## In the Cour t of Appeals Second Appellate District of Texas at Fort Worth

___________________________ No. 02

- 20

- 00085

- CV

_

__________________________

On Appeal from the 17th District Court Tarrant Coun ty , Texas Trial Court No

. 017

- 313064

- 19

Before Sudderth, C.J.; Womack and Wallach, JJ. Memorandum Opinion by Justice Wallach 

### T EJAS 

### S PECIALTY 

### G ROUP 

### , I NC



### . AND 

### T EJAS 

### S PECIALTY 

### C ONCRETE 

### C OATING S 

### , LLC , Appel la nts

V


### . U NITED 

### S PECIA LTY 

### I NSURANCE 

### C OM PANY 

### , Appellee2 MEMORANDUM OPINION
This is a general liability insurance coverage dispute involving the duty to defend and duty to p ay arising from an unde rlying constru ction defect case . Appellants Tejas Specialty G r oup, Inc. and Tejas Specialty Concrete Coatings , LLC ( collectively “ Tejas ” ) sued their li ability insurer, United Specialty Insurance Company ( “ United ” ) , asserting claims f or declaratory relief and bre ach of c ontract for United ’ s

r efus al to defend and indemnify Tejas in the underlying case as well as claim s for
violations of the Texas Insurance Code and for attorney ’ s fees

. Tejas filed a motion for partial summa ry judgment, seeking a ruling on United ’ s d uty t o defend th e underlying case

. United f iled a cross

- motion for summary judgment, seeking dismissal
of all of Tejas ’ s claims. Following a hearing, the trial court granted United ’ s motio n and denied Tejas ’ s moti on . T ejas now seeks reversal of the trial court ’ s summary judgment in favor of Unite d and of t he trial court ’ s denial of Tejas ’ s motion for partial summary judgment.
We hold that United ha d a duty to defend the third

- party claim against Tejas in the underlyi ng l awsuit , and it breached that duty

. W e there f ore reverse the trial court ’ s summary judgment in favor of United a nd the trial court ’ s den ial of Tejas ’ s motion
for partial summary judgment

. W e rend er judgment that United ha d a duty to defend Tejas in the third

- party claim in t he un derlying lawsuit and that it breached that duty , and we remand t h is case for proceedings consistent with this opinion.3 I. Factual Background
Th e third

- party claim against Tejas origina ted in the First Amended Third Party
Petition ( “ Third

- Party Petition ” ) of Icon Bui lders, LLC ( “ Icon ” ) filed in the 55 th District Court of Harris County . In that petition, Icon alleged that Avenue Community Development Corporation ( “ ACDC ” ) and Avenue Statio n, LP ( “ Avenue ” ) (collectively “ Plaintiffs ” ) had sued Icon , as general contractor, alle ging
bre ach of a constr uction contra ct, breach of express warranty, breac h of performance
bond , and negligence in the construction of Avenue Station, a multi

- family affordable housing development i n Houston, Texas ( Project or Avenue Station Project ) , and t hat
Icon was entitled t o indemnity o r contribution from Tejas if Icon was found liable to ACDC or Avenue for any work that Tejas had performed as a subcontractor on the
Avenue Station P roject

. In addition to Tejas, Icon sued five othe r subcon tractors rais ing simil a r claims of indemnity or co ntribution.
The six subcontracts we re alleged ly executed in 2014 , 2015, and 2016, with Tejas ’ s contract allegedly executed on December 21, 2015. Under th e te r ms of the
subcontract , Tejas agreed t o provide labor a nd materials to “ instal l lightweight and
gyp sum ” on the Project and to “ wate r

- proo f [] the balconies. ” No further terms or details of the general cont r act or the Tejas sub contract were sta ted

. Icon alleged that
the Avenue St ation Project was “ cert ified as substantially com p [ l ] ete on March 9,
2017. ” H owever, the Third

- P arty Petition did not allege when any of Tejas ’ s work, or4 any of the other subcontractor defendants ’ work, was perfo rmed, either before or
after March 9, 2017. According to Ic on ’ s Third

- Party Petiti on, Plainti ffs alleged that in mid

- 2017 , they began to receive reports of and or observe numerous concerning conditions at the Project. The non

- conforming and/or defective work items man ifested at the Projec t include the followin g: (1) improp erly sealed and/or nonfun ctioning weep gaps at window heads; (2) installation of a non

- specified and otherwise unapproved w eather

resistive barrier; (3) improper construction of vertical transition be tween the Project ’ s s tucco cladding and the lower

- level brick wall; (4) exposed
s heathing; (5) exposed weather

- resistive barrier; (6) lack of proper integration of the weather

- re s istive barrier; (7) lack of properly installed door flashing and trim [;] (8) a failed and collapse d landscape masonry re taining wall [;] and (9) balcony flashi ng and drainage systems failures.
21

. Further, with regard to the windows, Plaintiffs allege: ( 1 ) the pr esence of sealant within the drainage gap at the window heads has like ly resulted in excess ive moisture buildup wi thin the Project ’ s exterior cladding; and (2) the absence of a functional weep at the window heads has likely caused or contributed to the obs erved bulk water infiltration around the Project ’ s windows as evidence d by the widespread d istress visible around the interior finis hed at the windows.
22

. Additionally, with regard to the Project ’ s exterior cladding [,] Plaintiffs allege an absen ce of the nec essary vertical gap at the vertical transition between the Project ’ s stucco cladding and the lower level brick masonry wall which h as caused or cont ributed to distress and damage along the length of that transition, including: (1) brick masonr y delaminatio n at the horizontal mortar joint below the row

- lock; (2) reverse slo ping of flashing abov e the brick maso nr y r ow

- lock; and (3) rever se sloping of th e flashing above the brick masonry row

- lock.
Icon ’ s Third

- Party Petition alleg e s the following regarding indemnity or contribution against Tejas :5 5. CONTRIBUTION AND INDEMNITY

- [TEJAS] 38. Plaintiffs allege [Icon ’ s ] br each of contract

- constr u ction contract , breach of express warranty, breach of contract

- [] performance bond, and negligence on the constr u ction project known as Avenue Station was the proximate cause of P laintiffs ’ allegedly sust ained in j u ri es. 39. In the u nlikely event a judgment is rendered f or Plaintiffs against [Icon] based upo n a finding that damages were the result of work completed by Third

