Court Opinion

ID: 2865347
Source: CourtListenerOpinion
Date Created: 2015-09-06 00:53:30.701095+00
Date Added: 2024-06-11T09:34:24.715307
License: Public Domain

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

                                           NO. 03-01-00498-CV

            CU Lloyd=s of Texas and Potomac Insurance Company of Illinois, Appellants

                                                      v.

                     Main Street Homes, Inc. and Main Street, Ltd., Appellees

         FROM THE DISTRICT COURT OF TRAVIS COUNTY, 345TH JUDICIAL DISTRICT
             NO. GN102640, HONORABLE F. SCOTT MCCOWN, JUDGE PRESIDING

                 This appeal arises from a dispute over insurance coverage between appellees Main Street

Homes, Inc. and Main Street, Ltd. (together AMain Street@), and appellants CU Lloyd=s of Texas and

Potomac Insurance Company of Illinois (together ALloyds@). Lloyds, Main Street=s insurance provider,

refused Main Street=s request to defend Main Street in two suits brought against it. Following Lloyds=

refusal, Main Street sued Lloyds, seeking, inter alia, a declaratory judgment that Lloyds had a duty to

defend Main Street.1 Main Street moved for partial summary judgment that its insurance policies

contractually obligated Lloyds to defend it in the underlying suits. Lloyds also moved for partial summary

judgment, arguing that there was no duty to defend because the underlying suits= pleadings did not allege an

Aoccurrence@ and, alternatively, that the policies= business-risk exclusions applied. The district court granted

Main Street=s motion and denied Lloyds=. The court then granted an agreed motion to sever, rendering the

        1
            Main Street also sought monetary damages, attorney=s fees, and court costs.
duty-to-defend issue appealable. Lloyds appeals the district court=s grant of summary judgment in favor of

Main Street and the denial of its own motion. We will affirm the district court=s judgment.

                         FACTUAL AND PROCEDURAL BACKGROUND

                  Main Street, a general contractor, constructed residential homes in two subdivisions,

Chimney Hills North in Austin and Ashford Park in Buda. At Chimney Hills, Main Street hired Professional

Design Group (APDG@) to design foundations for the homes. Kevin and Denise Holiday purchased one of

the homes, and subsequently observed structural defects in the home=s construction. The Holidays filed suit

against Main Street as a result of alleged foundation defects.2 The Holiday petition asserts that Main Street

received warnings that the foundations of the Chimney Hills homes, as designed, were inappropriate for the

subdivision=s soil conditions, and that Main Street disregarded the warnings and knowingly proceeded with

construction. The Holidays seek damages for violations of the Texas Deceptive Trade Practices Act, fraud,

breach of implied warranty, negligence, and fraudulent conveyance.

         2
             Holiday v. Main St. Homes, Inc., No. GN003243 (98th Dist. Ct., Travis County, Tex. Nov. 6,
2000).

                                                     2
                  At Ashford Park, Main Street subcontracted with PDG and another foundation engineering

firm3 for the design and construction of residential foundations. Several Ashford Park homeowners brought

a suit similar to the Holidays=,4 alleging that Main Street and PDG relied on an inaccurate soil survey, which

resulted in deficient foundation designs that they knew were destined to fail. The Armstrong petition does

not seek damages from Main Street for negligence, but does assert that the foundations= conditions are

construction defects and structural failures as defined by the Texas Residential Construction Liability Act.

See Tex. Prop. Code Ann. ' 27.001(2), (5) (West 2000).

