Texas Supreme Court Reaffirms All Sums Allocation Approach for Continuous Losses

10/30/2013

Finally resolving 12 years of litigation, the Texas Supreme Court ruled on August 23, 2013, that the triggered insurer—not the insured—bears the responsibility for allocating costs among insurers when a continuing loss extends over several policy periods. The court also reaffirmed that an insured’s failure to comply with a policy’s consent-to-settle provision does not excuse the insurer’s liability unless the insurer was prejudiced by the settlement.

Lennar Corporation v. Markel American Insurance Company,—S.W.3d— No. 11–0394, 2013 Tex. LEXIS 597 (Tex. Aug. 23, 2013) involved an insurance coverage dispute stemming from damage to homes caused by a synthetic stucco commonly known as EIFS (exterior insulation and finish system). Prior to 2009, Lennar, the insured homebuilder, had used EIFS in its homes. After a televised exposé, Lennar investigated numerous complaints and decided to proactively remove the EIFS from hundreds of homes and replace it with traditional stucco.

Excerpted from American Bar Association Section of Litigation, Insurance Coverage Case Notes, October 30, 2013. To read the full article, click here.

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