United States Court of Appeals
Fifth Circuit
F I L E D
UNITED STATES COURT OF APPEALS
For the Fifth Circuit September 20, 2007
Charles R. Fulbruge III
Clerk
No. 04-51074
LAMAR HOMES, INC.
Plaintiff-Counter-
Defendant-Appellant,
VERSUS
MID CONTINENT CASUALTY COMPANY,
Defendant-Counter-Claimant-Appellee.
Appeal from the United States District Court
For the Western District of Texas
_______________________________________________
Before JONES, Chief Judge, and DAVIS and GARZA, Circuit Judges.
PER CURIAM:
Plaintiff-Appellant Lamar Homes, Inc. (“Lamar”) filed suit
against its insurer, Defendant-Appellee Mid-Continent Casualty
Company (“Mid-Continent”), in Texas state court seeking a
declaration that Mid-Continent’s comprehensive general liability
policy covered the claim asserted against Lamar by an insured
homeowner and that Mid-Continent owed Lamar a defense in that suit.
The homeowner alleged that Lamar was negligent and failed to design
and/or construct the foundation of their residence in a good and
workmanlike fashion in accordance with implied and express
warranties. Mid-Continent removed the case to federal court. On
cross-motions for summary judgment on Mid-Continent’s duty to
defend Lamar, the district court held that (1) the underlying claim
for damages from construction errors essentially presented either
a claim based on a breach of contract or breach of warranty; and
therefore (2) Mid-Continent did not have a duty to defend under its
CGL policy because such construction errors are not covered by CGL
policies as a matter of law.
On appeal, we recognized that the case involved a
determinative question of state law for which there was no
controlling precedent; therefore, we certified the following
questions to the Supreme Court of Texas:
1.
When a homebuyer sues his general contractor for
construction defects and alleges only damage to or loss
of use of the home itself, do such allegations allege an
“accident” or “occurrence” sufficient to trigger the duty
to defend or indemnify under a CGL policy?
2.
When a homebuyer sues his general contractor for
construction defects and alleges only damage to or loss
of use of the home itself, do such allegations allege
“property damage” sufficient to trigger the duty to
defend or indemnify under a CGL policy?
3.
If the answers to certified questions 1 and 2 are
answered in the affirmative, does Article 21.55 of the
Texas Insurance Code apply to a CGL insurer’s breach of
the duty to defend?
Lamar Homes, Inc. v. Mid Continent Casualty Company, 428 F.3d 193
(5th Cir. 2005). The Texas Supreme Court, with explanation,
answered that:
We conclude that allegations of unintended construction
defects may constitute an "accident" or "occurrence"
under the CGL policy and that allegations of damage to
or loss of use of the home itself may also constitute
"property damage" sufficient to trigger the duty to
defend under a CGL policy. Accordingly, as to the duty
to defend, we answer the first two questions, yes. We
do not reach the duty to indemnify, however, as that
duty is not triggered by allegations but rather by
proof at trial. We further conclude that former article
21.55 (recodified as sections 542.051-.061 of the Texas
Insurance Code) does apply to an insurer's breach of
the duty to defend and accordingly answer the third
question, yes.
Lamar Homes, Inc. v. Mid-Continent Cas. Co., 2007 Tex. LEXIS 797
(Tex. 2007). In light of this answer, we VACATE the judgment of
the district court and REMAND the case to the district court for
further proceedings consistent with the opinion of the Supreme
Court of Texas. Costs shall be borne by Defendant-Appellee.
VACATED and REMANDED.