- Party Defendant [Tejas] , [Icon] is entitled to contributi on and indemnity fr om [Te jas] under section 33.016 of t he Texas Civil Practice and Remedies C ode, to recover any payments [ Icon ] may be required to make to Plaintiffs as a res ult of [Tejas ’ s] acts or omissions. 40. [Ic on] contends they are not liable to Plaintiffs for their alle ged damages, if any. However, t o the ex tent that Plaintiffs establish that the proximate cause of the damages arose from work that was contained in th e scope of work for Third

- Party Defendant [Tejas] , [Icon ] asserts causes of actio n against [Tejas] for neg ligence and breach of contract. Finally, Icon ’ s Third

- Party Petition damage allegation state s : DAMAGES Plaintiffs ’ live Petition asserts [a] cla im for damages allegedly caused by

. . . Icon

. . . . This Petition is not an endorseme nt of the exist ence, validity, recoverability, admissib ility, credibility, or amount of those damages. However, to the extent the Court rules any of the alleg ed damages are valid, recoverable damages, and to the extent a jury awards Plaintiffs th ese damage s, these damage s were caused by the actions and omissio ns of the Third

- Party Defendants. The damages sought by Plaintiffs are incorporated and alleged herein aga inst the Third Party

Defendant. Tejas tendered the defense of Icon ’ s clai m against it to its comme rcial general liability insurer, United

. The incepti on date for United ’ s policy was Octobe r 1, 2017.
United denied c overage , claiming, among ot her things, that Icon ’ s claim was excluded6 under United ’ s “ Pre

- Existing Injur y or Damage Exclusion , ” s ometimes known as the

“ Montrose Exclusion. ” 1 Tejas sued United and Maxum Indemnity Company , 2 alleging breach of the duty to defend and indemnify fr om Icon ’ s T hird

- P arty P etition and seeking declaratory relief. Tejas also alleged vi olations of the Texas Insurance Code, Sections 541.010(a)(2)(A), (3) , 542.051 , and 542.0 60(A) , seeking recovery of damages,

at torney ’ s fees , and s tatutory penalt ies

.

1 I n Montrose Chemical Corp. v. Admiral In s . Co

. , 913 P.2d 878, 906 ( Cal. 1995) (op. on reh ’ g), the California Supreme Court
h eld that coverage is not precluded for damage that the policyholder knew existed at the time of th e pur chase (even afte r the policy ho lder had been sued) as long as th e policyho lder ’ s liability for t hat property damage was still contingent. In response to that decision, the Insurance Services Organization, Inc. (ISO) adopted an endorsement in 1999, whic h bec [a] me part of the October 2001 C GL form. This provision, commonly referred to as the Montrose end orsement or exclusion , retains the fundamental requirement that “personal injury” or “property damage” occur during the policy ’ s period. It adds the require m ent that no policyho lder knew th at the “bodily injury” or “property damage” h ad occurred, in whole or in part, prior to the policy ’ s inception. Additionally, if a policyholder knew, prior to the policy inception, that “bodily injury” or “property damage” h ad o ccurred, any con tinuation or r esumption of such bodily injury o r property damage will be consid ered to be known prior to the policy period. The provision establishes the end date for policies triggered under a continuous or injury

- in

- fact trigger. S c o tt M . Seaman & Jason R. Schulze , A l location of Losses in Complex In surance Co verage Claims § 2:2 (9th ed. 2020

– 21 ) Westlaw ALCICC (d atabase updated Dec. 2020).

2 Maxum Indemnity Compan y is not a party to this appeal

.7 United answered with a general denial and several af firmative defense policy exclusions, including the “ Montrose exclusion ” or “ Pre

- existing Injury of Damage
Exclusion

. ” The rele vant policy provisions are : COVERAG E A BODILY INJURY AND PROPERTY DAMAGE LIABILITY 1. Insuring Agreement

a. We will pa y those sums that the ins ured becomes legally obligated to pay as damages because of

. . . “ property damage ” to which this insurance appli es. We will have the right and du ty to defend th e insure d against any “ suit ” seeking those damages. However, we will h ave no duty to defend the insured against any “ suit ” seeking damages for

. . . “ property damage ” to which this insurance does not apply

. . . .

. . . . b. This insurance applie s to
. . . “ property damage ” only if: (1 ) The

. . . “ property damage ” is caused by an

“ occurrence ” that takes pl ace in the “ coverage territory ” ; [and] (2) The

. . . “ property damage ” occurs during the policy period [.]

. . . . SECTION V

— DEFINITION S

. . . . 13. “ Occurrence ” means an accident, including continuous or repea ted expos ure to substantially the same general harmful conditions.

. . . .8 17. “ Property damage ” means:

a. P hysical injury to tangible property, inc luding all resulting loss o f use of th at property. All such loss of use shall be deemed to occur at the time of t he physical injury that
ca used it

...

. . . . PRE

- EXISTING INJURY OR DAMAGE EXCLUSION This endorsement modifies the Conditions provided under th e following: COMMERCIA L GENERAL LIABI LITY COVERAGE PART This insurance does not apply to: 1. Any [ “ ] occurren ce [ ” ] , incident or “ s uit ” whe ther known or unknown to any officer of the Named Insured: (a) which first occurred prior to inception date of this po licy (or the retroac tive date of this policy, if any ) ; or (b) which is, or is alleged to be, in the process o f occurring as of the incep tion date of the policy or the retroactive date of this policy, if any; even if the “ occurrence ” continues during this p olicy period. 2. A ny damages arising o ut of or related to “ bodily injury ” , “ property damage ” or “ per sonal an d advertising injury ” , whic h are known to any officer of any insured, which are in the process of settlement, adjustment or “ suit ” as of the incepti on date of this po licy or the retroact ive date of this policy, if any. We shall have no duty to defe nd any Insured or Additional i nsur ed against any loss, “ occurrence ” , incident or “ suit ” , or other proceeding alleging damages arising out of or related to “ bodily injury ” , “ property damage ” or “ personal injury ” to which this endorsement applies. All other terms, conditions and exclusio ns under this policy are applicable to this Endorsement and remain unchanged

.9 Tejas moved for partial summary judgment on its claims that United had a duty
to defen d the Icon third