                  Lloyds was Main Street=s insurance carrier from September 1998 to September 2000, the

period in which the Holiday and Armstrong causes of action arose. During this time, Main Street was

covered by two identically worded comprehensive general liability insurance policies (the Apolicies@).5

ACoverage A,@ the applicable portion of the policies, insured Main Street for Abodily injury@ and Aproperty

damage@ and provided that Lloyds would defend Main Street from suits brought against it.6 Upon learning

of the Holiday and Armstrong petitions, Main Street notified Lloyds, requesting that it provide a defense to

             3
                  For convenience, we will refer to the two foundation engineering firms as PDG.
         4
             Armstrong v. Main St., Ltd., No. GN003566 (98th Dist. Ct., Travis County, Tex. Dec. 13,
2000).
             5
              The first policy, issued by Potomac to Main Street, was in effect from September 23, 1998,
to September 23, 1999. CU Lloyd=s issued the second policy, which was effective from September 23,
1999, to September 23, 2000.
             6
                The duty-to-defend language stated that the insurer would Apay those sums that the insured
becomes legally obligated to pay as damages because of >bodily injury= or >property damage= to which this
insurance applies@ and that A[w]e will have the right and duty to defend any >suit= seeking those damages,@
and that A[w]e may at our discretion investigate any >occurrence= and settle any claim or >suit= that may

                                                      3
the suits. Lloyds declined on the basis that the petitions failed to allege claims covered by the policies.

Main Street then brought this suit.

result.@

                                                    4
                 Main Street moved for partial summary judgment on the grounds that the pleadings in the

underlying petitions contained allegations of covered occurrences and allegations falling within the

Aproducts-completed operations hazard@ clause of the policies.7 Lloyds also moved for partial summary

judgment, asserting that the policies did not require it to defend because the facts alleged in the underlying

pleadings do not allege an Aoccurrence,@ and, in the alternative, that the policies= Abusiness risk@ exclusions

negated coverage for faulty workmanship, thereby failing to trigger a duty to defend. The district court

rendered partial summary judgment, granting Main Street=s motion and denying Lloyds=. In the summary

judgment, the district court found that Lloyds had a duty to defend Main Street, which it breached, and that

          7
                 The policy includes a definitions section, which states in pertinent part:

          AProducts-completed operations hazard@ includes all Abodily injury@ and Aproperty
          damage@ occurring away from premises you own or rent and arising out of Ayour
          product@ or Ayour work@ except (1) Products that are still in your physical possession;
          or (2) Work that has not yet been completed or abandoned.
          AYour product@ means: (a) Any goods or products, other than real property,
          manufactured, sold, handled, distributed or disposed of by: (1) You; (2) Others trading
          under your name; or (3) A person or organization whose business or assets you have
          acquired . . . .

          AYour work@ means: (a) Work or operations performed by you or on your behalf; and
          (b) Materials, parts or equipment furnished in connection with such work or
          operations.

The definitions of Ayour product@ and Ayour work@ include:

          (a) Warranties or representations made at any time with respect to the fitness, quantity,
          durability, performance or use of [Ayour product@ or Ayour work@]; and (b) The
          providing of or failing to provide warnings or instructions.

As used in the policies, Ayou@ and Ayour@ refers to Main Street.

                                                      5
Lloyds was obligated to reimburse Main Street for its defense costs. The parties then jointly moved to

sever, requesting that these issues be made final and appealable. The district court granted the motion, and

Lloyds brings this appeal.

                                             DISCUSSION

                When both sides move for summary judgment and the trial court grants one motion

and denies the other, the appealing party may appeal both the prevailing party=s motion as well as the

denial of its own. Holmes v. Morales, 924 S.W.2d 920, 922 (Tex. 1996). In such a situation, we

review the summary-judgment evidence presented by both sides and determine the questions

presented. Commissioners Court v. Agan, 940 S.W.2d 77, 81 (Tex. 1997). If the pertinent facts are

undisputed, we can determine the issues presented as a matter of law. Devoe v. Great Am. Ins., 50
S.W.3d 567, 570 (Tex. App.CAustin 2001, no pet.). This Court may then either affirm or reverse

and render. Jones v. Strauss, 745 S.W.2d 898, 900 (Tex. 1988); Tobin v. Garcia, 316 S.W.2d 396,

400-01 (Tex. 1958). However, if resolution of the issues rests on disputed facts, summary judgment is

inappropriate, and we will reverse and remand. Coker v. Coker, 650 S.W.2d 391, 394-95 (Tex. 1983).

