SAN ANTONIO COURT OF APPEALS FINDS DUTY TO DEFEND—EVEN WHEN ALLEGATIONS ARE FALSE OR FRAUDULENT

Last week, the Fourth Court of Appeals in San Antonio, Texas, addressed an insurer’s duty to defend when faced with false or fraudulent claims against the insured. In Avalos v. Loya Insurance Co., No. 04-17-00070, 2018 WL 3551260 (Tex. App.—San Antonio, Jul. 25, 2016) (mem. op.), Plaintiffs appealed from the trial court’s summary judgment in favor of Loya for claims of negligence, breach of contract, breach of duty of good faith and fair dealing and DTPA violations. The underlying suit stemmed from a car accident between Osbaldo Hurtado Avalos and Antonio Hurtado in one vehicle with Karla Flores Guevara and Rodolfo Flores in another. Flores was moving Guevara’s car when he struck the Hurtados. Guevara was insured by Loya, however, the policy listed Flores as an excluded driver. Guevara, Flores and the Hurtados reported to the police and insurance company that Guevara (not Flores) was driving the involved vehicle. The Hurtados sued Guevara and through discovery, Guevara’s counsel discovered that Flores, not Guevara, was driving at the time of the accident. Accordingly, Loya denied coverage and Guevara’s counsel withdrew. A judgment was rendered against Guevara for over $450,000. Thereafter, the Hurtados, as assignees of Guevara, brought the underlying suit against Loya for actions including negligence, breach of contract, breach of the duty of good faith, and violation of the DTPA. Loya moved for both a traditional and no-evidence motion for summary judgment on the basis it had no duty to defend or cover Guevara as Flores was driving the vehicle, that there was no evidence Loya had a duty to defend Guevara or that Guevara was covered, and there was therefore no evidence as to the assigned claims brought by the Hurtados. Loya included portions of Guevara’s deposition taken in the instant suit, where Guevara admitted Flores was driving the car. The trial court granted summary judgment for Loya and the Hurtado’s appealed.

Analyzing Loya’s duty to defend, the court employed the eight-corner rule—that only the insurance policy and the pleadings are relevant to the court’s determination of the duty. Under the Hurtado’s pleadings in the original negligence suit against Guevara, it is undisputed Guevara was a named insured under the policy, the vehicle involved was listed and that Flores was an excluded driver. Although Loya pointed to Guevara’s deposition where she admitted she was not driving the vehicle at the time of the accident, the Court concluded that it was Loya’s duty to establish the facts in defense of Guevara in the underlying suit—even if the allegations against Guevara were false or fraudulent. Accordingly, Guevara’s deposition could not be considered—and because Loya had a duty to defend Guevara, the trial court erred in granting Loya’s summary judgment. The Court reversed and remanded the case to the trial court.