Lennar Corporation, Lennar Homes of Texas Land and Construction, Limited, and Lennar Homes of Texas Sales and Marketing, Limited, D/B/A Village Builders v. Great American Insurance Company, American Dynasty Surplus Lines Insurance Company, Markel American Insurance Company Gerling America Insurance Company, RLI Insurance Company, Insurance Company of the State of Pennsylvania and Westchester Fire Ins Company

Opinion

Opinion of March 30, 2006, Withdrawn; and Substituted Concurring and Dissenting Opinion filed April 11, 2006

Opinion of March 30, 2006, Withdrawn; and Substituted Concurring and Dissenting Opinion filed April 11, 2006.

In The

Fourteenth Court of Appeals

_______________

NO. 14-02-00860-CV

LENNAR CORPORATION, LENNAR HOMES OF TEXAS LAND

AND CONSTRUCTION, LIMITED, AND LENNAR HOMES OF TEXAS SALES AND MARKETING, LIMITED D/B/A VILLAGE BUILDERS, Appellants

V.

GREAT AMERICAN INSURANCE COMPANY,

AMERICAN DYNASTY SURPLUS LINES INSURANCE COMPANY,

MARKEL AMERICAN INSURANCE COMPANY,

GERLING AMERICA INSURANCE COMPANY, RLI INSURANCE COMPANY, INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA

AND WESTCHESTER FIRE INSURANCE COMPANY, Appellees

On Appeal from the 270th District Court

Harris County, Texas

Trial Court Cause No. 00‑30034

S U B S T I T U T E D   C O N C U R R I N G   A N D   D I S S E N T I N G   O P I N I O N

My concerns with the majority=s 72-page opinion in this case mostly relate to the following three aspects.  First, if the costs for preventive replacement of EIFS, overhead, inspection, personnel, and attorney=s fees are not property damage within the meaning of the policies, as the majority holds, then the summary judgments should have been partially affirmed as to the claims for those costs against American Dynasty / Great American and Markel (as well as the other insurers).

Second, despite purporting to deny Lennar=s motion for summary judgment as to all carriers, the majority opinion nevertheless unequivocally holds, based on the uncontroverted evidence, that ALennar=s defective construction constitutes an >occurrence= in this case@; ALennar=s defective construction constitutes an >occurrence= under Texas law@; and ALennar has established an >occurrence= under all the policies.@  If this was a ground on which Lennar sought summary judgment, then the majority=s conclusion dictates that summary judgment be partially rendered for Lennar on that ground.  On the other hand, if the lack of an occurrence was merely a ground on which the insurers sought summary judgment, then our opinion should go no farther than to state that the insurers= summary judgment materials failed to establish this ground as a matter of law, Lennar=s evidence was sufficient to raise a fact issue, or the like, as the case may be.

Third, I disagree with the reasoning of the majority opinion in interpreting the term Aoccurrence@ in the policies.  As relevant to this appeal, Aoccurrence@ is defined to mean accident, which is not defined in the policies.  An injury is accidental if, from the viewpoint of the insured,^[1] it is not the natural and probable consequence of the action or occurrence that produced the injury; or, in other words, the injury could not reasonably be anticipated by the insured or would not ordinarily follow from the action or occurrence which caused the injury.  Mid-Century Ins. Co. of Tex. v. Lindsey, 997 S.W.2d 153, 155 (Tex. 1999).

An injury caused by voluntary and intentional conduct is not an accident just because the result or injury may have been unexpected, unforeseen, or unintended.  Id.  On the other hand, the mere fact that an actor intended to engage in the conduct that gave rise to the injury does not mean that the injury was not accidental.  Id.  Rather, both the actor=s intent and the reasonably foreseeable effect of his conduct bear on the determination of whether an occurrence is accidental.  Id.  An event is, thus, accidental if its effect: (1) cannot reasonably be anticipated from the use of the means that produced it; and (2) is one that the actor did not intend to produce and cannot be charged with the design of producing.  Trinity Universal Ins. Co. v. Cowan, 945 S.W.2d 819, 827 (Tex. 1997).

