Opinion ID: 17516
Heading Depth: 3
Heading Rank: 1

Heading: The allegations in the petition

Text: 13 Northern's brief can be read to argue that the third amended complaint, the live pleading at the time of settlement, did not trigger the duty to defend, and thus Northern could not owe a duty to indemnify. Under Texas law, the eight corners rule generally triggers a duty to defend whenever liability sought to be imposed by a petition is even potentially covered by the policy. See Enserch Corp., 952 F.2d at 1492; Heyden Newport Chem. Corp. v. Southern General Ins. Co., 387 S.W.2d 22, 24-26 (Tex.1965). In Texas, the duties to defend and indemnify are separate duties creating separate causes of action. See, e.g., American Alliance Insurance Co. v. Frito-Lay, Inc., 788 S.W.2d 152, 153 (Tex.App.--Dallas 1990, writ dism'd) (reversing injunction on insurer's declaratory judgment action for a determination of duty to indemnify in New York court granted on the grounds that Texas suit for breach of duty to defend involved the same cause of action). The duty to defend, which rests on allegations, is broader than the duty to indemnify, which can only be created by actual facts. Language in some cases can be read to indicate that if the live pleading at the time a determination of the duty to indemnify is sought did not trigger the duty to defend, no duty to indemnify can be found. See, e.g., Farmers Texas County Mutual Ins. Co. v. Griffin, 955 S.W.2d 81, 82-83 (Tex.1997). Thus, even though Western has dropped its duty to defend claim on appeal, a finding that no duty to defend existed at the time of settlement might foreclose a finding of a breach of the duty to indemnify. See Reser v. State Farm Fire & Casualty Co., 981 S.W.2d 260, 264 (Tex.App.--San Antonio 1998, no writ) (finding deletion of only covered claim from counterclaim complaint prior to settlement terminated duty to defend and also foreclosed insurer's duty to indemnify). 14 Northern's argument in this respect seems to rest on an unexplained and apparently avoidable and accidental defect in the record before this Court. The plaintiffs' theory throughout the Sparks litigation, as evidenced by the fact section of the second amended and fourth amended petitions in the Sparks case that are complete in the record before us, was that the FDIC placed financial restrictions on Sparks in handling the water heater problem, and that Sparks breached his duty of care by hiring an uncertified handyman and not supervising the handyman, who installed a used water heater and attempted to deal with a poor connection to the building's gas lines with duct tape. However, the copy of the plaintiffs' third amended petition in the Sparks case as contained in the record before us is missing three pages (it goes from its numbered page 3 to its numbered page 7, and its wording also makes obvious that page 7 does not immediately follow page 3). Assuming that the third amended petition followed the format of the other petitions, these pages were the ones that contained the plaintiffs' factual allegations. The incomplete third amended petition in our possession alleges only that Sparks was negligent in installing a water heater. Nowhere does it indicate that Sparks worked for the FDIC as a building manager, or set forth the factual background to Sparks' alleged negligence. 15 We note, however, that Northern failed to argue that the allegations in a complete copy of the third amended petition diverged in any material way from those in the other petitions, or to complain that the district court made its judgment on the basis of an incomplete copy like the one before us. Indeed, at oral argument counsel for Northern indicated that any defect in the record was not relevant to our inquiry. Accordingly, we believe it is highly probable that a complete copy of the third amended petition exists that contains factual allegations similar to those in the other versions of the petition. We believe the prudent course of action is to remand for a clarification on this point, rather than proceed to determine Northern's duty to defend based on the fragmentary evidence before us. 16 In the interest of judicial economy, we note that the second amended petition (and the fourth) alleged that Sparks was acting as a building manager for the FDIC and in this capacity hired an uncertified handyman rather than a professional to install a water heater in the building. It also alleges that Sparks never set foot in the building, and thus asserts that he did not oversee the handyman's negligent installation or inspect the building's dysfunctional smoke detectors. These allegations were sufficient to trigger the duty to defend under Northern's policy, and a complete copy of the third complaint containing similar factual allegations would foreclose Northern's argument that the duty to defend was absent and thus indemnification is inappropriate.