The parties do not dispute the pertinent facts; the issue in this case is whether those facts trigger

Lloyds= duty to defend.

                To determine an insurer=s duty to defend, Texas courts follow the Aeight corners@ rule. See

National Union Fire Ins. Co. v. Merchants Fast Motor Lines, Inc., 939 S.W.2d 139, 141 (Tex. 1997);

Texas Prop. & Cas. Ins. Guar. Ass=n v. Southwest Aggregates, Inc., 982 S.W.2d 600, 604 (Tex.

App.CAustin 1998, no pet.) (citing American Alliance Ins. Co. v. Frito-Lay, Inc., 788 S.W.2d 152,

                                                     6
153-54 (Tex. App.CDallas 1990, writ dism=d)). Pursuant to the rule, we consider only the allegations in

the underlying complaint and the terms of the insurance policy to determine whether a duty to defend exists,

giving the allegations in the petition a liberal interpretation and resolving any doubt in favor of the insured.

McCarthy Bros. Co. v. Continental Lloyds Ins. Co., 7 S.W.3d 725, 728 (Tex. App.CAustin 1999, no

pet.) (citing Merchants Fast Motor Lines, 939 S.W.2d at 141). AThe duty to defend is not affected by the

facts of the case ascertained before, during, or after the suit.@ Cullen/Frost Bank of Dallas, N.A. v.

Commonwealth Lloyd=s Ins. Co., 852 S.W.2d 252, 255 (Tex. App.CDallas 1993, writ denied). Nor do

we consider the reliability of the allegations in the underlying pleadings. Id. If the underlying petition does

not allege facts within the scope of coverage, the insurer has no duty to defend. Id. Once coverage has

been found for any portion of a suit, an insurer must defend the entire suit. St. Paul Ins. Co. v. Texas

Dep=t of Transp., 999 S.W.2d 881, 884 (Tex. App.CAustin 1999, pet. denied). Therefore, to determine

whether Lloyds has a duty to defend Main Street, we consider only the allegations in the underlying petitions

and the provisions of the insurance policies.

A. Occurrence

                  The applicable portion of the policies is Section I, Coverage A, which states:

        1.   Insuring Agreement

             a.     We will pay those sums that the insured becomes legally obligated to pay as
                    damages because of Abodily injury@ or Aproperty damage@ to which this
                    insurance applies. We will have the right and duty to defend any Asuit@ seeking
                    those damages . . . .

             b.     This insurance applies to Abodily injury@ and Aproperty damage@ only if:

                                                       7
                  (1) The Abodily injury@ or Aproperty damage@ is caused by an Aoccurrence@ that
                      takes place in the Acoverage territory@; and

                  (2) The Abodily injury@ or Aproperty damage@ occurs during the policy period.

The policies define Aoccurrence@ as Aan accident, including continuous or repeated exposure to substantially

the same general harmful conditions.@ However, the policies do not define Aaccident.@

                AAccident,@ in the context of a general liability insurance policy, Ainclude[s] negligent acts of

the insured causing damage which is undesigned and unexpected.@ Massachusetts Bonding & Ins. Co. v.

Orkin Exterminating Co., 416 S.W.2d 396, 400 (Tex. 1967). However, when the action taken is an

intentional tort, there is no accident, regardless of whether the results are unintended or unexpected. See

Argonaut Southwest Ins. Co. v. Maupin, 500 S.W.2d 633, 635 (Tex. 1973). In Trinity Universal

Insurance Co. v. Cowan, the court held that the unauthorized, purposeful copying of revealing personal

photographs to show others was intentional, and therefore no accident, 945 S.W.2d 819, 827-828 (Tex.

1997), but reaffirmed that the definition of Aaccident@ included Athe negligent acts of the insured causing

damage which is undesigned and unexpected.@ Id. at 828 (quoting Orkin, 416 S.W.2d at 400).

