MEMORANDUM OPINION

No. 04-12-00190-CV

Wendy Rutherford BRANHAM,

Appellant

v.

STATE FARM LLOYDS,

Appellee

From the 150th Judicial District Court, Bexar County, Texas

Trial Court No. 2011-CI-18919

Honorable Olin B. Strauss, Judge Presiding

Opinion by: Catherine Stone, Chief Justice

Sitting: Catherine Stone, Chief Justice

Karen Angelini, Justice

Marialyn Barnard, Justice

Delivered and Filed: September 12, 2012

AFFIRMED

Wendy Rutherford Branham appeals a summary judgment granted in favor of State Farm 

Lloyds. The trial court concluded that State Farm Lloyds had no duty to defend or indemnify 

Branham in relation to a claim against her for misrepresentations she allegedly made in selling 

her home. On appeal, Branham asserts the trial court erred in granting the summary judgment 

because: (1) State Farm Lloyds had a duty to defend the claim; (2) Branham is entitled to 

indemnity despite voluntarily settling the claim because State Farm wrongfully denied a defense 
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of the claim; and (3) the intentional act exclusion of Branham’s policy did not apply. We 

disagree with Branham’s contentions and affirm the trial court’s judgment.

BACKGROUND

Branham sued State Farm Lloyds for failing to provide a defense and indemnity with 

regard to a lawsuit filed against her by Patrick and Melissa McCullough. The McCulloughs’

lawsuit was based on a contract they entered into with Branham to purchase a home from her. In 

their petition, the McCulloughs alleged that Branham “falsely represented that there was no (1) 

previous flooding into the home, (2) water penetration into the home, (3) active infestation of 

termites or other wood destroying insects, (4) previous termite or wood destroying insect damage 

repaired, and (5) termite or wood destroying insect damage needing repair.” The McCulloughs 

further alleged that Branham “failed to disclose to Plaintiffs the previous problems with water 

penetration and damage to the home and that Ms. Branham had filed a homeowners’ insurance 

claim for water damages sustained in the home.” The McCulloughs also claimed that although 

Branham “was paid on these water damage claims by her homeowners’ insurance carrier,” she 

“did not make proper repairs to the home or if she did, only made cosmetic repairs to conceal the 

damages.” The McCulloughs asserted numerous causes of action against Branham based on 

these allegations including: (1) fraudulent concealment for making affirmative false 

representations or omitting to disclose material facts, alleging the representations and 

concealments were “made with knowledge of the real facts;” (2) breach of contract for “failing to 

disclose the home’s previous water penetration problems and damages, thereby, fraudulently 

inducing Plaintiffs into entering the contract;” (3) negligence for failing to properly disclose the 

condition of the home; (4) DTPA violations; (5) negligent misrepresentations by supplying false 

information and not exercising reasonable care or competence in communicating the 
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information; (6) common-law fraud and fraud by non-disclosure; and (7) violation of section 

27.01 of the Texas Business and Commerce Code for making misrepresentations in a transaction 

involving real estate that Branham knew were false.

The parties filed competing motions for summary judgment. State Farm Lloyds’s motion 

asserted it had no duty to defend or indemnify Branham because: (1) the McCulloughs’ petition 

did not allege damages arising from a covered occurrence; (2) the McCulloughs’ petition did not 

seek property damages as defined by Branham’s policy; and (3) the policy excluded coverage for 

intentional conduct. The trial court granted State Farm Lloyds’s motion and entered a take 

nothing judgment on Branham’s claims.

STANDARD OF REVIEW

We review a summary judgment de novo. Provident Life & Acc. Ins. Co. v. Knott, 128 

S.W.3d 211, 215 (Tex. 2003). We must therefore consider all the evidence in the light most 

favorable to the respondent, indulging all reasonable inferences in favor of the respondent, and 

determine whether the movant proved that there were no genuine issues of material fact and that 

it was entitled to judgment as a matter of law. Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 

548 (Tex. 1985). When competing motions for summary judgment are filed, and one is granted 

and the other denied, we must review all issues presented and render the judgment the trial court 

should have rendered. Comm’rs Court v. Agan, 940 S.W.2d 77, 81 (Tex. 1997). 