- party claim and bre ac hed that duty by refusing to defend. Tejas argued that the court c ould consider both the Thi rd

- Party Petition and the
Plaintiffs ’ First Amended Petition i n the underlying action in applying the eight

corners rule in de termining the duty to defe nd. Tejas reli ed on United ’ s le tter declining coverage based on the Montrose exclusion and the holding from AIX Specialty
Ins urance Co. v. Universal Cas ual ty Co. that “ [a ] lthough the burden is typicall y ‘ on the
insured to show tha t a claim aga inst him is potentially wi thin the scope of coverage under the policies, ’ when ‘ t he insurer relies on the policy ’ s exclusions, it bears the burden of proving that one or more of those exclusions apply

. ’ ” No. H

- 12

- 5 07,
2014 WL 12599325 , at * 10 (S.D. Tex. Ju ly 30, 2014) ( am. mem. and r ec .) (quoting
Federated Mut. Ins. Co. v. Grapevine Ex cavation , Inc. , 197 F.3d 720, 725 (5th C ir. 1999))

. Tejas argued that it did not need to first establish coverage of its claims under the insuring language of the policy and t hat the Montrose exclusion did not apply under the allegations of the Third

- Party Petition and the Pl aintiffs ’ First Amended Petition. United responded by arguing that only the Third

- Party Petition

— Icon ’ s petition

— s h ould be considered in the e ight

- corners analysis and that the allegations in
that Petition f a ll within the scope of the Montrose exclusio n. United did not contest Tejas ’ s assertion that it d id not first ha ve a duty to show that the Third

- Party Petition
al legations involved matters w ithin the coverage provisions of the policy , nor did
United as sert that Tejas had failed to do so.10 W hile disagreeing on which petitions to include in the eight

- corner s rule analysis , the parties squarely drew the b attle li ne on whether Tejas ’ s claims are b arred by the Montrose exclusion , as exemplified by t he “ Relief Requested ” paragraph at the opening of United ’ s Motion for Summ ary Judgment : There is no coverage under the U [nited] po licy for [Tejas] for the underlyi ng lawsuit because the policy contains a Pre

- Existing Injury or Damage Exclusion ( “ Montrose exclusion ” ) and the operative underlying case pleading alleges the damage occurred prior to policy in ception. The underlying Third

- Party Petition filed by Icon

. . . alleges a manifestation of damage “ begi nning in mi d

- 2017. ” The Montrose exclusion squarely excludes coverage for all damage beginning prior to the October 1, 2017 policy inception. Consequent ly, U [nited] requests summary judgment from this Court that: (1 ) U [nited] does not owe a duty to defend Tejas in the underl ying lawsuit; and (2) U [nited] d oes not owe a duty to indemnify Tejas for any award or judgment rend ered against Tejas in the underly ing lawsuit. In its Supplement to its Motion for Summary Judgme nt, United mad e clear that
its Motion for Su mmary Judgment was directed at both the duty to defend and the duty to indemnify and that if the court should find those duties lacking, then t he court
should d ismiss Tejas ’ s statutory claims , as United would owe no duty as a matter of
la

w in the absenc e o f any contractual duties. On February 28, 2020, the trial court signed its order granting United ’ s Motion
for Summary Judgment , d ismissing all of Tejas ’ s claims with prejudice and denying Tejas ’ s Motion for Part ial Summary Judgment.11 II. Legal Standards

a. St andards of Review In a summary

- judgment case, the issue on appeal is whether the movant met the summary

- judgment burden by establishing that no genuine issue of material fact
exists and that the movant is entitled t o judgm ent as a matte r of law. Tex. R . Ci v. P. 166a(c); Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding , 289 S.W.3d 844, 848 (Tex. 2009). We review a summary judgment de novo. Travelers Ins. v. Joachim , 315 S.W.3d 860, 862 (Tex. 2010).
We take as tr ue all evidence favor able to the nonm ovan t, and we indulge every reasonable inference and resolve any doubts in the nonmovant’s favor. 20801, Inc. v.
Parker , 249 S.W.3d 392, 399 (Tex. 2008); Provident Life & Accident Ins. v. Knott , 128 S.W.3d 211, 215 (Tex . 2003) . We also cons ider the evidenc e pr esented in the light most favorable to the nonmovant, crediting evidence favorable to the nonmovant if reasonable jurors could and disregarding evidence contrary to the nonmovant unless reasonable jurors could not. Mann Fr ankfort , 289 S .W.3d at 848. We mus t consider
whether reasonable and fair

- minded jurors could differ in their conclusions in light of all the evidence presented. See Wal

- Mart Stores, Inc. v. Spates , 186 S.W.3d 566, 568 (Tex. 2006); City of Keller v. Wilson , 168 S.W.3d 80 2, 822

– 24 (Tex. 2005 ). We will affirm a summary judgment only if the record establishes that the movant has conclusively proved all essential elements of the movant’s cause of action (or defense, as the case12 may be) as a mat ter of law. City o f Houston v. Clear Creek Basin Aut h. , 589 S.W.2d 671, 678 (Tex. 1979). When both parties move for summary judgment and the trial court grants one
motion and denies t he other, the reviewing court shou ld review both parties’
summary

- judgment evidence and det ermine all questions presented

. Ma nn Frankfort , 289 S.W.3d at 848. We should then render the judgment that the trial court should
have rendered. S ee Myrad Props., In c. v. LaSalle Bank Nat’l Ass’n , 30 0 S.W.3d 746,
753 (Tex. 2009); Mann Frankfort , 289 S.W.3d at 848. This includ es a situation where an
insured has moved for declaratory relief on the duty to defend and the insurer has
moved for summary judgment on the entire case. Westchester Fire In s. Co. v. Gulf Coast Rod, Reel & Gun Club , 64 S.W. 3d 609 , 612 (Tex. App.

