Court Opinion

ID: 2931292
Source: CourtListenerOpinion
Date Created: 2015-09-15 01:07:36.332234+00
Date Added: 2024-06-11T15:22:54.691048
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Affirmed and Opinion filed June 2, 2005

Affirmed and Opinion filed June 2, 2005.
 
 
 
In The
 
Fourteenth Court of Appeals
____________
 
NO. 14-04-00681-CV
____________
 
JIMMIE
W. HUFFHINES AND JUDITH ANN HUFFHINES, Appellants
 
V.
 
STATE FARM LLOYDS AND
STATE FARM FIRE AND CASUALTY CO., Appellees
________________________________________________________________________
 
On Appeal from
the 234th District Court
Harris County, Texas
Trial Court Cause No. 02-57566
________________________________________________________________________
 
O P I N I O N

In this appeal, we must resolve duty-to-defend
issues regarding a Homeowners’ Policy and a Personal Liability Umbrella
Policy.  Specifically, we are asked to
determine whether appellees, State Farm Lloyds and State Farm Fire and Casualty
Company (“State Farm”), had a duty to defend appellants, Jimmie W. Huffhines
and Judith Ann Huffhines, against an original third-party petition filed in an
underlying lawsuit when, in that original petition, the plaintiffs alleged
appellants knowingly failed to disclose defects in a townhouse they sold to the
plaintiffs.  Because we conclude State
Farm had no duty to defend appellants against this original third party
petition, we affirm the trial court’s judgment.
i.  Factual and Procedural Background
Appellants sold their townhouse to George and
Sharon Heaton in March 1998.  Up to the
time of sale, State Farm insured the townhouse under a Homeowners Policy.  State Farm also insured appellants’ subsequent
residence and insured appellants under an Umbrella Policy.
The owner of the townhouse adjoining the Heatons’,
Mary L. Piper, initiated the underlying lawsuit against the Heatons alleging
that various defects in the Heatons’ property caused water to encroach on and
damage her residence.  As part of her
factual allegations, Piper asserted the Heatons “failed to properly repair and
maintain the common wall, patio, drainage system, and adjoining land in general
in such a fashion so as to prevent water from intruding into [Piper’s]
townhome.”  In a claim of negligence,
Piper alleged the Heatons breached their duty to Piper to maintain and repair their property in a
reasonably prudent manner in order to avoid water intruding onto Piper’s
adjacent premises. 
The Heatons then sued appellants.  In their Original Third Party Petition, the
Heatons alleged the following facts:
George Heaton purchased the Property from the Huffhines [sic] in March
of 1998.  In the course of this
litigation, the Heatons received a copy of a letter and an engineering report
sent to the Huffhines[sic] before they sold the Property to the Heatons,
detailing various alleged defects of the Property and/or the common wall with
Mrs. Piper related to water encroachment from the Property to Mrs. Piper’s
residence.  In connection with the
purchase of the Property, the Huffhines [sic] made certain disclosures to the
Heatons regarding the Property in a document entitled Seller’s Disclosure of
Property Condition.  In this Disclosure,
the Huffhines [sic] assured the Heatons that, they were unaware of anything on
the Property in need of repair, water penetration (other than a roof leak),
improper drainage, or defects of the interior walls, exterior walls, roof,
walls, fences, or plumbing.  In summary,
the Huffhines [sic] were on notice of the alleged problems made the basis of
this suit, and failed to disclose same to the Heatons.

The Heatons’ petition alleged common law fraud,
statutory fraud, violation of the Deceptive Trade Practices Act (DTPA), and negligence,
and sought contribution, damages, and attorney’s fees.  In the negligence paragraph, the Heatons
pleaded, “In the alternative, Third-Party Defendants’ misconduct as described
above, constituted negligence which was the proximate cause of the Heatons’
damages, for which they sue herein.”
Appellants, in turn, sued State Farm, seeking a
declaratory judgment that State Farm owed them a duty to defend in the
underlying suit and to pay any adverse judgment rendered against them.  The Heatons subsequently amended their
petition, modifying the factual allegation set forth above to read:
George Heaton purchased the Property from the Huffhines [sic] in March
of 1998.  Plaintiff is alleging that water began
entering her home prior to the Heatons [sic] purchase of the Property in
1998.  Moreover, in the course of this litigation, the Heatons received
a copy of a letter and an engineering report sent to the Huffhines [sic] before
they sold the Property to the Heatons, detailing various alleged defects of the
Property and/or the common wall with Mrs. Piper related to water encroachment
from the Property to Mrs. Piper’s residence. 
However, the Huffhines [sic] failed to adequately repair and remediate
the various alleged defects.  The
Huffhines [sic] also failed to advise the Heatons of the alleged defects and
complaints of Mrs. Piper.
 
