Clemons v. State Farm Fire & Casualty Co.
1994 WL 286706, 879 S.W.2d 385 (1994)
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Rule of Law:
An insurer's duty to defend is determined by the "eight-corners rule," which limits the inquiry to the factual allegations in the third-party plaintiff's petition and the language of the insurance policy. No duty to defend arises if the petition does not allege facts that would constitute a covered claim, such as "bodily injury" or "property damage," as defined in the policy.
Facts:
- In October 1989, State Farm Lloyds issued homeowners insurance policies to Jack and Lydia Clemons and Adolph Assenheimer, which provided liability coverage for "property damage."
- The policies defined "property damage" as "injury to or destruction of property, including loss of use thereof."
- Assenheimer was the president of the Windwood Civic Association, and Mr. Clemons was the chairman of the Architectural Committee.
- On September 13, 1990, Assenheimer and Mr. Clemons, in their official capacities, signed and approved a plat plan for Michael and Annette Florance.
- The approved plan demonstrated on its face that the Florances' proposed house and garage would be constructed in violation of the subdivision's recorded deed restrictions concerning building setback requirements.
- Following the approval, the Florances built their house and garage in violation of the deed restrictions.
- Other residents of the Windwood subdivision filed a lawsuit against Assenheimer and Mr. Clemons, among others, alleging the construction impaired their rights.
Procedural Posture:
- Residents of the Windwood subdivision ('Windwood plaintiffs') sued Jack Clemons and Adolph Assenheimer in a Texas trial court seeking an injunction and attorney's fees.
- Clemons and Assenheimer tendered the defense of the suit to their homeowners' insurer, State Farm Lloyds.
- State Farm Lloyds investigated the claim and denied the request for defense and indemnity, concluding the lawsuit did not allege 'property damage' as defined by the policies.
- The Clemonses and Assenheimer later filed a new lawsuit against State Farm in a Texas trial court, alleging breach of contract and other claims for its refusal to defend them.
- State Farm moved for summary judgment, arguing as a matter of law that it had no duty to defend.
- The trial court granted summary judgment in favor of State Farm.
- The Clemonses and Assenheimer, as appellants, appealed the trial court's grant of summary judgment to the Texas Court of Appeals.
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Issue:
Does a homeowners insurance policy, which provides coverage for "property damage," impose a duty on the insurer to defend a lawsuit against the insured that seeks only injunctive relief and attorney's fees for a violation of deed restrictions, without alleging any physical injury to or destruction of tangible property?
Opinions:
Majority - Draughn, Justice.
No. An insurer has no duty to defend under a policy covering 'property damage' when the underlying lawsuit against the insured does not allege facts constituting physical injury to or destruction of property. The court applied the 'eight-corners rule,' comparing the allegations in the Windwood plaintiffs' petition with the terms of the appellants' insurance policies. The petition sought only an injunction to remedy a violation of deed restrictions and attorney's fees; it contained no factual allegations of injury to, destruction of, or loss of use of tangible property. The court reasoned that merely pleading legal theories like negligence or fraud, which could potentially support a claim for property damage, does not trigger the duty to defend unless the petition actually seeks damages for a covered loss. A general prayer for 'other and further relief' is insufficient to convert a suit for equitable relief into one for property damages.
Analysis:
This case reinforces the strict application of the 'eight-corners rule' in Texas insurance law, which confines the duty-to-defend analysis to the pleadings and the policy. It clarifies that 'property damage,' under standard policy language, refers to physical injury to tangible property and does not extend to purely economic losses or the impairment of rights, such as those arising from a deed restriction violation. The decision provides a clear precedent for insurers to deny a defense in suits where the plaintiff seeks only injunctive relief or other remedies not covered by the policy, even if the underlying facts involve real estate. This holding cabins the scope of an insurer's defense obligation to the explicit terms of the insurance contract.
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