— Houston [1 st Dist.] 2001 , no pet.). As noted by the court in Westchester Fire , Before a court of appeals may reverse a summary judgment for one party and render judgment for the other, both parties must ordinarily have sought final judgmen t r eli ef in their motions for sum mary jud gment. CU Lloyd ’ s of Tex. v. Feldman , 977 S.W.2d 568, 569 (Tex. 1998 ) [ (per curiam)]

. When the relief sought is a declaratory judgment, an appellate court may properly render judgme nt on liability alone. Id. 64 S .W .3d at 612. 3

3 United contends that the trial court ’ s deni al of Tejas ’ s par tial motion fo r su mmary judgment , which sough t summary judgmen t on the duty to defend and breach by United , is a non

- appealable order because it was not a final judgment. Tejas ’ s motion for partial s ummary judgment sought “an Order ru l ing that Maxum13 b. Insurer ’ s Duty to Defend Whether an insurance carrier owes a duty to defend under an insurance policy is a question of law, which we review de novo. Transport Int ’ l Pool, Inc. v. Cont ’ l Ins. , 166 S.W. 3 d 7 81 , 7 8 4 (Tex. App.

— Fort Worth 2005 , no p et. ) ; State Farm Gen . Ins. Co.
v. Whi te , 955 S.W.2d 474, 475 (Tex. App.

— Austin 1997, no writ )

. Generally, i n determining an insurer ’ s duty to defend an insured against a third party ’ s liability claim, we use t he “ eight

- corners rule. ” Richards v. State Farm L loyds , 597 S.W.3d 492,
4 94

– 95 (Tex. 2 020). 4 The claims alleged in the four corners of the third party ’ s petition are compared to the terms of coverage in the four corners of the insurance policy to determine if the insurer has a duty to defend. Id. ; Pi ne Oak Builders, Inc. v. Great Am. Lloyds Ins. Co. , 279 S.W.3d 650, 654 (Tex. 2009). The duty to defend is determined without regard to the truth or falsity of the third party ’ s allegations , Rich ards , 597 S.W.3d at 495 ; Guide One Elite Ins. Co. v. Fi elder R d. Baptist Church ,

and Un ited Special ty each had a duty to defend Teja s . . . , and they b oth breached that duty.” Tejas ’ s p etition sought both breach of contract relief and declaratory relief on the duty to defen d

. United did not specially e xcep t to Tejas ’ s motion for partial sum ma ry judgmen t regarding whe ther it was assertin g a request for declaratory relief or relief for breach of contract . The motion could be read as asking for either for m of relief . W e do not find it material. We reject U nite d ’s contention based on the rationa le set forth i n Westchester Fire , 64 S.W.3d at 612

.
4 We are not dealin g with any potential exception to the eight

- corners rule in this c ase. See State Farm Lloyds v. Richards , 966 F.3d 389 , 396

– 97 (5 th Cir. 2020) (ho l ding no exception applies) ; Loya Ins. C o. v. Avalos , 61 0 S.W.3d 8 78 , 881

– 82 (Tex. 2020) (recogn izing a collu sive

- fraud exception)

.14 197 S.W.3d 305, 308 (Tex. 2006) , and is based on the factual allegations in the underlying complaint, not the legal theories or legal causes of actions pleaded. Zurich
Am. Ins. Co . v. Nokia, Inc. , 268 S.W.3d 487, 495 (Tex. 2008).
In cas es where the dispute co n cerns the claims made by the injured party against the insured, the “ petition ” used in the eight

- corners analysis is the plaintiff ’ s petition in the underlying case. See Ric hards , 597 S.W.3d at 500. In this case, where Tejas w as bro ugh t into the underlyin g case by virtue of Icon ’ s Third

- Party Petition, Tejas and United disagree on wh ich “ petitions ” the court may consider in applying the eight

- corners rule. United contends that we can only consider the allegations in Icon ’ s T hird

- P arty P e titio n , which rep re sent the actual allegations made against Tejas. On the other hand, Tejas contends that we should consider not only the T hird

- P arty
P etition but also the petitions of the P laintiff s in the unde rlying litigation, which Tejas

conte nd s were incorpor ated by re f erence in the T hird

- P arty P etition. The parties did not direct our attention to any Texas Supreme Court or Fifth Circuit authority on this point , and lower Texas state courts and federal district courts split. 5 W e need not decid e this in teresting question because it is uncontested that

5 Agreeing with United are Huffhines v. State Far m Lloyds , 167 S.W.3d 493, 497 (Tex. App.―Houston [14th Dist. ] 2005, no pet.) (hol ding insurer ’ s duty to defend is ba sed on the alleg ations con tained in the t hird

- p arty p etition and disagreeing with E & R Rubalcava Constr., Inc. v. Burlington Ins . Co. , 148 F. Supp. 2 d 746, 750 n. 4 (N.D. Tex. 2001 ) (mem. op. and order ) ) ; Colony Ins. Co. v. Custom Ag Com m od it

ies, LLC , 272 F. Supp. 3d 948, 959 (E.D. Te x. 2017) ( holding under the eight

- corners rule, the court is to consider only the third

- party petition); Liberty Surplus Ins. Corp. v. Allied15 Icon ’ s T hird

- P arty P etition should be part of our eight

- corners analysis and , considering th at T hird

- P arty P etition with the United insurance policy in our eight

corners analysis , we conclude that U nited has a duty to defend Teja s in the Icon third

party action

. Interpretation of insurance contracts in Texas is governed by the same rule s as interpretati on of other contracts. Am. Mfrs. Mut. Ins. Co. v. Schaefer , 1 24 S.W.3d 154, 157 (Tex. 2003) ; Forbau v. Aetna Life Ins. Co. , 87 6 S.W.2d 132, 133 (Tex. 1994 ) (op. on
reh ’ g ) . Each insurance policy must be interpreted according to its own specific provisions and coverages. G ilbert Tex. Constr. v. Underwriters at Lloyd ’ s London , 327 S.W.3d 118, 129 n.7 (Tex. 2010). As summ arized by th e court in Colony Ins urance Co. ,

Waste Sys. , 758 F. Supp. 2d 414, 425 (S.D. Tex. 2010) ( holding rel e vant pleadin g for t he purpose of determ ining duty to de fend is th ird

- party petition); and Gibson & Assocs., Inc. v. Home Ins. Co. , 966 F. Supp. 468, 473 (N.D. Tex. 19 97 ) ( holding duty to defend is determined by reviewing only the third

- party petition asse r ting claims against insured ). S upportin g Tejas ’ s positi on are BIT CO Gen. Ins. Corp. v. Acadia Ins. Co. , 427 F. Supp. 3d 838, 852

