Opinion ID: 63263
Heading Depth: 2
Heading Rank: 3

Heading: Subject-Matter Stacking

Text: This leads us to North American's last stacking argument. North American impliedly concedes that the actual settlement it paid was for a claim covered under the HPL portion of the policy. However, North American argues for a stacking of sorts as to the CGL and HPL portions of each policy for defense costs. North American reasons that Heritage Housing's defense actually triggered the CGL portion of the policies in lieu of or in addition to the HPL policies. Under Texas law, a duty to defend is determined under the eight corners rule. In Texas, [t]he eight-corners rule provides that when an insured is sued by a third party, the liability insurer is to determine its duty to defend solely from terms of the policy and the pleadings of the third-party claimant. Resort to evidence outside the four corners of these two documents is generally prohibited. GuideOne Elite Ins. Co. v. Fielder Rd. Baptist Church, 197 S.W.3d 305, 307 (Tex.2006). The duty to defend does not depend upon the truth or falsity of the allegations: A plaintiff's factual allegations that potentially support a covered claim is [sic] all that is needed to invoke the insurer's duty to defend. ... Id. at 310 (citing Heyden Newport Chem. Corp. v. S. Gen. Ins. Co., 387 S.W.2d 22, 26 (Tex.1965)). North American contends that, under the eight corners rule, Royal was obligated to defend Heritage Housing under the CGL portion of the policy. Thus, it argues that at least another $1 million in policy limits are available here. North American's contention is based upon the argument that, until 2005, Texas law treated claims for faulty supervision in a health care setting as ordinary, rather than health care negligence claims. Under this argument, the claims against Heritage Housing for inadequate staffing and funding were not health care liability claims. Questions about what claims constitute health care liability claims often have arisen in Texas because health care liability claims are subject to strict pleading and proof requirements under Texas law. See TEX. CIV. PRAC. & REM.CODE ANN. §§ 74.001-.507 (Vernon 2005) (replacing TEX.REV.CIV. STAT. ANN. art. 4590i (Vernon 2003)). Thus, the question of whether a claim was or was not a health care liability claim was important in contexts other than insurance. North American contends that the 2005 decision of Diversicare Gen. Partner, Inc. v. Rubio, 185 S.W.3d 842 (Tex. 2005) changed Texas law regarding what constitutes a health care liability claim, and made understaffing and underbudgeting claims health care liability claims for the first time. Thus, since the Carr litigation was defended before that date, North American reasons that the defense obligation should be viewed under the law existing at the time, making the claims against Heritage Housing CGL claims. We need not decide whether subject-matter allocation of defense costs under an eroding policy is judged by the law at the time of defense or some time later, because North American's argument rests on a faulty premise. In fact, Rubio did not change Texas law. For at least a decade before Rubio, the Texas Supreme Court (and numerous intermediate appellate courts) had made clear that a plaintiff's legal theories and labels do not control the question of whether a claim is a health care liability claim subject to (then existing) Article 4590i, known as the Medical Liability and Insurance Improvement Act (MLIIA). Garland Cmty. Hosp. v. Rose, 156 S.W.3d 541, 543-44 (Tex.2004) (citing authorities dating back to 1994). Plaintiffs cannot use artful pleading to avoid the MLIIA's requirements when the essence of the suit is a health care liability claim .... To determine whether a cause of action falls under the MLIIA's definition of a health care liability claim, we examine the claim's underlying nature .... If the act or omission alleged in the complaint is an inseparable part of the rendition of health care services, then the claim is a health care liability claim .... One consideration in that determination may be whether proving the claim would require the specialized knowledge of a medical expert. Id. These same standards were used to determine Rubio as they had been in numerous cases before. Given the many cases defining health care claims by substance rather than form, Rubio was not some revolutionary change in Texas law. Under Texas law, HPL coverage like that in the Royal and Evanston policies provides for breaches of professional standards of health care, while CGL coverage provides for other non-care related negligence. See generally Utica Nat'l Ins. Co. of Tex. v. Am. Indem. Co., 141 S.W.3d 198, 201 (Tex.2004) (addressing a professional services exclusion in a CGL policy). Mrs. Carr's suit was manifestly a claim alleging breach of professional care. North American points to a reference in Mrs. Carr's complaint to a corporate policy of underbudgeting and understaffing. However, this reference is not a claim of negligence unrelated to standards of professional care. It is not an actionable tort merely to underbudget or understaff. Rather, Mrs. Carr's allegation amounted to a claim of negligence because the alleged Heritage Housing policy of underbudgeting and understaffing caused the nursing home to deliver inadequate medical care to Mr. Carr. Indeed, the only way to know whether a nursing home is properly staffed is by resort to professional standards of care. This claim fell squarely within the HPL side of the policies at issue. The decision to defend the Carr case under the HPL coverage, rather than the CGL coverage, was proper, and North American's argument does not result in more coverage.