Legal Concerns For Policy Coverage

A good friend of yours is a developer in Grand Prairie, or maybe Arlington, Fort Worth, Dallas, or Weatherford. He develops a property with a lake and the lake was not properly designed. This improper design causes damage to homes around the lake and the homeowners sue your friend, the developer. Will his insurance defend him?
The above situation is kinda what happened in the case, Mid-Continent Casualty Company v. Academy Development, Inc., et al. This case decision was handed down on March 24, 2010, by the Federal District Court, Southern District, Houston Division, by Judge Gray H. Miller. In this case, Academy Development, Inc., Chelsea Harbour, Ltd., Legend Classic Homes, Ltd., and Legend Home Corporation (collectively “Academy”) were sued on or about May 23, 2005 by a group of plaintiff’s that purchased from the defendants in the Chelsea Harbour subdivision of Fort Bend County, Texas. This property was developed as a lake front community and nearly all of the homes were constructed on lots connected to one of the lakes in the community. The plaintiff’s allege that Academy knew at the time it sold the homes to the plaintiffs that the lake walls were failing and that water was leaking from the lakes onto the adjacent home sites. The plaintiffs further alleged that Academy did not disclose this information to them. As a result, the plaintiffs brought claims of negligence, negligent misrepresentation, statutory fraud, and violations of the Texas Deceptive Trade Practices Act against Academy.
The fight here was over whether or not Mid-Continent Casualty Company (Mid-Continent)had a duty defend Academy in this lawsuit brought by the plaintiffs. The plaintiffs in this case amended their lawsuit papers at least eleven times. Mid-Continent agreed that they had a responsibility to defend Academy thru the eigth amendment but they said the wording of the allegations in the lawsuit papers changed enough that they no longer had a duty to defend Academy.
At this point the Judge had to get into a discussion about insurance contract provisions, their meanings, and how they related to or caused it to become necessary for Mid-Continent to defend the lawsuit. In this case there were multiple policies in effect but the language was similar. Also, the damages allegedly caused by Academy stretched over a period of time and at one point the allegations were for potential damages that had not yet occurred. All of this relevant for the Judge in determining the responsibility of Mid-Continent in defending the lawsuit.
In this case, the changed wording in the lawsuit, used by the plaintiffs, which occurred after the ninth amendment caused the Judge to rule in favor of Mid-Continent.
This case is another interesting reading for trying to understand how Courts look at insurance policies and determining their resposibilities when a claim is made.