– 55 ( E .D. Tex. 2019) ( holding court may look to the th ird

- party petition and underlying plaintiff ’ s petition); E & R Rubalcava C onst r. , 148 F. Supp. 2d at 750 n. 4 (co nsider ing allegations in the third

- party petition and petition in the underlying lawsuit in ass essing the insurer ’ s duty to defend and disagreeing with Gibson , 966 F. Supp. at 473 ); and Evanston Ins. Co. v. K insale Ins. Co. , No. 7:17

- CV

- 327, 2 018 WL 4103031, at *11 (S. D. Tex. July 12, 2018) (holding “ the [ c ] ourt may refer , if necessary, to the claims in the underlying suit in order t o determine if the facts asserted trigger coverage ” ) (citations omitted ) )

.16 In determining the scope of coverage, a court examines the policy as a whole to ascertain the true intent of the par ties. Utica Nat ’ l Ins. Co. of Tex. v. Am. Indem. Co. , 141 S.W.3d 198, 202 (Tex. 2004) [ (op. on reh ’ g)] . T he court must also read all parts of the policy together in order to give meaning to every sentence, clause, and word to av oid rendering part of the policy inoperative. Citigroup Inc. v. Fed. Ins. C o. , 649 F.3d 367, 372 (5th Cir. 2011); S tate Far m Life Ins . C o. v. Beas ton , 907 S.W.2d 430, 433 (Tex. 1995); Balandran v. Safeco Ins. Co. of Am. , 972 S.W.2d 738, 741 (Tex. 1998). A policy ’ s terms must be given their ordinary a nd generally accepted meaning unless the policy shows the words were m eant in a technica l o r differen t sense. Nat ’ l Union Fire Ins. Co. v. McMurray , 342 F

. App ’ x 956, 958 (5th Cir. 2009 ) [ (per curiam)]

. When an insurance poli cy defines its terms, those definitions contr ol. Gastar Expl. Ltd. v. U.S. Specialty Ins. Co. , 412 S.W.3d 577, 583 ( Tex. A pp
. — Houston [14th Dist.] 2013, pet. denied); Gilbert Tex. Constr. , 327 S.W.3d at 126. If a policy can be given only one reasonable mea ning, it is not ambiguous and will be enforce d as written. Evergreen Nat ’ l Indem. Co. v. Tan It All, Inc. , 111 S.W.3 d 669, 6 76 (Tex. A pp.

— Austin 20 03, no pet.); State Farm Fire & Cas. Co. v. Vaughan , 968 S.W.2d 931, 933 (Tex. 1998 ) [ (per curiam)] ; Nat ’ l Union Fire Ins. C o. v. CBI Indus

. , Inc. , 907 S.W.2d 517, 520 ( Tex. 1995) [ ( per curiam ) ( op. on reh ’ g) ]

. Only the terms of th e contract should be consulted when int erpretin g an unamb iguous contra ct provision. See Brown v. Palatine Ins. Co. , 89 Tex. 590, 35 S.W. 1060, 1061 (1896); State Farm Lloyds v. Pa ge , 315 S.W.3d 525, 527 (Tex. 2010). 272 F. S upp. 3d at 956

– 57

. The insured b ears the initial b urden to establish t hat the
claim falls within the scope of coverage provided by the policy. KLN Steel Prod. Co.,
Ltd. v. CNA Ins. Cos. , 278 S.W.3d 429, 434 (Tex. App.

— San Antonio 2008, pe t. denied)

. Should the insured establish a right t o coverage, the b urden then shifts to the
insu rer to demo nstrate that the claim is subject to a policy exclusion. Venture Encoding Serv., Inc. v. Atl. Mut. Ins. Co. , 107 S.W.3d 729, 733 (Tex. App.

— Fort Worth 2003, pet.
denied ) (op. on reh ’ g) . The insurer h as the burden of proving that the alle gations in question establish the policy exclu sion to coverage as a matter of law. Gilbert Tex.17 Constr

. , 327 S.W.3d at 124 ; State Farm Lloyds v. Hanson , 500 S.W.3d 84, 94 (Tex. App.

— Houston [14th Dist.] 2016, pet. deni ed) ; see Utica , 141 S.W.3d at 204 (holding Utica
had the burden to establish the professional services exclusion in its policy)

. If the
insurer e stab lish es that an excl usion applies , the burden shifts back to the insured to show that an exception to the ex clusion br ings the claim back within the terms of the
po licy. Venture Encoding , 107 S.W.3d at 733. In applying the eight

- corners rule , w e liberally construe the allega tions in the
p etition in favor of the insured. Allstate Ins. Co. v. Hallman , 159 S.W.3d 6 40, 643 ( Tex.
200 5). All that is needed to invoke the d uty to defend are f actual allegations that support a claim potentially covered by the polic y. See GuideOne , 1 97 S.W.3d at 310. The court may consider inferences logically flowing from the facts alleged in the
p etition. Hallman , 159 S.W.3d at 644

– 45 ; Gen. S tar Indem. Co. v. Gulf Coast Marine Assocs., Inc

. , 252 S .W. 3d 450, 456 (Tex. App.

— Houston [14 th Dist.] 2008 , pet. denied ). If the petition ‘ “ does not state facts sufficient to clearly bring the case wi thin
or wi thout th e coverage, the general rule is that the insurer is obligated to defend if
there i s, potenti ally, a case under the [pleading] within the coverage of the policy. ” ’
Nat ’ l Union Fire Ins. Co. v. Merchs. Fast Motor Lines, Inc. , 939 S.W.2d 139 , 141 (Tex.
1997 ) (per curiam ) (quoting Heyden Newport Chem. Corp. v. S

. Gen. Ins. Co. , 387 S.W.2d 22, 26 (Tex. 1 965 ) )

. In other words, i f there is doubt as to whether the claimant has plea ded a cause of action wi thin coverage, the doubt is resolved in favor of the insured, and the insurer must defend. Id. ; s e e also GEICO Gen

. Ins. Co. v. Austin P ower18 Inc. , 357 S.W. 3d 821 , 824 (Tex . App.