In this amended petition, the Heatons set forth
negligence as their first cause of action. 
The  Heatons alleged appellants
(1) failed to effectively repair the water problems and (2) negligently failed
to disclose the alleged defects of the property.  The Heatons again alleged common law fraud,
statutory fraud, and DTPA violations, and sought contribution, damages, and
attorney’s fees.  State Farm agreed to
defend against this amended petition.
After both sides moved for summary judgment, the
trial court granted State Farm’s motion, denied appellants’ motion, and
rendered judgment declaring State Farm had no duty to defend appellants against
the allegations in the Heatons’ Original Third Party Petition or to indemnify
appellants against a judgment based on those allegations.

ii.  Discussion
In a single issue, appellants challenge the trial
court’s declaratory judgment that State Farm had no duty to defend appellants
against Defendants’ (Heatons’) Original Third Party Petition in the underlying
lawsuit.  Whether an insurance carrier
owes a duty to defend under an insurance policy is a question of law, which we
review de novo.  State Farm Gen. Ins.
Co. v. White, 955 S.W.2d 474, 475 (Tex. App.CAustin
1997, no pet.).  Additionally, de novo
review is appropriately applied to the trial court’s declaratory judgment in
this case because the trial court resolved the case on competing motions for
summary judgment in the face of undisputed facts.  See Guthery v. Taylor, 112 S.W.3d 715,
720 (Tex. App.CHouston [14th Dist.] 2003, no
pet.) (regarding
standards applied to declaratory judgments); Taub v. Aquila Southwest
Pipeline Corp., 93 S.W.3d 451, 462 (Tex. App.CHouston
[14th Dist.] 2002, no pet.) (regarding de novo review in summary judgment
context).
A.  Legal Principles Applicable to Determining
the Duty to Defend
A
liability insurer is obligated to defend a suit if the facts alleged in the
pleadings would give rise to any claim within the coverage of the policy.  Utica Nat’l Ins. Co. of Tex. v. Am. Indem.
Co., 141 S.W.3d 198, 201 (Tex. 2004). 
If, however, a petition does not allege facts within the scope of
coverage, an insurer is not legally required to defend a suit against its
insured.  Nat’l Union Fire Ins. Co. v.
Merchs. Fast Motor Lines, Inc., 939 S.W.2d 139, 141 (Tex. 1997) (per
curiam).

We
determine State Farm’s duty to defend based on the allegations contained in the
Heatons’ Original Third Party Petition and the language of appellants’
insurance policies.  See id.  Courts refer to this standard for determining
coverage from the four corners of the pleading and the four corners of the
insurance policy as the “eight corners” rule. 
Id.  In applying the “eight
corners” rule, we give the allegations in the Original Third Party Petition a
liberal interpretation.  See id.  Thus, in construing the allegations of the
underlying suit, we strictly construe the pleadings against the insurer, and
resolve any doubt in favor of coverage.  See
Heyden Newport Chem. Corp. v. S. Gen. Ins. Co., 387 S.W.2d 22, 26 (Tex.
1965).
If the
Heatons’ Original Third Party Petition does not state facts sufficient to bring
the case clearly within or outside appellants’ coverage, State Farm is
obligated to defend if potentially there is a case under the
complaint within the coverage of appellant’s policy.  See Merchs. Fast Motor Lines, Inc.,
939 S.W.2d at 141.  In making this
determination, we must focus on the petition’s factual allegations showing the
origin of the damages rather than on the legal theories alleged.  Id. 
We will not read facts into the petition, nor will we look outside of
the petition, or imagine factual scenarios which might trigger coverage.  Id. at 142.  In the context of this case, if State Farm
has a duty to defend against any claim pleaded in the Original Third Party
Petition, it is required to defend against all claims in that petition.  See Stumph v. Dallas Fire Ins. Co., 34
S.W.3d 722, 728 (Tex. AppCAustin 2000, no pet.).
B.  Analysis
1.         The Petition
and the Policy
In their
Original Third Party Petition, the Heatons alleged that, at the time appellants
sold their townhouse to the Heatons, appellants knew of various defects of
their townhouse and its common wall with Piper’s property, including water
encroachment.  The Heatons also alleged
appellants assured them they were unaware of (1) anything in need of repair,
(2) water penetration other than a roof leak, (3) improper drainage, or (4)
defects of the interior walls, exterior walls, roof, walls, fences, or
plumbing.  As summarized by the Heatons:
Appellants “were on notice of the alleged problems made the basis of this suit,
and failed to disclose same to the Heatons.”