                Recently, the court again addressed Aaccident@ in an insurance-coverage context and stated

that,

        an injury is accidental Aif from the viewpoint of the insured [it is] not the natural and
        probable consequence of the action or occurrence which produced the injury; or in other
        words, if the injury could not reasonably be anticipated by the insured, or would
        not ordinarily follow from the action or occurrence which caused the injury.@

                                                      8
Mid-Century Ins. Co. v. Lindsey, 997 S.W.2d 153, 155 (Tex. 1999) (quoting Republic Nat=l Life Ins

Co. v. Heyward, 536 S.W.2d 549, 557 (Tex. 1976)) (alteration in original). The Lindsey court observed

that Aboth the actor=s intent and the reasonably foreseeable effect of his conduct bear on the determinations

of whether an occurrence is accidental.@ Lindsey, 997 S.W.2d at 155. Furthermore, this Court has noted

that the failure of a petition to include the word Aaccident@ does not preclude the possibility that an accident

caused the damage. Stumph v. Dallas Fire Ins. Co., 34 S.W.3d 722, 729 (Tex. App.CAustin 2000, no

pet.).

                 Thus, if the tortfeasor=s acts are deemed intentionally harmful, there is no accident, therefore

no occurrence, no duty to defend, and no policy coverage. However, if intentionally performed acts are not

intended to cause harm but do so because of negligent performance, a duty to defend arises. See

Federated Mut. Ins. Co. v. Grapevine Excavation, Inc., 197 F.3d 720, 729 (5th Cir. 1999).

                 Simply put, Lloyds= assertions are that the underlying petitions allege intentional conduct by

Main Street, and thereby, because of the eight-corners rule, deprive Main Street of insurance coverage.

                 The Holiday petition alleges that both a construction superintendent and Main Street=s

concrete contractor informed Main Street, before construction of the Chimney Hills homes, that the

foundation designs Awere totally inappropriate@ for the soil conditions. The construction superintendent had

the soil tested, revealing a higher plasticity index8 than the designs anticipated. The petition contends that

despite Main Street=s knowledge of these test results, it constructed the homes pursuant to the original PDG

         8
           A soil=s Aplasticity index@ describes the range within which the soil, due to water content, moves
or changes its shape, thus behaving Aplastically.@ A higher plasticity index indicates a soil more prone to
shifting and flexing.

                                                       9
post-tension slab design, and neither disclosed the warnings nor the results of the soil test to the

homebuyers. A[T]he post tension slabs designed by . . . PDG were not sturdy and/or stiff enough to resist

the differential movement of the expansive clay soils in the area,@ and Athe residence was not designed nor

built in a good and workmanlike fashion . . . .@

                We need not determine whether the Holiday petition alleges an intentional tort as the

petition=s allegations against Main Street include allegations of negligence. See Grapevine Excavation,
197 F.3d at 730. Because at least one of the claims asserted in the Holiday petition potentially falls within

the scope of coverage, Lloyds= duty to defend is triggered. Id. at 726; St. Paul Ins. Co., 999 S.W.2d at

884.

                The Armstrong petition alleges that PDG designed the Ashford Park foundations in

accordance with a geotechnical investigation identifying the soil=s maximum plasticity index as 32. However,

a post-construction investigation revealed a significantly higher plasticity index. Additionally, the

Armstrong plaintiffs contend Main Street Awas aware, prior to the construction of the foundations . . . that

the slabs as designed would be inadequate,@ and that Main Street failed to disclose this to the homebuyers.

This knowledge is undisputed, the assertions continue, because some Main Street foundations at Chimney

Hills had failed, and Main Street had previously filed suits against PDG for Ainadequate foundation designs.@

                The Armstrong petition does not preclude coverage. The petition fails to allege facts that

Main Street intentionally designed the foundations to fail. Conversely, the petition alleges that Main Street

built the foundations at Ashford Park in reliance on a geotechnical survey of the area that Main Street

received when it purchased the lots. Additionally, Main Street=s second survey, showing a higher plasticity

                                                     10
index, was conducted after the homes had been built in reliance on the earlier report. These allegations do

not preclude damages due to an Aaccident,@ and therefore an Aoccurrence,@ rather than a result of an intent

to construct defective foundations.