— Houston [14 th Dist.] 2012, pet. denied). Further, “ [i] f a complaint potentially i ncludes a covered claim, the insur er must defend
the ent ire suit. ” Zurich , 268 S.W.3d at 491. Finally, when dealing with an exclusionary
clause in an in surance policy, ‘ “ [t] he court must adopt the construct ion of an

exc lusionary clause urged by the insured as long as that construction is n ot unreasonable, even if the construction urged by the insurer appears to be more
reasonable or a more accurate reflect ion of t he parties ’ intent. ” ’ Utica Nat. Ins. , 141 S.W .3d at 202 ( quoting Na t ’ l Union Fire Ins. Co. v. Hudso n Energy Co. , 811 S.W.2d 552, 555 (Tex.1991) )

.

c . Insure r ’ s Duty to Indemnify The duty to indemnify is a duty independent of the duty to defend under a liabil ity insurance policy. Burlington N

. & Santa F e Ry. Co. v. Nat ’ l Un ion Fire Ins. Co. of
Pit tsburgh, P a , 334 S.W.3d 217, 219 (Tex . 2011) (per curiam); D.R. Horton

– Tex., Ltd. v.
Markel Int ’ l Ins. Co. , 300 S.W.3d 740, 743

– 44 (Tex. 2009); Utica Nat ’ l In s. , 141 S.W.3d

at 203 . While the duty to defend typic ally arises during li tigation, resulti ng in the applicability of th e eight

- corners rule for resolving duty

- to

- defend disputes, the duty to indemnify is generally determined based on fac t s actually establ ished in the underlying litigation. Burlington , 334 S .W .3d at 219; Zurich , 268 S.W.3d at 490. Ther e can be circumstances where the plea dings in the underlying action may negate both the duty to defend and the duty to indemnify. Burlington , 334 S.W.3d at 21 9, Farme rs Tex. C ty

. Mut. Ins. Co. v. Griffin , 955 S. W.2d 81, 82 (Tex. 199 7 ) (per curiam) (op. on19 reh ’ g ) . Such circ umstances involve al legations in the underlying lawsuit petition which render it impossible for the insured to show by extrinsic evidence that the loss falls
under the t erms of the policy. Burlington , 334 S.W.3d at 220; Griffin , 955 S.W.2d at 81

– 8 2.
III. Analysis

a. Duty to Defe nd
Since United ’ s defense to Tejas ’ s claim that it had a duty to defend was based on an exclusion to coverage under United ’ s policy, t he first question w e must de cide
is whether the allegations against Tej a s in the Third

- Par t y P etition fall within the
Mont rose exclusion. Applying the rules of construction applicable to the eight

- corners rule , w e hold that they do not.
The essence of United ’ s position is t h at the T hird

- Party Petition allege s that the
work o n the P roj ect had been certified as substantially co mple te by March 9, 2017

. B y implication , this included Tejas ’ s work

. Further, the Third

- Party Petition allege s that
the P laintiffs in the underlying cas e alleged that problems with the construction had
be e n observed or made kno wn to them, the owners , in th e mi ddle of 2017 , which problems reflected property damage to the P roject

. According to United, because the inception date of its policy was October 1, 2 017 , the work and resulting prop erty damage occurred b efore the policy was issued and continued into th e pol icy period,20 thereb y exclud ing the claims under the M ontrose exclusion. 6 While simplisti cally appealing, this position fails when tested against the rules of construction which apply
to the eight

- corne r s rule

. The Third

- Par ty Petition is not just direc ted a t the work of Tejas and property damages arising from it. The pleading names six subcontractors as third

- party defendants ; Tejas is one. The subcon t ractors ’ contracts all were allegedly si gned in
2014 , 2015 , and 2016, and the Third

- Party Petition was filed on April 30, 2019

. Thus, we can infer that the work of all the subcontractors was performed and the property damage occurred between 2014 and Apr i l 30, 20 19

. However, the Third

- Party P etition
does n o t allege specifi cally when Tejas ’ s work was perform ed during that period , nor does it expressly state when property damage specifically from Tejas ’ s work occurred
or manifested

. Under these allegations, Tejas ’ s work could have been performed , and
property damage could have occu rred, a fter October 1, 2017

. Con struing the allegations of the Third

- Party Petition liberally in favor of the insured and resolving all doubts about coverage in favor of the insure d , we hol d that the property damage
claim would not b e excluded under the Mo nt rose exclusion because the wor k and property damage arising therefrom c ould have occurred after the inception date of the

6 The duty to defend analysis utilizes t he “actual injury” rule, not the “manifestation ” rule. Actual injury to property damage occurs when actual physical damage takes place rather th a n when the d amage manifests itself or becomes discoverable. Don ’ s B ldg. Supp ly , Inc. v. OneBeacon Ins. Co. , 267 S.W.3d 20, 24

– 2 6 (Tex. 2008)

.21 policy. See Vines

- Herrin Custom Homes, LLC v. Great Am

. L loyds In s. Co. , 357 S.W.3d 166, 173 (Tex. App.

— D alla s 2011, pet. denied ); D allas Nat ’ l In s. Co. v. Sabic Am s . , Inc. , 355 S.W.3d 111 , 119 (Tex. App.

— Houston [1st Dist.] 2011, pet. denied)

. The fact that the Third

- Party Petition alleges that manifestations of property
d a mage beg an in mid

- 2017 does not negate this potentia l ly non

- ex cluded claim.
U nited contends that manifestati ons of damage only occur after actual damage has
occurred and that therefore actual damage had occurred before mid

- 2017. This, of course, begs the q uestion of whether the property damage which ha d occ urred befo re mid

- 2017 was related to Te jas ’ s work becaus e the Third

- Party Petition does not expressly tie t he alleged damage manifestations and damages to Tejas ’ s work

. While United argues that the damag e s descri bed in the Third

- Party Petition fall within the
scope of Tejas ’ s work , nothing on t he f ace of the Third

- Party Petitio n makes this
connection. The mere fact that some manifestations o f some damages occurred

“ beginning in mid

- 2017 ” does not mean tha t these m anifestations were necessarily
related to Te jas ’ s work as opposed to any other subc ontractor ’ s work. Likewise, the fac t that the work on the P roject had been certified as substantially complete on March 9, 2017 , does not establish that Tejas ’ s wo r k did no t occur after that date. The Third

- Party Peti tion d oes n ot all ege the terms of the

c ontract between ACDC/Avenue a nd Icon , nor does it allege any terms of the Icon subcontract with Tejas other than a broad description of the work to be done. The
Thir d

- Party P etition contain s no allegations regarding an y contract ual effect of a22 certificate of substantial completion

. Because the Third

- Party Pe tition fail s to allege an agreement that a third party ( like an architect ) was to be the arbi ter to determine
d isputes about whether work had been completed accordi ng to the terms of the

contr act, the op inion of whoever prepared the alleged certificate of su bstantial

c ompletion is not conclusive. See R .C. Small & Assoc s . , Inc. v. S

. Mech

. , Inc. , 730 S.W.2d 100, 10 4 (Tex. A pp.

