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Good News From Austin For Homeowners

There’s some rare good news from Austin for Texas homeowners who have claims or lawsuits against their builders. Last Friday, the Texas Supreme Court handed down the opinion in Lamar Homes, Inc. v. Mid-Continent Casualty Company, and held that an insurance company owes a duty to defend (and likely a duty to indemnify) its homebuilder client under a commercial general liability (“CGL”) policy when the work done by the builder’s subcontractors causes defects in the home.

This holding is of utmost importance to both our homeowner and homebuilder clients. While many of the larger volume builders have the capacity to pay judgments or make repairs, many custom builders, which tend to be smaller operations, don’t. As a result, when making claims, two big battles were always (1) does the builder’s insurance cover the claim, and if not (2) does the builder have enough assets to cover any subsequent judgment. For almost all custom builder cases (since custom builders tend to not have employees and strictly use subcontractors to perform all the work), this case answers the first question in a way that’s favorable to both the homeowner making the claim and the homebuilder seeking insurance coverage for the claim.

Unfortunately, the victory may be short-lived. The likely result is that the insurance companies, as usual, will rewrite their policies to make sure they cover as little as possible.

Another summary of the case can be found don the Houston Litigation Blog.  For summaries of other Supreme Court decisions handed down last week, check out the Texas Appellate Law Blog. They’ll probably have summaries up in a few days.

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