Opinion ID: 895185
Heading Depth: 1
Heading Rank: 3

Heading: discussion duty to indemnify

Text: In liability insurance policies generally, an insurer assumes both the duty to indemnify the insured, that is, to pay all covered claims and judgments against an insured, and the duty to defend any lawsuit brought against the insured that alleges and seeks damages for an event potentially covered by the policy, even if groundless, false or fraudulent, subject to the terms of the policy. 14 LEE R. RUSS & THOMAS F. SEGALLA, COUCH ON INSURANCE § 200:3 (3d ed.2009); see also Zurich Am. Ins. Co. v. Nokia, Inc., 268 S.W.3d 487, 490 (Tex.2008). However, the duty to defend and the duty to indemnify are distinct and separate duties. Utica Nat'l Ins. Co. v. Am. Indem. Co., 141 S.W.3d 198, 203 (Tex.2004) (quoting King v. Dallas Fire Ins. Co., 85 S.W.3d 185, 187 (Tex.2002)). We noted in Farmers Texas County Mutual Insurance Co. v. Griffin that one duty may exist without the other. 955 S.W.2d at 82. To that extent, the duties enjoy a degree of independence from each other. [2] See Trinity Universal Ins. Co. v. Cowan, 945 S.W.2d 819, 821-22 (Tex.1997). While analysis of the duty to defend has been strictly circumscribed by the eight-corners doctrine, it is well settled that the facts actually established in the underlying suit control the duty to indemnify. Pine Oak Builders, Inc. v. Great Am. Lloyds Ins. Co., 279 S.W.3d 650, 656 (Tex.2009); GuideOne, 197 S.W.3d at 310; Cowan, 945 S.W.2d at 821. As with any other contract, breach or compliance with the terms of an insurance policy is determined not by pleadings, but by proof. See, e.g., Progressive County Mut. Ins. Co. v. Sink, 107 S.W.3d 547, 551 (Tex.2003); Provident Life & Accident Ins. Co. v. Knott, 128 S.W.3d 211, 216 (Tex.2003); State Farm Life Ins. Co. v. Beaston, 907 S.W.2d 430, 433 (Tex.1995). The duty to defend, however, is established according to the eight-corners doctrine, considering only the factual allegations in the pleadings and the terms of the policy. Pine Oak, 279 S.W.3d at 654; Cowan, 945 S.W.2d at 821. The insurer's duty to indemnify depends on the facts proven and whether the damages caused by the actions or omissions proven are covered by the terms of the policy. Evidence is usually necessary in the coverage litigation to establish or refute an insurer's duty to indemnify. This is especially true when the underlying liability dispute is resolved before a trial on the merits and there was no opportunity to develop the evidence, as in this case. We hold that even if Markel has no duty to defend D.R. Horton, it may still have a duty to indemnify D.R. Horton as an additional insured under Ramirez's CGL insurance policy. That determination hinges on the facts established and the terms and conditions of the CGL policy. [3] Markel reasons that if the terms of the policy, when read in light of the allegations asserted in the petition, do not give rise to a duty to defend, then proof of all of those allegations could not give rise to a duty to indemnify. It relies on Griffin for this proposition, [4] but the holding in Griffin was fact-specific and cannot be construed so broadly. See 955 S.W.2d at 84. In Griffin, the issue was whether facts developed in the underlying tort suit for injuries caused by a drive-by shooting could form the basis for coverage under an automobile insurance policy. Id. We explained in that case that no facts can be developed in the underlying tort suit that can transform a drive-by shooting into an `auto accident.' Id. In that scenario, the duty to indemnify is justiciable before the insured's liability is determined in the liability lawsuit when the insurer has no duty to defend and the same reasons that negate the duty to defend will likewise negate any possibility the insurer will ever have a duty to indemnify. Id. This conclusion was grounded on the impossibility that the drive-by shooting in that case could be transformed by proof of any conceivable set of facts into an auto accident covered by the insurance policy. It was not based on a rationale that if a duty to defend does not arise from the pleadings, no duty to indemnify could arise from proof of the allegations in the petition. These duties are independent, and the existence of one does not necessarily depend on the existence or proof of the other. In Griffin, in fact, we recognized that it may be necessary to defer resolution of indemnity issues until after the underlying third-party litigation is resolved because coverage may turn on facts actually proven in the underlying lawsuit. See id.; see also GuideOne, 197 S.W.3d at 310 (explaining that the facts actually established in the underlying suit control the duty to indemnify); Utica, 141 S.W.3d at 204-05 (affirming an insurer's duty to defend, but reversing and remanding on the duty to indemnify issue because whether indemnification under the policy was triggered required a factual resolution); Cowan, 945 S.W.2d at 821 (explaining that the the duty to indemnify is triggered by the actual facts establishing liability in the underlying suit). In this case, unlike Griffin, D.R. Horton presented evidence with its response to Markel's summary judgment motion that showed Ramirez was a subcontractor for D.R. Horton for the home, Ramirez performed masonry work and repairs allegedly contributing to the defects, and Markel's CGL policy for Ramirez named D.R. Horton as an additional insured. This evidence raises fact questions that defeat Markel's motion for summary judgment in this case on the duty to indemnify claim. Of course, other terms, conditions, exclusions, or exceptions in the policy or other proof may establish or refute, before or during trial, the existence of CGL coverage for D.R. Horton. The insurer and the putative insured may introduce evidence in coverage litigation to establish or refute the insurer's duty to indemnify. Where disputed facts are proven in the liability case, whether none, some, or most of the material coverage facts will have been established in that underlying suit depends on the circumstances of the case and other legal and equitable principles.