— Dallas 1987, no writ); Longview Constr

. and D ev . , I nc. v. Loggins
Constr

. Co. , 5 23 S.W.2d 771, 777 (Tex. App.

— Tyler 1975, writ dism ’ d by agr

. ) ; Ol s o n v. Burton , 141 S.W. 549, 551 (Tex. App.

— Fort Worth 1911, no writ)

. Because the
certificate of substant ial completion is not binding, the allegation of substa ntial completion merely creat es conflicting fact ual inferences which will not negate
coverage , as such a conflict is resolved in favor of the insured. Westchester Fire , 64 S.W.3d at 614 ( “ In l i ght of t hese conflicting allegations, and giving the plea dings a liberal interpretation, we must resolve any do ubts regarding coverage in the favor of
the insured. ” )

. Finally, United contends that because the Third

- Party Petition allege s that
property dam a ges bega n to m anifest “ beginning in mid

- 2017 , ” the langua ge of the
Montrose exclusion operat es to exclude T ejas ’ s claim , given that t he exclusion (endorsement) precludes coverage for [a]ny [ “ ] occurrence [ ” ] , incident or “ s uit ” whether known or unknown

. . . which f irst occurred prior to inception date of this policy

. . . ; or . . . which is, or i s alleged to be, in the process of oc curring as of the ince ption date of the policy

. . . even if the “ occurrence ” continues during this policy per iod23 a nd nega tes a d uty to d efend against any loss, “ occurrence ” , incident or “ suit , ” or other proceeding alle gin g damages arising out of or related to “ bodily injury , ” “ property damage ” or “ personal injury ” to which th is endorsement applies. According to United, because “ pr o perty da mage ” had begun to manifest in
mid

- 2017, all prop erty dam age occurring before Octo ber 1, 2017, as well as a ll property damage continuing into the policy period, is excluded. United further argues
that because such property damage occurred prior to the ince ption date of the policy and continuing into the policy p eriod, it ha s no duty to defend any of Tejas ’ s cla i ms as they “ arise ou t of or [are] related to ” “ property damage ” to which this endorsement applies. United relies on Mount Vernon Fire Ins ur a nce Co. v. Boyd , No. H

- 11

- 3785,
2012 WL 1610745 , at *4 ( S. D. Tex. May 8, 2 012) , in supp ort of this proposition

. Mount Vernon is not analogous because it does not deal with general allegations of liability against multiple parties for generally described pro p erty dam age. However, United also relies on Colony Ins ura n ce Co. v. Adsil, Inc. , No

. 4:16

- CV

408, 2016 WL 4617449, at *1 (S.D. Tex. Sept. 2, 2016)

. Colony illustrates why United is painting with too broad of a brush in its a rguments about the Montrose exc l usion. A dsil
manufactured an anti

- corrosive product for a ir conditioning units. Cal allen ISD (CISD) had over 200 air conditioning units installed over five years, involving multiple

contractors
. CISD sued Adsil , CJO Enterprises , Weathertrol, Inc. , AirPro , Inc. , an d
others in the underlying case be cause of proble ms with corrosion which de velope d in
the air conditioners in question

. In some instances, it appear ed that Adsil contracted24 with CJO to apply the product, and in other instances it appear ed that CIS D

contrac ted directly with CJO to apply the product. Altho ugh CISD dismissed its
cla ims ag ainst Adsi l, Weathertrol and AirPro filed cross

- claims against Adsil for
contribution.
C olony insured Adsil and defended the underlying lawsuit under a reservation

o f rights

. Colony filed suit in federal court, seeking , amon g other things, a declara tion
th at it owe d no duty to defend or indemnify Adsil in the underlying case, invoking an
exclusion for claim s “ arising directly or indirectly out of the installation, ser v

ice or

r epair of [Adsil ’ s] product(s) [] performed by indepe ndent contractors or
subc ontract ors of an ins ured

. . . . ” I d. at *1. Colony claim ed that this exclusion
encompasse d all claims asserted against Adsil, thereby relieving Colony of any duty to
defen d or inde mnify Adsil. Id. Colony moved for summary judgment on its claims fo r declar atory r elief of no duty to defend or indemnify Adsil based on this exclusion. Id. In its opinion, t he court noted the applicability of the eight

- corners rule , the
liberal c o nstructi on rules in applying that rule , and the placement of the burden of proving an excl usion on the insurer

. Id. at *6. The court then reviewed the pleadings in the underlying case relating to Adsil ’ s role in the sales and application of its
pro duct . T h e court found conflicting allegations regarding who hired the contractors, who appl ied the product , and whether Adsil was responsible for providing inadequate
instructions on the use of its product to the installers. Id. at *7. After noting the

“ arising d i rectly o r indirectly out of ” language in the exclusion , an d the broad25 applicati on g iven to such language by Texas courts requiring only “ a causal connection between the excluded operation and the loss ” (as is argued here by United), the court d enied Colon y ’ s motio n for summary judgment. Id. at * 7

– 8 (citations and internal quotation marks omitte d)

. In denying Colony ’ s m otion for summary judgme nt on the duty to defend, t he court st ated , Examining the pleadings in the underlying lawsuit, it is not clear that all of the claims against Ads i l arise out of the installati on of its product by a subcontra ctor. Although CISD al leg es that Adsil “ sub

- contr acted ” with CJO to install Adsi l ’ s product, Weathertrol ’ s pleading asserts that Weathertrol “ contracted directly ” with CJO to apply Adsil ’ s produ c t. AirPr o ’ s cross

- claim state s only that the coating applied to the air conditionin g u nits was “ manufactured b y Adsil and applied by CJO. ” It is possible that both CISD and Weathertrol ’ s allegations are true

— the underlying lawsuit relates to the installat i on of mo re than 200 air condi tioning units over the course of five years, involving mu ltiple defendants and se veral contracts. Thus, conduct that is covered under Colony ’ s policy exclusion and conduct that falls outside of the exclusion could have jointly contribu ted to CISD ’ s loss

. . . .

