FEDERAL DISTRICT COURT IN DALLAS HOLDS INSURER HAS NO DUTY TO DEFEND DUE TO “DAMAGE TO YOUR WORK” EXCLUSION

In a significant decision for Texas insurers, a federal district court in Dallas recently granted summary judgment in favor of a general liability insurer based on the “damage to your work” exclusion, finding they had no duty to defend or indemnify a lawsuit against the insured. And, in doing so the court also dismissed all extra-contractual claims asserted. In Siplast, Inc. v. Employers Mutual Casualty Co., 2020 WL 5747869 (N.D.Tex., 2020), Siplast filed suit against Employers Mutual seeking declaratory relief requesting a defense in an underlying lawsuit. Siplast further alleged that by refusing to defend it, Employers Mutual breached the insurance contract and violated Chapter 542 and 541 of the Texas Insurance Code.  Employers Mutual answered and asserted a counterclaim for declaratory relief seeking a declaration that it had no duty to defend Siplast in the underlying lawsuit. The parties filed cross-motions for summary judgment before significant discovery had been conducted.  

In the underlying suit, the Plaintiffs asserted that a Siplast roof membrane and system had failed and Siplast failed to honor its Guarantee. In the Siplast Guarantee, Siplast guaranteed that the new roof membrane and system installed at the school would “remain in a watertight condition for a period of 20 years, commencing with the date hereof; or SIPLAST will repair the Roof Membrane/System at its own expense.”

The court first analyzed whether the allegations against Siplast constituted an “occurrence” as defined in the policy.  On this issue, the court found that the allegation against Siplast for breach of the Guarantee did not matter because the underlying complaint alleged property damage caused by an accident or occurrence.  But the court noted that the inquiry does not end there and turned its attention directly to the “your work” policy exclusions. The court concluded there were no allegations from which the court could find that a claim was made to recover from Siplast for any damage to the building caused by the leaky roof that was separate from the damage to Siplast's product. The claims against Siplast were solely based on its failure to replace the roof as required by the Siplast Guarantee. And the “your work” exclusion precludes coverage for the cost of repairing Siplast's own work. Accordingly, there was no duty to defend. Further, based on this same finding, the court held that Employers Mutual was also entitled to judgment as a matter of law on all claims for breach of contract and violations of the Texas Insurance Code, and granted summary judgment in favor of the insurer on all claims.

Editor’s note: This significant decision emphasizes the importance of raising dispositive coverage issues as early as possible.  MDJW had the privilege of representing Employers Mutual Casualty Company in this matter and we take this opportunity to congratulate them, along with our attorneys Christopher W. Martin, Leslie Pitts and Ryan K. Geddie, in securing this significant victory.