The Supreme Court of
Texas recently adopted the “actual injury” trigger of
coverage for latent property damage claims. Don’s
Building Supply, Inc. v. OneBeacon Insurance Co., 51
Tex. Sup. J. 1367, - - - Tex. - - - (2008). Answering a
certified question from the U.S. Court of Appeals for
the Fifth Circuit, the Supreme Court of Texas rejected
the manifestation (date of discovery) trigger and
exposure trigger applied by appellate courts. With this
decision, the court provided clarity concerning when an
insurer has a duty to defend its insured against suit
alleging property damage.
Don’s Building Supply,
the insured, manufactured and distributed a synthetic
siding product that was installed on residual buildings
from December 1, 1993 though December 1, 1996. During
this time period, Don’s Building Supply was insured by
policies assigned to OneBeacon Insurance Company.
Between the years 2003 – 2005 numerous homeowners filed
suit against Don’s Building alleging property damage
caused by water infiltration through the siding. The
complaints included allegations that the siding began to
fail within six months after installation. Although
OneBeacon agreed to defend Don’s Building Supply, at the
same time OneBeacon sought a declaration that its
policies did not provide coverage because the property
damage did not become identifiable until after the
expiration of its policies.
The Court evaluated the
policy provisions and held that the date of discovery is
irrelevant for determining coverage under the policy.
Likewise, the Court held that the “exposure” trigger was
not mandated by the policy language. Instead, the
“policy links coverage to damage, not damage detection.
. . . The policy asks when damage happened, not whether
it was manifest, patent, visible, apparent, obvious,
perceptible, discovered, discoverable, capable of
detection, or anything similar.” Based on the
allegations in the complaints, property damage occurred
when the home experienced wood rot or other physical
Because the underlying
litigation against Don’s Building Supply remains
pending, the Court limited its opinion to the duty to
defend. The Court did not address the duty to indemnify.
Further, because the siding was installed during the
three year policy period of the OneBeacon policies, the
Court did not opine on allocation to other policy
periods or insurers. Finally, while the Court attempted
to limit this decision to property damage claims, the
opinion makes clear that for latent bodily injury
claims, mere exposure may not be the determinative
trigger of coverage.
This decision provides a
clear course of action for manufacturers and builders
who are sued in Texas for property damage claims:
allegations of property damage during a policy period
are sufficient to trigger coverage under a policy of
insurance, even if the property damage itself did not
become apparent for many years.