Oklahoma Surety Co. v. Noviello
Dallas Court of Appeals, No. 05-13-01546 (December 29, 2014)
Justices FitzGerald, Evans (Opinion), and Brown
Pleading for coverage as well as for liability is particularly important if a plaintiff takes an assignment of claims against the defendant’s insurer. Noviello obtained a judgment affirming an arbitration award against Metro Townhomes for damages to a home negligently designed and constructed by Metro, and was assigned Metro’s rights under its insurance policies, including a CGL policy issued by Oklahoma Surety. Noviello then sued Oklahoma Surety to recover Metro’s defense costs and indemnification for the underlying judgment. After a bench trial, the district court determined Oklahoma Surety had breached its duty to defend Metro and awarded Noviello underlying defense costs as well as attorneys’ fees for the coverage action. The court held, however, that the insurer had no duty to indemnify with respect to the underlying judgment against Metro. The Dallas Court of Appeals reversed the judgment on the duty to defend, and affirmed the judgment on the duty to indemnify, rendering a take-nothing judgment against Noviello.
Oklahoma Surety had refused to defend Metro Townhomes and denied any duty to indemnify based on the CGL policy’s “Damage to Your Work” exclusion, which barred coverage for damage to work done by Metro or on its behalf. The Court of Appeals applied the “Eight Corners Rule” to the duty to defend, and concluded that Noviello’s petition in the underlying lawsuit had not alleged facts that would give rise to any losses that would not be subject to that exclusion. Noviello argued on appeal that the damages “could have reasonably included appliances, carpets, rugs, and other products” not provided by Metro, but the Court held he had not alleged such damages in his underlying petition. “The duty [to defend] is not triggered by claims that might have been alleged but were not.” The Court likewise rejected Noviello’s cross-appeal on the duty to indemnify. Although the facts established in the underlying lawsuit may trigger the insurer’s duty to indemnify even when it had no duty to defend, the only damages awarded against Metro were for reasonable costs to repair the home itself, which were excluded.
