Ewing vs. Amerisure: How Quickly Things Change
By: Art Briseno, CPCU, AIC; Director of Operations – Agency Risk Manager, Claims
January 15, 2013 – We have all heard the old saying in Texas “if you don’t like the weather wait a minute it will change”. This old saying also applies to court cases and the way the court looks at insurance policies.
With the recent decision on the well-publicized and infamous Ewing v. Amerisure case, we now have come full circle with the court’s decisions. In this case the general contractor (Ewing) is sued for breach of contract and for negligence in the faulty construction of tennis courts. Ewing demanded defense under an Amerisure policy and coverage was denied based on the Contractual Liability Exclusion found in the Commercial General Liability (CGL) policy. Because no damage was claimed other than damage to the tennis courts, the trial court found no liability existed in the absence of the contract. Thus, the exception to the exclusion failed to restore coverage.
The case was appealed to the Fifth Circuit who initially affirmed but then vacated their position and sent certified questions to the Texas Supreme Court.
The Supreme Court again confirms Lamar and answers the questions about the Contractual Liability Exclusion. Two Questions sent to the Supreme Court on the Ewing v. Amerisure case.
1. Does a General Contractor that enters into a contract in which it agrees to perform its construction work in a good and workman like manner, without more specific provisions enlarging this obligation, “assume liability” for damages arising out of the contractors’ defective work so as to trigger the Contractual Liability Exclusions for “liability that would exist in the absence of contract”.
2. If the answer to question one is “Yes” and the Contractual Liability Exclusion is triggered, do the allegations in the underlying lawsuit alleging that the contractor violated its common law duty to perform the contract in a careful, workmanlike, and non-negligent manner fall within the exception to the contractual liability exclusion for “liability that would exist in the absence of contract”.
The court stated in their conclusion: “Accordingly, we conclude that a general contractor who agrees to perform its construction work in a good and workman like manner, without more, does not enlarge its duty to exercise ordinary care in fulfilling its contract, thus it does not “assume liability” for damages arising out of its defective work so as to trigger the Contractual Liability Exclusion. We answer the first question “no” and do not answer the second”.
A well-known attorney Jes Alexander with the Fletcher Farley law firm commented, “The Ewing decision appears to mark the complete restoration of the Lamar Homes holding that a standard CGL policy provides coverage for faulty workmanship. Combined with the recent Lennar decision finding that an “all sums” applies in Texas and that carriers can be liable for settlements where no suit is ever filed against the insured, the trend is clear carriers that deny coverage for faulty workmanship do so at their own peril”.
Because of the constantly changing litigation landscape IBTX encourages you to periodically review your contracts with our Insurance Risk advisers and legal counsel to be sure your contracts conform to the current state of the law.