The seminal Hawai`i case on injury in fact and trigger of coverage is Sentinel Ins. Co., Ltd. v. First Ins. Co. of Hawaii, Ltd. 76 Hawai`i 277, 875 P.2d 894 (1994), where the Hawai`i Supreme Court adopted the injury in fact trigger. Since Sentinel, however, the Hawai`i Supreme Court has not returned to the issue.
Texas has put forth some important cases on trigger of coverage of late. In September, we reviewed here Don's Building Supply, Inc. v. OneBeacon Ins. Co., 267 S.W. 3d 20 (Tex. Sup. Ct. 2008), where, in responding to certified questions from the 5th Circuit Court of Appeals, the Texas Supreme Court stated the injury in fact trigger was applicable under a comprehensive liability policy. [See update on Don's Building Supply below]. Now comes the Texas Court of Appeals' decision in Byrne, Ltd. v. Trinity Universal Ins. Co., 2008 Tex. App. LEXIS 9041 (Tex. Ct. App. Dec. 4, 2008), which holds that when the underlying complaint is silent as to when property damage occurred, the insurer must defend.
Byrne was a general contractor. Subcontractors included Subfloor Systems, Inc., which was responsible for installing concrete flooring, and Sam White Investments, which was to install stucco on the complex's walls. Byrne was named as an additional insured under commercial general liability policies obtained by these subcontractors. The policies excluded property damage occurring before the work was completed and before the work was put to its intended use.
Construction was substantially completed in April 1999. Mercantile purchased the complex in June 1999. In 2001, Mercantile sued Byrne (but not its subcontractors) for construction defects concerning water infiltration. The subcontractors' insurers refused to defend and Byrne sued for declaratory relief. The trial court granted the insurers' motion for summary judgment.
The Court of Appeal noted that Don's Building Supply held that property damage under a CGL policy occurred when actual physical damage to the property took place. The date on which physical damage is or could have been discovered was irrelevant under the policy. The Court then looked to the underlying complaint to determine when allegations of property damage occurred. Although such allegations were sparse in Mercantile's complaint, one allegation indicated some water related problems had occurred before the sale to Mercantile in June 1999. Exactly when the property damage occurred was left unclear, however. Based on prior Texas case law, the Court noted that if the underlying complaint was silent as to when property damage occurred but left open the potential that it occurred during the policy period, summary judgment for the insurer was improper.
Therefore, in Byrne, some property damage could have occurred during the policy period, and thus the claims against Byrne were potentially covered. Read as a whole, the underlying complaint left open the possibility that property damage occurred during the policy period. Consequently, the insurers had not shown they were entitled to summary judgment based on the eight corners of the complaint and the policies.
Byrne favors policy holders who seek a duty to defend. In our next post, we will review a New Jersey case addressing trigger of coverage which favors insurers.
[Update on Don's Building Supply] - Having received input from the Texas Supreme Court, the Fifth Circuit remanded the case to the district court. See OneBeacon Ins. Co. v. Don's Building Supply Inc., 2008 U.S. App. LEXIS 26423 (5th Cir. Dec. 23, 2008). The district court will consider when property damage occurred, not when the property damage was discovered, for purposes of determining whether there is coverage under the policy.