As examples, Aaccident@ has been held to include: (1) an employer=s alleged negligent hiring, training, and supervision of an employee whose intentional conduct (assault) caused the injury;^[2] (2) an unintentional discharge of a gun resulting from an attempt to gain entry to a truck by reaching through its rear window;^[3] (3) a hunter=s deliberate firing of a gun at what he believed to be a deer, but was actually a person;^[4] and (4) a deliberate application of a pesticide to rice in a rice mill.^[5]  Conversely, Aaccident@ has been held not to include: (1) the copying of revealing photos of a person and showing them to others;^[6] or (2) the removal of over 5000 cubic yards of borrow material (dirt) from a property pursuant to an agreement with a party who was later determined to be only a tenant in possession rather than an owner of the property.^[7]

In this case, the trapping of water by EIFS is accidental if that effect: (1) could not reasonably be anticipated from the use of the product; and (2) is one that Lennar did not intend to produce and cannot be charged with the design of producing.  See Cowan, 945 S.W.2d at 827.  However, the majority opinion has instead framed the controlling issue as

 whether defective construction resulting in damage to the insured=s own work can be an occurrence (accident).  After discussing (for 20 pages) that the accident framework established by the Texas Supreme Court does not eliminate coverage for damage to the insured=s own work, and that business risk exclusions would be rendered superfluous if such damage was not an occurrence, the majority concludes that Lennar has established an Aoccurrence@ under all the policies because Athe uncontroverted evidence demonstrates Lennar did not intend to build the homes with a defective product and did not intend or expect the resulting damage.@

On the contrary, framing the controlling issue as merely whether defective construction resulting in damage to the insured=s own work can be an accident only begs the question because, under the Texas Supreme Court=s standards (outlined above), it unquestionably can be an accident, but depends entirely on other circumstances.  Similarly, the fact that the Aaccident framework@ established by the Texas Supreme Court does not eliminate coverage for damage to the insured=s own work is of no consequence because that consideration is not even remotely a part of that framework.

Likewise, if framed broadly enough, any category of subject matter can potentially be covered by some policy exclusion and, under the majority rationale, thereby fall within the scope of the insuring agreement.  Therefore, the fact that defective construction resulting in damage to an insured=s own work could come within a business risk exclusion provides no guidance whether the water entrapment in this case was an accident.

Lastly, the fact that Lennar did not intend to use a defective product or expect the resulting damage does not alone establish an accident at all, let alone do so as a matter of law (if affirmatively establishing an accident is even an issue that is properly before us, as noted above).  Instead, additional evidence (than is recited in the majority opinion) would be needed about the properties of EIFS and Lennar=s decision to use it in the manner that it did to determine whether its water-trapping effect: (1) could not reasonably be anticipated from the use of the means that produced it; and (2) is one that Lennar not only did not intend to produce, but also cannot be charged with the design of producing.  See Cowan, 945 S.W.2d at 827.

/s/        Richard H. Edelman

Justice

Substituted Concurring and Dissenting Opinion filed April 11, 2006.

Panel consists of Justices Fowler, Edelman, and Seymore.   (Seymore, J., majority.)

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^[1]           Where the insured is not the actor who actually caused the injury, the actor=s intent is not imputed to the insured to determine whether there was an occurrence.  See King v. Dallas Fire Ins. Co., 85 S.W.3d 185, 190-92 (Tex. 2002).

^[2]           See King, 85 S.W.3d at 193.

^[3]           Lindsey, 997 S.W.2d at 155.

^[4]           Cowan, 945 S.W.2d at 828.

^[5]           See Mass. Bonding & Ins. Co. v. Orkin Exterminating Co., 416 S.W.2d 396, 400-01 (Tex. 1967); see also Orkin Exterminating Co. v. Gulf Coast Rice Mills, 362 S.W.2d 159, 161-62 (Tex. Civ. App. Houston 1962, writ ref=d n.r.e.).

^[6]           Cowan, 945 S.W.2d at 828.

^[7]           See Argonaut Southwest Ins. Co. v. Maupin, 500 S.W.2d 633, 635 (Tex. 1973).