DUTY TO DEFEND

“Under the eight-corners rule, the duty to defend is determined by the claims alleged in 

the petition and the coverage provided in the policy.” Pine Oak Builders, Inc. v. Great American 

Lloyds Ins. Co., 279 S.W.3d 650, 654 (Tex. 2009). If a petition does not allege facts within the 

scope of coverage, an insurer is not legally required to defend a suit against its insured. Id. 
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“Interpretation of insurance contracts in Texas is governed by the same rules as interpretation of 

other contracts,” and “when terms are defined in an insurance policy, those definitions control.” 

Trinity Universal Ins. Co. v. Cowan, 945 S.W.2d 819, 823 (Tex. 1997).

Branham acknowledges that several of our sister courts have held that an insurance 

carrier has no duty to defend a homeowner who makes misrepresentations in selling a home. See 

Huffhines v. State Farm Lloyds, 167 S.W.3d 493 (Tex. App.—Houston [14th Dist.] 2005, no 

pet.); Freedman v. Cigna Ins. Co., 976 S.W.2d 776 (Tex. App.—Houston [1st Dist.] 1998, no 

pet.); State Farm Lloyds v. Kessler, 932 S.W.2d 732 (Tex. App.—Fort Worth 1996, writ denied). 

Branham argues, however, that the facts in those cases are distinguishable, at least with regard to 

Branham’s negligence claims, or, alternatively, that the holdings in these decisions are 

questionable under the Texas Supreme Court’s holding in Lamar Homes, Inc. v. Mid-Continent 

Cas. Co., 242 S.W.3d 1 (Tex. 2007).

A. Cases Holding No Duty to Defend

In Kessler, John and Alison Fanning sued Paul and Mary Kessler for breach of contract, 

breach of warranty, and DTPA violations arising from the Kesslers’ sale of their home to the 

Fannings. 932 S.W.2d at 734. The Fannings alleged the Kesslers misrepresented that the home 

had no drainage or foundation problems when the home actually had severe drainage and 

foundation problems. Id. The Fannings further alleged that the Kesslers knew the statements 

were false when they made them. Id. The trial court signed a judgment declaring that the 

Kesslers’ insurance company, State Farm, had a duty to defend the Kesslers. Id. at 733. The 

Fort Worth court reversed the trial court’s judgment, holding State Farm did not have a duty to 

defend because: (1) the Fannings’ petition did not allege property damage as defined by the 

policy; and (2) the Fannings’ petition did not allege damages arising from an occurrence or loss 
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as defined by the policy. Id. at 734. We will focus our analysis on the definition of occurrence 

or loss. 

In order for State Farm to have a duty to defend under the Kesslers’ policies, the alleged 

damages had to result from an “occurrence” or “loss.” Id. at 738. The policies defined 

occurrence and loss as an “accident” that results in property damage. Id. The Fort Worth court 

then noted, “Under Texas law, when the insured’s acts are voluntary and intentional, the results 

or injuries, even if unexpected, are not caused by an ‘accident,’ and therefore the event is not an 

‘occurrence’ under the policy.” Id. The Fannings’ petition alleged the Kesslers made statements 

concerning the property that they knew or should have known were false, especially given 

allegations that the Kesslers attempted to cover up the problem. Id. Accordingly, the Fort Worth 

court held that all of the Fannings’ allegations revolved around the Kesslers’ alleged intentional 

acts; therefore no accident occurred. Id.