Appellants’ Homeowner’s Policy states that State
Farm will provide a defense A[i]f a
claim is made or a suit is brought against an insured for damages
because of bodily injury or property damage caused
by an occurrence to which this coverage applies.”  An occurrence is defined as “an accident, including exposure to
conditions, which results in bodily injury or property
damage during the policy period.”[1]
Appellants’ Umbrella Policy provides State Farm
will “defend the suit against” the insured “[w]hen the claim or suit is covered
by this policy, but not covered by any other policy available to [the insured].”  State Farm’s “obligation to defend a claim or
suit ends when the amount [State Farm pays] for damages equals [its] limit of
liability under Coverage L.”  Under the
Coverage L provision, “If
[the insured is] legally obligated to pay damages for a loss, [State
Farm] will pay [the insured’s] net loss minus the retained limit.  [State Farm’s] payment will not exceed the
amount shown on the Declarations as Policy Limits ‑ Coverage L ‑
Personal Liability.”  Loss
means “an accident that
results in personal injury or property damage during the policy
period.  This includes injurious exposure
to conditions.”[2]
2.         “Accident” under Cowan
In its summary judgment motion, State Farm argued
both “occurrence” in the Homeowners Policy and “loss” in the Umbrella Policy
required an “accident,” and argued the Heatons had not alleged an accident in
their Original Third Party Petition. 
Neither policy defines “accident.”

In Trinity Universal Insurance Co. v. Cowan,
the supreme court explained the meaning of the term “accident” as found in the
standard homeowner’s insurance policy. 
945 S.W.2d 819, 826B28 (Tex.
1997).  In Cowan, the insured, a
photo lab clerk, made extra prints of revealing photographs of the plaintiff
(Cowan) which she had submitted for developing. 
Id. at 820.  He then showed
the prints to his friends and left them with one friend with instructions to
throw them away.  The friend, however,
showed them to someone else, who then told the plaintiff.  See id. at 820B21.  The supreme court decided the insured’s
intentional tort that resulted in unintended injuries was not an “accident,”
and thus not an “occurrence.”  Id.
at 820.  Therefore there was no coverage
under the policy.  Id.
In reaching this conclusion, the court noted the
rule that whether an event is accidental “is determined from the viewpoint of
the insured.”  Id. at 827.  Nevertheless, more significant for the case
before the court was the rule that “whether an event is accident is determined
by its effect.”  Id.  The court then reiterated its earlier holding
that “an effect that ‘cannot be reasonably anticipated from the use of [the
means that produced it], an effect which the actor did not intend to produce
and which he cannot be charged with the design of producing, is produced
by accidental means.’”  Id. at 827
(quoting Republic Nat’l Life Ins. Co. v. Heyward, 536 S.W.2d 549, 555
(Tex. 1976), in turn citing Int’l Travelers’ Ass’n v. Francis, 119 Tex.
1, 23 S.W.2d 282, 284B85
(1930)).  Regarding the specific conduct
of the photo lab clerk (Gage), the court explained:
[W]e conclude that Gage’s conduct was not an “accident.”   He did exactly what he intended to do when
he purposefully copied the photographs and showed them to his friends.  That Gage did not expect or intend Cowan to
learn of his actions is of no consequence to our determination of whether his
actions were an “accident.”  Nor did Gage
negligently invade Cowan’s privacy; he intentionally made the copies of her
photographs and showed them to his friends. 
We conclude, therefore, that there was no coverage under the policy for
damages caused as a result of Gage’s invasion of Cowan’s privacy.
. . . Rather, Gage’s conduct was not an “accident”
because the injury to Cowan, the invasion of her privacy, is of a type that “ordinarily
follow[s]” from Gage’s conduct and the injuries could be “reasonably
anticipated from the use of the means, or an effect” that Gage can “be charged
with . . . producing.”  To hold otherwise
would inappropriately enhance rather than minimize the moral hazard inherent in
insurance.

