SPECIAL REPORT - Lennar Homes v. Markel
Several weeks ago, the Texas Supreme Court issued one of the most significant insurance decisions in the country in the last decade. In Lennar Homes v. Markel, the Texas Supreme Court determined the “consent to settle” provision of Markel’s liability policy was subject to a requirement that the insurer show material prejudice from its breach. In sweeping language, the Texas Supreme Court stated that the consent to settle provision was no different than any other condition of the policy – similar to late notice – that requires a showing of material prejudice to the insurer before the clause can be invoked.
This opinion has sweeping ramifications for casualty claims in Texas. The consent to settle provision in the Markel policy is not materially different from other standard condition provisions in other liability insurance policies. The impact of the decision could lead to liability insurers being excluded from the policyholder’s settlement discussions with the claimant since its consent is no longer automatically necessary. Many believe the decision from the high court of Texas converted Markel’s construction liability policy into a virtual performance bond for defective construction performed by Lennar. But, as written by the Court, the opinion speaks broadly to all “consent to settle” provisions in all liability insurance policies (including standard auto and homeowner’s policies) and will reach far beyond the construction defect arena and commercial liability coverage.
In Lennar Corp. v. Markel Am. Ins. Co., 11-0394, 2013 WL 4492800 (Tex. Aug. 23, 2013), Lennar Corp sought coverage from its general liability carrier, Markel, for a voluntary remediation program it developed to compensate and replace synthetic stucco (commonly known as EIFS) with conventional stucco. Improperly installed EIFS can trap water and cause substantial rot and structural damage in homes. Lennar offered, and in some instances openly solicited, their remediation program to hundreds of homeowners regardless of whether or not their homes suffered damage from EIFS. As a result, Lennar replaced the EIFS it installed on hundreds of homes. (We first reported the details of this decision in our Texas Insurance Law Newsbrief on September 4, 2013.)
Markel will be filing a motion for rehearing in the Texas Supreme Court in the Lennar Homes v. Markel decision. This Special Report is being provided to alert those in the industry of the rehearing efforts and the need for amicus briefing support from any interested carriers. Markel’s motion for rehearing is due October 9, 2013.
Martin, Disiere, Jefferson & Wisdom will be involved in the preparation of one or more amicus briefs in support of the carrier’s motion for rehearing in an effort to bring to the Court’s attention the importance of this matter to insurers doing business in Texas. If any carrier would like more information about the amicus efforts or wishes to participate in those efforts, please contact Jamie Cooper of our Insurance Team at (713) 632-1771.