In Freedman, Alfred and Sylvia Freedman sold their house to the Marxes. 976 S.W.2d at 

777. The Marxes subsequently learned that the roof had needed repairs while the Freedmans 

lived there and sued the Freedmans for not disclosing the problems with the roof, alleging the 

Freedmans intentionally defrauded them. Id. The Marxes alleged causes of action for DTPA 

violations, common-law fraud, fraud in a real estate transaction, and negligence. Id. The 

Freedmans’ insurers, Cigna Insurance Company of Texas and Insurance Company of North 

America, refused to defend the Freedmans, and the Freedmans eventually settled the Marxes’ 

suit. Id. The Freedmans then sued Cigna and ICNA. Id. Cigna and ICNA moved for summary 

judgment, asserting as one ground that they had no duty to defend the Freedmans because the 

Marxes sued them for an event that was not an “occurrence” under the insurance policies. Id. 

The trial court granted the motion, and the Houston court affirmed. Id.
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The definition of “occurrence” in the Freedmans’ policies was the same as the definition 

in the Kesslers’ policies, defining “occurrence” as an “accident” resulting in property damage. 

Id. at 778. The Houston court noted, “An accident is commonly defined as an unexpected 

happening without intention or design.” Id. The court further noted, “As a matter of law, 

fraudulent promises, misrepresentations, and untrue statements do not fall within the plain 

meaning of the definition of an occurrence.” Id. Although the Freedmans represented the roof 

on the house needed no repair, the Marxes alleged that the roof was repaired at least 18 times in 

the seven years preceding the sale, 12 times in the preceding four years, and 3 times while the 

property was listed for sale, and the Freedmans took affirmative steps to conceal the roof defect. 

Id. The Houston court held, “On the face of the Marxes’ pleadings, the event for which the 

Freemans sought coverage was an intentional act,” i.e., their statements to the Marxes, “and not 

an ‘accident.’” Id.

The Houston court then examined the effect of the Marxes pleading negligence as an 

alternative to fraud. Id. The court noted, “The label the plaintiff puts on the cause of action is 

not controlling; it is the allegation of the facts which give that control.” Id. The court further 

noted, “The Marxes alleged that the Freedmans intentionally omitted any mention of the roof’s 

problems in their oral and written representations” and “claimed the Freedmans destroyed 

records of roof repair, and fixed the water damages to conceal any evidence of the problems.” 

Id. at 779. The court concluded that the Marxes alleged intentional acts by the Freedmans and 

reasoned, “Even though the Marxes added negligence as an alternative claim, the mere allegation 

of negligence does not control the issue of duty to defend. The facts alleged by the Marxes 

control, and the facts do not give rise to a duty to defend.” Id.
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Finally, the decision in Huffhines contains reasoning similar to Kessler and Freedman. In 

Huffhines, the sellers received an engineering report on the property before the sale detailing 

various defects; however, the sellers assured the buyers that they were unaware of anything on 

the property in need of repair. 167 S.W.3d at 495. The buyers later sued the sellers, alleging 

common law fraud, statutory fraud, DTPA violations, and negligence, and State Farm denied any 

duty to defend. Id. at 496. Once again, the analysis focused on whether the buyers had alleged 

property damage resulting from an “occurrence,” which was similarly defined by the policy in 

question as an “accident.” Id. at 498.

The Houston court noted, “‘whether an event is [an] accident is determined by its 

effect.’” Id. (quoting Trinity Universal Insurance Co. v. Cowan, 945 S.W.2d 819, 827 (Tex. 

1997)). The Houston court further noted that an effect is produced by accidental means if the 

actor did not intend to produce the effect and the actor cannot be charged with the design of 

producing the effect. Id. The Houston court then reasoned that the event or conduct alleged by 

the buyers in Huffhines was the sellers assuring the buyers they were not aware of any defects 

when the sellers had knowledge of defects. Id. at 499. The Houston court then held that the 

damages resulting from the undisclosed defects were an effect the sellers could be charged with 

producing and, therefore, was not an accident. Id. Following the reasoning in Freedman, the 

court also held State Farm did not have a duty to defend against the buyers’ negligence claim, 

asserting, “A mere characterization of negligence, alternatively made, is insufficient to convert 

claims based on knowing misrepresentation into a claim for recovery of property damage caused 

by an accident within the meaning of the insurance policies.” Id. at 501.