                 When construed liberally in favor of the insured,9 the entirety of the pleadings= allegations,

particularly those relating to Main Street=s potential liability for violations of the Texas Deceptive Trade

Practices Act and the Texas Residential Construction Liability Act, does not restrict the Armstrong

plaintiffs= to successfully prosecuting their suit only if they prove an intentional tort on Main Street=s part.

                 Lloyds directs this Court to Hartrick v. Great American Lloyds Insurance Co., which

held that a homebuilder=s failure to comply with its own implied warranties by not properly preparing the soil

or constructing the foundation was intentional conduct, and therefore was not a covered Aoccurrence@ under

the insured=s policy. 62 S.W.3d 270, 276-78 (Tex. App.CHouston [1st Dist.] 2001, no pet.). Hartrick,

however, concerned a duty to indemnify, not a duty to defend. There, a jury found in favor of the insured

builder on negligence and deceptive-trade-practices-act claims, while finding for the homeowner on breach-

of-warranty claims. Id. at 273. On appeal, the court held that the insurer had no duty to indemnify, stating

that A[b]ecause the judgment in the underlying case did not . . . award damages >caused by Aan

occurrence[,]@= [the insurer] had no duty to indemnify [the insured] for the judgment in the underlying case.@

Id. at 278. Here, there is no trial or verdict in the underlying suits finding for or against the insured.

        9
         See National Union Fire Ins. Co. v. Merchants Fast Motor Lines, Inc., 939 S.W.2d 139,
141 (Tex. 1997).

                                                      11
Moreover, only the underlying pleadings and insurance policy may be examined to determine a duty to

defend, and there is nothing in the underlying petitions to indicate that Main Street intentionally constructed

the foundations to fail.

                 Lloyds also relies on this Court=s opinion in Devoe. 50 S.W.3d 567. There, however, we

noted that the underlying petition did not Aallege any event or series of events that could be construed as an

accident.@ Id. at 572. Rather, the Devoes alleged Aimproper and deficient workmanship and the failure to

complete the home in the agreed upon time.@ Id. at 569. The Holiday and Armstrong petitions allege that

the soil surveys on which the foundation designs were based were erroneous, resulting in damage to the

homes. They allege that the designs proved faulty or inadequate and that Main Street knew the foundations

would fail, but do not allege that Main Street failed to construct the foundations in accordance with PDG=s

preconstruction designs. The allegations in the Holiday and Armstrong petitions differ from those in Devoe

in that they do not assert claims restricted to shoddy workmanship. The petitions sufficiently allege facts that

can be construed as an Aoccurrence.@

B. Business Risk Exclusions

                 Insurance policies are contracts, and their construction is governed by the same rules of

construction applicable to all contracts. Balandran v. Safeco Ins. Co. of Am., 972 S.W.2d 738, 740-41

(Tex. 1998); National Union Fire Ins. Co. v. CBI Indus., 907 S.W.2d 517, 520 (Tex. 1995). In

construing a written contract, the primary goal of the court Ais to give effect to the written expression of the

parties= intent.@ Balandran, 972 S.W.2d at 741 (citing State Farm Life Ins. Co. v. Beaston, 907 S.W.2d
430, 433 (Tex. 1995); Forbau v. Aetna Life Ins. Co., 876 S.W.2d 132, 133 (Tex. 1994)). The court

                                                      12
should Aascertain the true intent of the parties as expressed in the instrument.@ National Union, 907
S.W.2d at 520 (citing Forbau, 876 S.W.2d at 133).

                A written contract that can be given a definite or certain legal meaning is not ambiguous.

National Union, 907 S.W.2d at 520; Coker, 650 S.W.2d 391, 393. If a contract is not ambiguous, the

words used in the contract are to be given their ordinary meaning. See Puckett v. U.S. Fire Ins. Co., 678
S.W.2d 936, 938 (Tex. 1984); see also Security Mut. Cas. Co. v. Johnson, 584 S.W.2d 703, 704 (Tex.

