Texas Supreme Court Finds Coverage Under CGL Policies for Property Damage Caused by Construction Defects in Lamar Homes, Inc. v. Mid-Continent Casualty Co.
By K&L Gates partner Paul E. Ridley
Introduction
On August 31, 2007, the Texas Supreme Court issued its long-awaited opinion in Lamar Homes, Inc. v. Mid-Continent Cas. Co., 242 S.W.3d 1 (Tex. 2007) deciding the issue of whether commercial general liability (“CGL”) policies provide coverage for property damage caused by defective construction by the policyholder. This issue has been the subject of great controversy not only in Texas but in many other states and has resulted in numerous conflicting judicial decisions. Prior to this decision, there was a split of authority within the Texas Courts of Appeal, several of which have issued diametrically opposed rulings. That controversy has now been resolved, at least within the State of Texas, by the Texas Supreme Court’s answers in Lamar Homes to certified questions from the United States Fifth Circuit Court of Appeals. In a well-reasoned opinion, the Texas Supreme Court ruled that unintended construction defects may constitute an “accident” or “occurrence” under a CGL policy and that resulting damage to or loss of use of the home may constitute “property damage” sufficient to trigger a duty to defend by the insurer.
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