Id. at 827B28 (citations
omitted). 
In the present case, the event or conduct alleged
by the Heatons in their Original Third Party Petition is appellants’ assuring
the Heatons they were not aware of defects of their townhouse when appellants
had knowledge of such defects, including water encroachment.[3]  Water damage is of a type that “ordinarily
follow[s]” from existing and undisclosed water encroachment; and the injuries
to Piper, who occupied the adjoining townhouse, could be “reasonably
anticipated from the use of the means, or an effect” appellants can “be charged
with . . . producing.”  See id. at
828.
The allegations in Heatons’ Original Third Party
Petition, did not set forth an “accident” as defined by Cowan.  Absent an “accident” there can be no “occurrence”
under appellants’ homeowners policy and no “loss” under their umbrella
policy.  Thus, the Heatons did not allege
facts within the scope of appellants’ insurance policies, and State Farm was
not required to defend appellants against Heatons’ Original Third Party
Petition.  See Merchs. Fast
Motor Lines, Inc., 939 S.W.2d at 141.
3.         Appellants’ “Negligence” Claim
However, in an attempt to avoid the implications
of Cowan, appellants urge three arguments.  First, they contend that because the Heatons
are seeking contribution under Texas Civil Practices and Remedies Code chapters
32 and 33, Piper’s allegation of the Heatons’ negligence triggers coverage
under the policies.  Second, appellants
argue the Heatons in fact alleged a negligence claim in their Original Third
Party Petition.  Third, appellants assert
that the intentional nature of appellants’ alleged conduct (i.e., the
knowing misrepresentation) does not determine the absence of an “accident.”

Heatons’ claim for contribution.  Appellants perfunctorily reference chapters
32 and 33 and quote the definition of “responsible third parties,” in Texas
Civil Practice and Remedies Code section 33.011(6).  See Act of May 8, 1995, 74th Leg.
R.S., ch 136, ' 1, sec. 33.011(6), 1995 Tex. Gen
Laws 971, 973 (amended 2003) (current version at Tex. Civ. Prac. & Rem. Code Ann. '
33.011(6) (Vernon Supp. 2004B05)).[4]  Appellants, however, do not explain how the
Heatons’ request for contribution or indemnification warrants reference to
Piper’s claims to determine  whether
State Farm is obligated to defend Heatons’ suit against appellants.
Appellants do argue their case is analogous to Gibson
& Associates v. Home Insurance Co., 966 F. Supp 468 (N.D. Tex.
1997).  Gibson, however, is
inapposite.

Gibson concerned a coverage dispute
involving a commercial general liability policy.  See id. at 470.  Gibson, the insured, had contracted with the
City of Dallas to perform construction work along Main Street.  Shop owners subsequently sued the City
claiming, among other things, (1) the City had failed adequately to access the
scope of necessary construction, in particular the total closing of Main Street
for a period of time, and (2) the City’s restriction of access to the owners’
properties during the construction was “‘illegal, unnecessary, negligently
performed and/or unduly delayed.’”  Id.
at 471.  The City, in turn, sued Gibson,
alleging Gibson had agreed to indemnify the city from claims arising from a
breach of any term of the contract and Gibson had breached its contractual
duties because the construction contract required Gibson to insure continued
access to businesses along Main Street during business hours.  Id. 
Attached to the City’s pleading against Gibson was a copy of the shop
owners’ underlying pleading.  Id.  After Gibson’s insurer declined to defend
Gibson, Gibson sued its insurer, Home Insurance Company, alleging that, in
refusing to provide Gibson with a defense, Home failed to deal fairly and in
good faith.  Id.
The district court first considered whether Home
had a duty to defend Gibson against the City’s breach of contract claims.  The court concluded (1) any damages sought by
the City as a direct consequence of Gibson’s breach of its construction
contract could not be characterized as “property damage,” and (2) a breach of
contract did not represent an “occurrence” as defined by commercial general
liability policies.  Id. at 473B74.  Therefore, the City’s breach of contract
claims did not give rise to a duty to defend. 
Id. at 475.  In the course
of reaching its conclusion regarding property damage, the court specifically
rejected  Gibson’s invitation to consider
the shop owners’ claims:
Significantly,
in determining the nature of damages for which recovery is sought from Gibson,
the Court must look not, as Gibson insists, to the claims brought by the Shop
Owners against the City of Dallas, but rather to the facts asserted in the City’s
own third‑party actions against Gibson. 
In other words, it is the factual background alleged in the third‑party
complaints that provides the pertinent frame of reference with regard to the
issue of coverage.  It is true, as Gibson correctly points out,
that the City’s complaints incorporate the Shop Owners’ pleading by
reference.  Yet, the mere fact of
incorporation neither demonstrates that the City has thereby adopted the Shop
Owners’ causes of action as part and parcel of its own claims against Gibson,
nor does it indicate that the City is seeking recovery on a theory of
negligence for injuries sustained directly by the Shop Owners.  Quite to the contrary, the only damages
claimed by the City derive from its potential liability to the Shop Owners as a
result of Gibson’s alleged breach of the construction contract.
 
