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Gardere attorney Jim "James" Cooper in Law360.com article
Texas Court Unlikely To Back Sweeping Liability Exclusions
 
October 2, 2012 11:58 pm

Law360.com:

Law360, Houston (October 02, 2012, 11:11 PM ET) -- Insurers and construction companies are eagerly waiting for the Texas Supreme Court to weigh in on a federal lawsuit that could radically expand general commercial liability exclusions in the state, but experts from both industries say the high court is likely to call foul on the Fifth Circuit';s insurer-friendly ruling.

The state's high court is considering certified questions in Ewing Construction Co. Inc. v. Amerisure Insurance Co. following the Fifth Circuit's withdrawal of its own opinion, which was criticized as expanding so-called contractual liability exclusions to broadly wipe out coverage for errors arising in the context of most construction projects.

....

James Cooper, co-chair of the Policyholder Specialty Practice Group at Gardere Wynne Sewell LLP, pointed to the fact that Ewing Construction had never agreed to as a specific an undertaking as the one Gilbert';s dispute centered on. Cooper represents the Texas Association of Builders and National Association of Home Builders, which have filed an amicus brief in the Ewing case with the Texas Supreme Court.

"There were simple contractual obligations in place in Ewing to perform the work in a good and workmanlike manner," Cooper said. "But the way that the contractual liability exclusion was being construed [by the Fifth Circuit], just simply agreeing to do your job properly would fall into this exclusion and eliminate coverage."

Gardere attorney Jim "James" Cooper in Law360.com article

Cooper also noted that while the Ewing case involves the contractor's claim that Amerisure has a duty to defend it, the Gilbert case involved an indemnity claim, calling into question whether the holding in Gilbert is applicable to the facts in Ewing.

"There's a completely different analysis between duty to defend and duty to indemnify cases," he said.

And because the Fifth Circuit's ruling would effectively eviscerate a general contractor';s coverage for construction defects and other mistakes by expanding the application of the contractual liability exclusion, it would also render useless a separate provision of commercial general liability policies that allows for coverage of identical mistakes made by subcontractors, Cooper said.

"When these policies were put in place, there was an intent on the part of insurance companies that when subcontractors are involved, builders would have coverage for faulty construction or inadvertent errors," Cooper said.

But the Fifth Circuit';s sweeping expansion of the contractual liability exclusion is inconsistent with, and probably supersedes, the subcontractor exception, Cooper said.

....

Cooper said it was very rare, particularly for a prevailing party, to ask an appeals court to vacate its decision. He believes the request was motivated by Amerisure's recognition that the Gilbert case left important, unresolved issues of state law that should be determined by the state Supreme Court.

Cooper said his clients were pinning their hopes on the high court's ruling in Ewing, which is expected sometime next year, to clearly define when the contractual liability exclusion applies.

"Insurance companies issued policies with the intent of providing coverage," Cooper said. "To broadly construe this clause would be contrary to the way they've been selling insurance. If you don't clarify this area of the law, think about it: Anytime you have a contract, you have the potential that the court will use that exclusion to wipe out coverage."

....

http://www.law360.com/insurance/articles/383680/texas-high-court-unlikely-to-back-sweeping-liability-exclusions


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