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 damage.
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.