Id. at 473 (emphasis added).

The district court did conclude Home was required
to defend Gibson based on the City’s cause of action for indemnification.  Id. at 476.  This duty, however, arose not, as appellants
urge in the present case, from a general allegation of contribution or
indemnification in the City’s pleadings. 
Instead, the duty arose from an indemnification agreement in the
contract between Gibson and the City and specific provisions in Gibson’s
commercial general liability insurance contract.  See id. at 476B77.  The policy in question excluded coverage for
bodily injury or property damage for which the insured was obligated to pay
damages because of an assumption of liability in a contract or agreement, but
exempted from this exclusion liability assumed in a contract or agreement that was
an “insured contract.”  Id.
at  476. 
The contract between Gibson and the City was an “insured contract.”  See id. at 479.  In determining whether there was policy
coverage for the City’s claim for indemnification of its liability to the shop
owners, the district court necessarily looked at the nature of the shop owners’
claims.  See id. at 478B79.
Appellants point to no provision in their
homeowners or umbrella policies comparable to the provision giving rise to the
duty to defend in Gibson.  In the
only portion of the Gibson opinion even arguably instructive for the
present case (analysis of the City’s breach of contract claims), the Gibson
court declined to consider the initial plaintiffs’ claims against the party
subsequently suing the insured.  We
conclude the Heatons’ claim for contribution does not give rise to a duty to
defend on the part of State Farm.
Heatons’ “negligence” claim.  Appellants also contend State Farm had a duty
to defend because the Heatons alleged a “negligence claim” in their Original
Third Party Petition.  As an initial
matter, in making this assertion, appellants seem to overlook the rule that, in
determining an insurer’s duty to defend, court must focus on the factual
allegations showing the origin of the damages rather than on the legal theories
alleged.  See Merchs. Fast Motor
Lines, Inc., 939 S.W.2d at 141.

Second, viewed in the context of the entire
Original Third Party Petition, the bare allegation of “negligence” is not
controlling.  In their Original Third
Party Petition, the Heatons alleged appellants were aware of defects in their
property and the common wall related to water encroachment but assured the
Heatons they were unaware of any water penetration or anything needing
repair.  The Heatons next asserted claims
for common law fraud, statutory fraud, and engaging in false, misleading, or
deceptive acts in violation of the DTPA. 
Finally, the Heatons set forth the following allegation of negligence: “In
the alternative, Third Party Defendants’ misconduct as described above,
constituted negligence which was a proximate cause of the Heatons’ damages, for
which they sue herein.”
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.  See Freedman v. Cigna Ins. Co. of Tex.,
976 S.W.2d 776, 779 (Tex. App.CHouston
[1st Dist.] 1998, no pet.) (stating, even though plaintiffs in underlying case
alleged negligence as an alternative claim the mere allegation of negligence does
not control duty to defend); see also Jim Johnson Homes, Inc. v.
Mid-Continent Cas. Co., 244 F. Supp. 2d 706, 716 (N.D. Tex. 2003) (stating
no reading of any Texas decision would reasonably lead to conclusion that mere
characterization, alternatively made, that contractor’s failure to perform
building contract properly was negligent is sufficient to convert claims based
on breach of express and implied covenants and warranties into claim for
recovery of property damages caused by accident within meaning of liability
insurance policy).  The negligence claim
in the Heatons’ Original Third Party Petition is at best a bare-bones
allegation of negligence, insufficient to trigger State Farm’s duty to
defend.  See Tealwood Constr., Inc. v.
Scottsdale Ins. Co., No. Civ.A.3:02-CV-2159-L, 2003 WL 22790856 at *5 (N.D.
Tex. Nov. 19, 2003).