1979) (terms of insurance contract given Aordinary and generally accepted meaning@). However, if Athe

language of a policy or contract is subject to two or more reasonable interpretations, it is ambiguous,@ and

the construction that would afford coverage to the insured must be adopted. National Union, 907 S.W.2d

at 520; see also Balandran, 972 S.W.2d at 741.

                Without making specific arguments, Lloyds contends that Aone or more of the policies=

>business risk= exclusions are triggered by the allegations in the underlying lawsuit.@ Generally, Lloyds

contends that Athere is no coverage for faulty workmanship or for a contractor=s failure to perform his

contract.@ Additionally, Lloyds argues that Athe business risk exclusions are designed to protect insurers

from a contractor=s attempt to recover funds to correct deficiencies caused by the contractor=s questionable

performance@ and specifically cites exclusions A.2.j.(5), (6), A.2.k., and A.2.l. as applicable to preclude

coverage.

     1. Exclusion A.2.j.(5)

                The policies contain numerous exclusions to property-damage liability, including section

A.2.j.(5), which states:

                                                    13
        2.   Exclusions. This insurance does not apply to:

             j.     Damage to Property

                    AProperty damage@ to:

                    (5) That particular part of real property on which you or any contractors or
                        subcontractors working directly or indirectly on your behalf are performing
                        operations, if the Aproperty damage@ arises out of those operations . . . .

                  Main Street posits that this exclusion should not apply, because Main Street is not presently

Aperforming operations.@ The underlying petitions allege that the homebuyers purchased the homes after

Main Street completed construction. Giving the exclusion its plain meaning, the use of the present tense

indicates that the exclusion applies to circumstances where the contractor or subcontractors are currently

working on the project. Words such as Aworking,@ Aare,@ Aperforming,@ and Aarising@ are not used to

extend the policy exclusion to a home purchased after construction is complete.

                  In Houston Building Service, Inc. v. American General Fire & Casualty Co., the court,

interpreting a similarly worded exclusion, addressed the same argument as Lloyds asserts here. 799
S.W.2d 308, 311 (Tex. App.CHouston [1st Dist.] 1990, writ denied). A janitorial service=s employees

negligently applied linseed oil to wooden doors, damaging the property. After the owner complained, the

contractor made a claim under its general liability policy. The insurer denied coverage, arguing that the

policy=s business risk exclusions did not cover faulty workmanship. On appeal, the court agreed and held

that the exclusion did not apply because the janitorial service was operating under an existing contract;

therefore, the work had not yet been completed. Although the facts in Houston Building Service differ, the

reasoning is applicable. Since the underlying petitions indicate that Main Street had completed construction

                                                               14
and sold the homes to the homebuyers before the alleged damage resulted, the exclusion does not preclude

Lloyd=s duty to defend Main Street.

    2. Exclusion A.2.j.(6)

                      Lloyds also contends that business-risk exclusion A.2.j.(6) denies coverage for faulty

workmanship. The exclusion states:

       2.        Exclusions. This insurance does not apply to:

                 j.     Damage to Property

                        AProperty damage@ to:

                        (6) That particular part of any property that must be restored, repaired or
                            replaced because Ayour work@ was incorrectly performed on it.

       Paragraph (6) of this exclusion does not apply to Aproperty damage@ included in the
       Aproducts-completed operations hazard.@

                      Main Street argues that this exclusion Awould be applicable but for the fact that the policy

contains an exception to this exclusion,@ the products-completed operations hazard. The products-

completed operations hazard states the following:

       AProducts-completed operations hazard@ includes all Abodily injury@ and Aproperty
       damage@ occurring away from premises you own or rent and arising out of Ayour product@
       or Ayour work@10 except:

       (1) Products that are still in your physical possession; or

            10
                      See footnote 7, supra, for definitions of Ayour product@ and Ayour work.@

                                                          15
        (2) Work that has not yet been completed or abandoned.11

Main Street asserts that the exception to exclusion A.2.j.(6) applies because the claims Ainvolve: (1)

property that was put to its intended use by the homeowners who purchased the homes, (2) property

damage that occurred away from premises owned or rented by Main Street, and (3) [the claims] arise out

of Main Street=s work.@ The underlying petitions support Main Street=s contention, because Main Street

and its subcontractors worked on and completed the homes, which Main Street later sold to the plaintiffs.

