "property damage" for which the Kesslers are legally liable because the Fannings do not assert that the Kesslers injured the property, destroyed the property, or caused the resulting loss of use. Instead, the Fannings allege that the Kesslers misrepresented the problems. The Kesslers' alleged misrepresentations did not cause the drainage and foundation problems; those problems existed before negotiations began.
The Fannings do allege economic damages; that is, repair costs to restore the property to the condition at which the Kesslers represented...
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