The intentional nature of appellants’
injury-causing conduct. 
Finally, citing Cowan, appellants observe the supreme court “has
rejected the notion that if an actor intended to engage in the injury-causing
conduct, there can be no ‘accident.’” See Cowan, 945 S.W.2d at 828
(rejecting insurer’s argument there can be no accident if actor intended to
engage in conduct giving rise to injury). 
Appellants then cite a series of Texas cases they claim support their
position:  Gehan Homes, Ltd. v.
Employers Mutual Casualty Co., 146 S.W.3d 833 (Tex. App.CDallas,
pet. filed); Hallman v. Allstate Insurance Co., 114 S.W.3d 656 (Tex.
App.CDallas,
2003), rev’d, 48 Tex. Sup. Ct. J. 474, 2005 WL 563110 (Tex. Mar. 11,
2005); Acceptance Insurance Co. v. Lifecare Corp., 89 S.W.3d 773 (Tex.
App.CCorpus
Christi 2002, no pet.); Westchester Fire Insurance Co. v. Gulf Coast Rod,
Reel & Gun Club, 64 S.W.3d 609 (Tex. App.CHouston
[1st Dist.] 2001, no pet.); and Stumph v. Dallas Fire Insurance Co., 34
S.W.3d 722 (Tex. App.CAustin 2000,
no pet.).[5]
In Gehan, the appellate court characterized
the plaintiffs in the underlying case as having alleged, in part, that the
insured home builder, “was negligent in relying upon the developers’ general
soil analysis and in failing to obtain an accurate soil analysis upon which to
base a foundation design.”  Gehan,
146 S.W.2d at 837.  The Gehan
court specifically distinguished Jim Johnson Homes on the ground the
allegations of negligence in the case before the court were “more than simply
bare-bones allegations.”  Id. at
842.  In contrast, as discussed above,
the “negligence” claim in the Heatons’ Original Third Party Petition is just
that, a bare-bones allegation.

In Lifecare Corp., the plaintiff in the
underlying case, a sexual assault victim, sued the insured, her attacker’s
former employer, alleging the employer negligently provided inaccurate
information in a request from the attacker’s subsequent employer.  Lifecare Corp., 89 S.W.3d at 776.  The appellate court observed, “The insured
and its agents’ or employees’ conduct said to have caused the injuries were
purely and simply negligence.  The
specific and only facts alleged against [the insured] were the negligent
representations.”  Id. at
778.  The court also appears to have
concluded the sexual assault was not expected or intended from the insured’s
standpoint.  Id. at 784.  Thus, unlike the present case, Lifecare involved
neither allegations of intentional misrepresentation nor damage that might
reasonably have been expected.
In Stumph, the plaintiff in the underlying
case, a garage owner, sued the insured concrete contractor for damages caused
when cement and sediment fell onto vehicles. 
Stumph, 34 S.W.3d at 729. 
As the Austin court subsequently explained, “The petition in Stumph
contained facts alleging that the damages resulted from certain events and were
not the natural and probable consequences of repairing a garage.”  Devoe v. Great Am. Ins., 50 S.W.3d
567, 571 (Tex. App.CAustin
2001, no pet.).
As appellants acknowledge, in Gulf Coast Rod,
Reel & Gun Club and Hallman, the appellate courts also concluded
the damage at issue was not the intended or expected result of the alleged
conduct by the insured.  See Gulf
Coast Rod, Reel & Gun Club, 64 S.W.3d at 613 (concluding sand erosion
neither expected nor intended); Hallman, 114 S.W.3d at 661 (concluding
underlying plaintiff alleged insured negligently leased her property but did
not allege damages to neighboring landowners from mining operations on property
were inevitable and predictable), rev’d on other grounds, 48 Tex. Sup.
Ct. J. at 477, 2005 WL 563110 at *5.  In
contrast, one could reasonably anticipate water damage would result when one
fails to disclose known water encroachment, but instead assures the buyer there
is no problem.  See Cowan, 945
S.W.2d at 828.
In sum, in terms of the intentional nature of the
insured’s alleged conduct or the extent to which the ensuing damage could be
anticipated, the cases on which appellants rely are distinguishable and do not
provide persuasive authority for deciding the present case.