For these reasons, Lloyds= assertion that Main Street=s application of the products-completed operation

hazard Afails to negate the application of exclusion A.2.j.(5)@ is without merit. Main Street completed and

sold the homes before the alleged damages; therefore, the products-completed operations hazard exception

is not applicable to A.2.j.(5), which contains language that refers to ongoing operations.

     3. Exclusion A.2.k.

                Lloyds also relies on Exclusion A.2.k. for the denial of a duty to defend. This provision

excludes coverage for A>[p]roperty damage= to >your product= arising out of it or any part of it.@ Lloyds

argues that Main Street=s homes are its Aproducts,@ and therefore it should preclude Lloyds= duty to defend.

           11
                 The policy states that: A>[Main Street=s] work= will be deemed completed at the earliest of
the following times: (1) When all of the work called for in your contract has been completed, (2) When all of
the work to be done at the site has been completed if your contract calls for work at more than one site, (3)
When that part of the work done at a job site has been put to its intended use by any person or organization
other than another contractor or subcontractor working on the same project.@

                                                             16
The term Ayour product,@ as stated in the policy includes Agoods or products . . . manufactured, sold,

distributed, or disposed of . . . .@ The term also includes A[w]arranties or representations made at any time

with respect to the fitness, quality, durability, performance or use of >your product,=@ as well as Aproviding or

failing to provide warnings or instructions.@

                   Main Street responds that the definition of Ayour product@ does not apply to a building and

its components. In support of its argument, Main Street relies on Mid-United Contractors, Inc. v.

Providence Lloyds Insurance Co., which interpreted the term as Anot apply[ing] to the construction of

[a] building because in ordinary language buildings are constructed or erected, not manufactured,

and because any ambiguity in the policy language must be construed against the insurer and in

favor of the insured.@ 754 S.W.2d 824, 826 (Tex. App.CFort Worth 1988, writ denied). We agree

with the Second Court of Appeals= analysis.

     4. Exclusion A.2.l.

                   Finally, Lloyds argues that Exclusion A.2.l. applies to preclude its duty to defend Main

Street against the underlying suits:

        2.    Exclusions. This insurance does not apply to:

              1.     Damage to Your Work

                     AProperty damage@ to:

                     AProperty damage@ to Ayour work@ arising out of it or any part of it and included
                     in the Aproducts-completed operations hazard.@

                                                      17
However, the policy provides that the exclusion does not apply Aif the damaged work or the work out of

which the damage arises was performed on your behalf by a subcontractor.@ Both the Holiday and

Armstrong petitions allege that the property damage caused by the subcontractors who designed and

constructed the foundations. Specifically, the Holiday petition alleges that: AMichael Alexander and PDG

were hired by Main Street, Inc. to design foundations for the homes . . . .@ The Armstrong petition alleges

that AMain Street contracted with two foundation engineering firms . . . to design the foundations in the

subdivision.@ A plain reading of this exclusion in light of the underlying pleadings demonstrates that the

subcontractor exception applies and the exclusion does not preclude Lloyd=s duty to defend.

                                             CONCLUSION

                We hold that the pleadings in each underlying suit allege an Aoccurrence@ that would trigger

Lloyds= duty to defend under the policy, and that no Abusiness risk@ exclusions preclude this duty to defend.

Accordingly, we overrule Lloyds= issues and affirm the district court=s judgment.

                                                  Lee Yeakel, Justice

Before Justices Kidd, Yeakel and Patterson

Affirmed

Filed: June 13, 2002

Publish

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