. . . . In this case, We athertrol ’ s complaint against Adsil alleg es conduct that could ha ve caused CISD ’ s injury indepen dent of any conduct that would qualify under Colony ’ s subcontractor exclusion. Weathertrol allege s that it contracted directly w ith CJO, not Adsil. If this is t rue, CJO was not a su bcontractor for Adsi l for this portion of th e claims, and any injury that C ISD sustained as a result of Weathertrol ’ s contract with CJO falls outside of Colony ’ s exclusion. This con duct would have caused the injury separately and indep endently of any contr act work that would fall under Colony ’ s excl usion. The Eight Comers Rule di ctates that the allegations as set forth in the underlying complaint should be liberally construe d without reference to their tr uth or falsity, and that any dou bts about an exclusio n should be resolved in favor of the insured

. [ Willbros RPI, Inc. v. Cont ’ l Cas. Co. , 601 F.3d 306, ] 309 [ (5th Cir. 2010 ) (per curiam ) ] ; Gore Design [ C ompletions, Ltd. v . Hartford Fire In s . Co. , ] 5 38 F.3d [ 365, ] 370 (5th Cir. 2008) ]

. F urthermore, because this is a motion fo r26 summary judgment, the Court must view all evidence in the light most favorable to the non

- moving party and draw all reasonable inferences in that party ’ s favor. Colony , 2 016 WL 4 617449, at *8.
So how does Colony gui de us in this case ? First, it reminds us that it is the
insurer ’ s burden to establish the applicability of the exclusion as a matter of law based
on the allegations in the underlying pleadings, whi ch are const r ued libe ra lly in favor of

t he insured with all doubts regarding coverage being reso lved in favor of the insured.
Id. at *6 , *8

. Second, where multiple parties are alleged to have caused property damage over several years, there may be conduc t by several p a rt ies wh ich may have

cont ri bute d to cause the property damage independently or conc urrently. W here
claim s may involve both covered and excluded cause s, the insurer has a duty to
defend the entire case. Id. at *8

. In this case, Icon sued six third

- party d e fendants . It sought contribu tion or indemnity f rom each third

- party defendant separ ately for damages for which it might
be held liable which were caused by each separate third

- party defendant. Icon pleaded
the existence of property damage generally and th a t manife stat ions of property damage occurred be ginning in mid

- 2017, but it did not affirmatively allege that property damage caused by Tejas, the damage being claimed by Icon, occurred or was in the process of occurring before October 1, 2017. Construing t he plead ing s liberally
and r esolv ing all doubts in favor of the insured as required , we hold that the Third

Party Petition does not allege facts which bring this case, in its entirety, within the27 Montrose exclusion . As a result, United failed to meet its b urden to sustain its s ummary judgment on the du ty to defend. By the same token , the trial court should have granted Tejas ’ s motion for partial summary judgment

. See Mid

- Continent Cas. Co. v. Krolczyk , 408 S.W .3 d 896, 901, 906 (Tex. App.

— Houston [1st Dist.] 2013, p et. denied) (op. on reh ’ g ) ( holding w he re insurer admitted allegati ons were cove red but unsuccessfully asserted policy exclusion, insured was entitled to judgmen t that insure r owed a duty to defend ); Tucker v. Allstate Tex. Lloyds Ins. Co. , 180 S.W .3d 880, 884,
889 (Tex. App.

— Texarkana 2005, no pet. ) ( holding w here insure r acknowledge d that petition invoke d coverag e of policy and unsuccessfully relie d on policy exclus ion,
insured was entitled to judgment on duty to defen d ).
b. Duty to I ndemnify /In surance C ode Violations /Attorn ey ’ s Fees
United mo ved for summary judgm e nt on the duty to indemnify based on its
assertion that the alle gations in the Thir d

- Pa rty Petition did not state factual allegations sufficient to invoke the duty to defend. “ If the un derlying petition does not

sta te factual allegati ons sufficient to inv o ke t he duty to defend, then even proof of all those allegations could not invoke th e in surer ’ s duty to indemnify. ” Lair v. TIG Indem.
Co. , No. 02

- 11

- 00241

- CV, 2011 WL 6415 163, at *1 ( Tex . App.

— Fo rt Worth Dec. 22,
20 11, no pet.) (mem. op.)

. Having h eld that the pleadings d o make allegations sufficient to raise the duty to d efend, we further hold that summary judgment for
United on the duty to indemnify was improper. See Burlington , 334 S.W .3d at 220. Likewise, United moved for summary j udgment on Te j as ’ s claims for violations of t he28 Texas Insurance Code and for attorney ’ s fees unde r Tex as Civ il Practice & Remedies Code Chapter 38 on the groun d that it had no duty to defe nd and in demnify Te jas
under the insur ance policy. For the same reas on , the trial court ’ s order granting summary judgment on those claims was also improper.
I V
. Conclus ion We sustain Tejas ’ s five issues that the trial court erred in gr anting summary judgment f o r United on the dut y to defend, the duty to indemnify , and the

extra contractual claims and that the trial court erred in denying Tejas ’ s Partial Motion for Summary Judgment. We overrule United ’ s Cross

- Points that: 1) Tejas failed to meet its burden to pro v e a duty to defend under United ’ s policy or an exception to
the Mont rose exclusion , 2) the trial court ’ s order denying Tejas ’ s Motion for Partial Summary Judgment is not appea l able , and 3) Tejas is not entitled to partial summary judgment if the ju dgment f o r Un ited is reversed. Cross

- P oint 4 is moot in light of the

re lief g ranted

. See Tex. R. App. 47.1.
We reverse the trial court ’s judgment gra nting United ’s M otion for S ummary J udgment and denying Tejas ’s M otion for P artial S ummary J udgment as to United, and we render judgment i n favo r of Te jas that United had a duty t o defend Icon ’ s Third

- Party P etition and that United breached that duty by failing to defend Tejas
when requested. We remand this case to the trial court f or further proceedings
consistent with this opinion.29 / s/ Mike Wallach Mike Wa l lach Justice Delivered: J une 3, 2021