A federal district court in Austin recently granted a summary judgment filed by Western World Insurance Company (“Western”) and dismissed the declaratory judgment action filed by Plaintiff, Xavier Benites (“Benites”). Benites v. Western World Ins. Co., 1:21-CV-1093-RP, 2022 WL 2820669 (W.D. Tex.—Austin July 18, 2022).

Benites owned a condominium unit in the BeachGate Condominiums (“BeachGate Condos”) that he rented out to visitors, and BeachGate Owners Association, Inc. (“BOA”) was the homeowners association for BeachGate Condos. A group of people rented a condo unit at BeachGate Condos and were assigned Benites’ unit. On one evening, the group was congregating on the upstairs outdoor balcony attached to the unit when it collapsed, injuring those on it. The group then sued BOA and Benites in state district court for personal injuries. Western provided a defense to BOA in the state court action under a reservation of rights. Benites sought a defense from Western as an “additional insured,” arguing that the balcony attached to his unit was a “General Common Element” of the property for which BOA was responsible. Western contended that the balcony was reserved for Benites’ “exclusive use or occupancy,” which precluded Benites from being considered an “additional insured” under its policy. As such, Western denied Benites’ claim.

Benites then filed a third-party claim against Western in the state court action, and Western successfully severed and removed the third-party claim to federal court based on diversity jurisdiction. Once in federal court, both Benites and Western filed motions for summary judgment on the coverage issue, which rested on whether Benites was an “additional insured” under Western’s policy.

                Although the district court noted that the “eight-corners” rule applied to determine whether an insurer owed a duty to defend an insured, and that the duty to indemnify is only determined when a plaintiff ultimately prevails on claims covered by the policy, the court concluded that the allegations in the state court petition did not conclusively show whether coverage existed in this case. As such, and under the facts alleged in the state court action, the court could consider extrinsic evidence, such as the BeachGate Condo Declarations and Bylaws. Because the Declarations and Bylaws did not state that the balconies of individual condo units are included as “General Common Elements” and the Uniform Condominium Act and case law considered balconies to be “limited common elements allocated exclusively to [the] unit” and not “general common elements,” the district court concluded Benites’ private balcony was reserved for his “exclusive use or occupancy,” and he was therefore not an “additional insured” under the Western policy and not entitled to coverage.

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