Under Cowan, it is the effect of
intentional conduct that determines whether an event is an accident.  Cowan, 945 S.W.2d at 827.  As discussed above, the effect in the present
case, water damage, is damage of a type that “ordinarily follow[s]” when one
knows of, but intentionally does not disclose, existing water
encroachment.  See id. at
828.  In determining State Farm had no
duty to defend, we have looked not to the allegation of appellants’ intentional
conduct, but to the effect of that conduct as Cowan requires.
III.  Conclusion
Based on the allegations of the Original Third
Party Petition and the applicable provisions of appellants’ policies, we
conclude State Farm did not have a duty to defend appellants’ against that
petition.  Accordingly, we overrule
appellants’ sole issue and affirm the judgment of the trial court.
 
/s/        Eva M. Guzman
Justice
 
Judgment
rendered and Opinion filed June 2, 2005.
Panel
consists of Justices Edelman, Seymore, and Guzman.
 
 

[1]  Under the
Homeowners Policy, “‘Bodily Injury’ means bodily harm, sickness
or disease,” including Arequired care, loss of services and death that
results,” and “‘Property Damage’ means injury to, destruction of,
or loss of use of property.”  State Farm
does not contend the Heatons failed to allege claims involving bodily injury or
property damage.

[2]  Under the Umbrella Policy, A>personal injury’
means . . . bodily harm, sickness, disease, shock, mental anguish or mental
injury” including “required care, loss of services and death resulting
therefrom,” and ‘property damage’ means physical injury to or
destruction of tangible property,” including Athe loss
of use caused by the injury or destruction.” 
As stated in note one above, State Farm does not contend the Heatons
failed to allege claims involving bodily injury or property damage.

[3]  State Farm
does not argue the Heatons failed to allege a claim for property damage or
failed to allege a causal connection between appellants’ non-disclosure and the
damage to Piper’s townhouse.  Cf.
State Farm Lloyds v. Kessler, 932 S.W.2d 732, 737B39 (Tex. App.CFort
Worth 1996, writ denied) (concluding underlying plaintiffs alleged only
economic loss and alleged misrepresentations did not cause property damage).

[4]  Appellants
quote the current version of section 33.011(6). 
Appellants’ lawsuit against State Farm and the Heatons’ Original Third
Party Petition were filed before July 1, 2003 and are governed by the law in
effect immediately before the 2003 amendment. 
See Act of June 2, 2003, 78th Leg., R.S. ch. 204, ' 23.02(c), 2003 Tex. Gen. Laws 847, 857, 899.  That version provided:
 
“Responsible third party” means any person to whom all
of the following apply:
 
(i) the court in which the action was filed could
exercise jurisdiction over the person;
(ii) the person could have been, but was not, sued by
the claimant; and
(iii) the person is or may be liable to the plaintiff
for all or a part of the damages claimed against the named defendant or
defendants.
 
Act of May 8, 1995, 74th Leg. R.S., ch 136, ' 1, sec. 33.011(6)(A), 1995 Tex.
Gen Laws 971, 973 (amended 2003) (current version at Tex. Civ. Prac. & Rem. Code Ann. ' 33.011(6) (Vernon Supp. 2004B05)).
 

[5]  In addition,
appellants cite Aetna Casualty & Surity Co. v. Metropolitan Baptist
Church, 967 F. Supp. 217 (S.D. Tex. 1996), in which the court was
interpreting Texas law, and  CU Lloyd’s
of Texas v. Main Street Homes, 79 S.W.3d 687 (Tex. App.CAustin 2002, no pet.). 
Aetna Casualty was decided before Trinity Universal Insurance
Co. v. Cowan, 945 S.W.2d 819 (Tex. 1997). 
Main Street Homes has been described as an “anomaly” and “not
representative of Texas law.”  Jim
Johnson Homes, Inc. v. Mid-Continent Cas. Co., 244 F. Supp. 2d 706, 719
(N.D. Tex. 2003).