We find the reasoning in Kessler, Freedman, and Huffhines persuasive. Branham 

contends those decisions are factually distinguishable based on the extent of the 
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misrepresentations in those cases because she could have “negligently” forgotten about the prior 

damage and insurance claim in the instant case. The McCulloughs, however, do not allege that 

Branham forgot about the prior damage. See Huffhines, 167 S.W.3d at 497 (courts “will not read 

facts into the petition” or “look outside of the petition, or imagine factual scenarios which might 

trigger coverage”). Instead, the McCulloughs’ factual allegations assert Branham made false 

representations and made cosmetic repairs to conceal the prior damage for which she received 

insurance proceeds to repair. The McCulloughs’ “mere characterization of negligence, 

alternatively made, is insufficient to convert [their claims] based on knowing misrepresentation 

into a claim for recovery of property damage caused by an accident within the meaning of the 

insurance polic[y].” Id. at 501.

B. Texas Supreme Court’s Ruling in Lamar Homes

Branham also contends that these prior decisions have questionable precedential value 

after the Texas Supreme Court’s decision in Lamar Homes. We disagree. The manner in which 

the Texas Supreme Court defined the term “accident” in Lamar Homes is consistent with these 

prior decisions. In Lamar Homes, the court explained, “An accident is generally understood to 

be a fortuitous, unexpected, and unintended event.” 242 S.W.3d at 8. An accident occurs “as the 

culmination of forces working without design, coordination, or plan.” Id. “[A]n intentional tort 

is not an accident and thus not an occurrence regardless of whether the effect was unintended or 

unexpected.” Id. “But a deliberate act, performed negligently, is an accident if the effect is not 

the intended or expected result; that is, the result would have been different had the deliberate act 

been performed correctly.” Id. “Thus, a claim does not involve an accident or occurrence when 

either direct allegations purport that the insured intended the injury (which is presumed in cases 

of intentional tort) or circumstances confirm that the resulting damage was the natural and 
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expected result of the insured’s actions, that is, was highly probable whether the insured was 

negligent or not.” Id. at 9. In the instant case, the damages resulting from Branham’s 

misrepresentation of known facts, as alleged by the McCulloughs, were not unexpected but were 

the natural and expected result of Branham’s design or plan to conceal the true facts. Moreover, 

the McCulloughs clearly allege that Branham intended the injury. Accordingly, we read the 

definition of the term “accident” in Lamar Homes as being consistent with the holdings in 

Kessler, Freedman, and Huffhines, and hold that the trial court did not err in concluding that 

State Farm did not have a duty to defend Branham in the McCulloughs’ lawsuit.

DUTY TO INDEMNIFY

Branham’s argument regarding State Farm’s duty to indemnify is based on her contention 

that State Farm breached its duty to defend. Because we have held State Farm did not breach its 

duty to defend, Branham’s argument fails. Moreover, since any money paid by Branham in 

settlement of the McCulloughs’ claim could not be for property damages resulting from an 

“occurrence,” State Farm did not have a duty to indemnify Branham.

CONCLUSION

Based on the allegations in the McCulloughs’ petition and the definition of occurrence in 

Branham’s insurance policy, we conclude State Farm did not have a duty to defend Branham 

against that petition.1 The trial court’s judgment is affirmed.

Catherine Stone, Chief Justice

 1 Because we hold no duty to defend exists based on the absence of an occurrence, we need not address whether the 

damages alleged by the McCulloughs were property damages as defined by the policy or the applicability of the 

intentional act exclusion which were alternative grounds asserted in State Farm’s motion for summary judgment also 

challenged by Branham on appeal. See TEX. R. APP. P. 47.1.