NORTHERN DISTRICT OF TEXAS COURT FINDS NO COVERAGE FOR CLAIMS ARISING FROM ROADWAY MAINTENANCE AND OPERATION
The Northern District of Texas recently ruled in favor of an insurer, plaintiff Liberty Mutual, finding that it owed no duty to defend its insured in a lawsuit.
In Liberty Mut. Fire Ins. Co. v. N. Tarrant Infrastructure LLC, Civil Action No. 4:23-cv-01043-O, 2025 U.S. Dist. LEXIS 49986 (N.D. Tex. 2025), Liberty Mutual filed the action seeking a declaration that it had no duty to defend its insureds, defendants North Tarrant Infrastructure, LLC, Ferrovial Construction US Corp., and Webber, LLC. (collectively, “Insureds”) in various lawsuits which arose from a fatal pile-up that occurred during the 2021 winter storm (“Underlying Lawsuits”). The plaintiffs in the underlying lawsuits alleged that the Insureds failed to maintain the roadway.
Liberty Mutual alleged, and the court agreed that the claims against the Insureds in the Underlying Lawsuits were excluded by the Designated Work Exclusion and Professional Liability Exclusion. The Insureds attempted to argue that, because the Underlying Lawsuits made allegations relating to defects, the Court should infer that the plaintiffs pleaded construction defect claims. However, the court here found this argument unpersuasive, finding that the facts giving rise to the alleged conduct do not support the inference.
Although the parties disagreed on what the policy covered, the court found that the policy covered only bodily injury arising out of work conducted for the project, that is, rebuilding, constructing, and expanding. As such, the duty to defend hinged upon whether the Insureds’ maintenance and operation of the roadway was for the project. The court here found that it was temporally impossible for maintenance and operation to be “for” the purposes of rebuilding, constructing, and expanding the roadway. As such, work relating to the maintenance and operation of the roadway could not have been for the project, and Liberty Mutual had no duty to defend the Insureds. Liberty Mutual also sought a declaration that it had no duty to indemnify the Insureds, but the court found that the issue was not ripe, as there was a possibility that the facts at trial could defer from the allegations which could give rise to the duty to indemnify.
RES JUDICATA BARS INSUREDS’ ATTEMPT TO RELITIGATE CLAIM
In James v. Allstate Vehicle, No. 4:24-CV-636, 2025 U.S. Dist. LEXIS 48747 (S.D. Tex. 2025), the Southern District of Texas recently granted Allstate’s motion to dismiss a lawsuit filed by their insureds, finding that insureds were not entitled to bring identical claims in another lawsuit to remedy their failure to plead and prove their claims properly in a prior suit.
The lawsuit arose from a claim made by the Insureds for storm damage to their home. The Insureds alleged that Allstate underpaid their claim, did not investigate the weather near the property, misrepresented the extent of the damage, and compiled an inaccurate damage estimate, leaving them without adequate funds to repair their home.
The doctrine of res judicata precludes the relitigating of claims that have been finally adjudicated. Allstate moved to dismiss, arguing that the Insureds were attempting to relitigate a prior lawsuit that was dismissed on Allstate’s motion for summary judgment. In the prior lawsuit, the Insureds alleged that Allstate underpaid their storm damage claim and did not investigate the weather. The judge in the prior lawsuit granted summary judgment, finding that the Insureds failed to produce evidence that the storm damage occurred during the policy period. Because the lawsuit here arose out of the same inspection and alleged underpayment of the storm claim, the court found that the judgment in the prior lawsuit barred the Insureds’ claims in this lawsuit. Res judicata ensures that a defendant, such as insurers, are not “twice vexed for the same acts.”
THIRD PARTY’S CLAIM DISMISSED UNDER TEXAS’ “NO DIRECT ACTION RULE”
KEY Allegro Condos. v. Progressive Fire & Flood, Inc., No. 4:25-CV-00396, 2025 U.S. Dist. LEXIS 52274 (S.D. Tex. 2025) involved a third party’s attempt to obtain a declaration that an insurer, Nautilus, was obligated to provide coverage.
The dispute arises from a coverage issue related to an arbitration proceeding involving the plaintiff, Key Allegro Condominiums and Nautilus’ insured, Roadrunner Restoration Holdings, LLC. Key Allegro sought a ruling that Nautilus was obligated to provide coverage for Roadrunner and Nautilus moved to dismiss the lawsuit, arguing that the “No Direct Action Rule” barred Key Allegro’s claim.
Ultimately, the court found that Key Allegro lacked standing to pursue its claims against Nautilus under the “No Direct Action Rule.” This rule prohibits third parties from bringing direct action against an insurer for indemnification before liability is established against the insured. Further, these third parties have no standing to seek declaratory relief regarding an insurer’s duty to indemnify prior to the liability determination. Although Key Allegro attempted to argue that Nautilus waived the rule by filing a declaratory judgment action in a different state, the court here found that that declaratory judgment action was limited to a determination of Nautilus’ duty to defend, which insurers are permitted to seek under Texas law. As such, Nautilus’ motion to dismiss was granted.
COURT ABATES LAWSUIT PENDING INSUREDS’ COOPERATION AND SUBMISSION TO EXAMINATIONS UNDER OATH
The U.S. District Court for the Northern District of Texas recently examined an insurer’s right to abate a lawsuit and compel examinations under oath (EUOs) even when another insurer involved in part of the fire loss, had already done so and provided the current insurer an opportunity to attend.
In TNT Gaming Ctr. LLC v. American Specialty Ins. & Risk Services, Inc., 2025 U.S. Dist. LEXIS 44650*; WL 790336 (N.D. Tex. - March 11, 2025), the insurance policy contained valid provisions requiring the insured to cooperate and submit to EUOs. American Specialty (Arch), which insured the business personal property, requested EUOs and the insured failed to comply and ultimately filed suit, alleging in part that Arch could have attended EUO’s taken by St. Paul which insured the real property damaged due to a kitchen fire.
In response to Arch’s motion to abate and compel the EUOs, the court carefully examined well established Texas case law upholding and insurer’s right to the insured’s cooperation and submission to EUOs and Arch’s extensive efforts to secure the EUOs prior to suit being filed. The insureds asserted that Arch’s conduct was unreasonable and inequitable and, that Arch could have attended “EUOs conducted by St. Paul and, even so, Arch has those transcripts ‘at its disposal.’” Arch asserted in part that “it is entitled to conduct its own investigation, which includes EUOs, that is separate and apart from that of St. Paul…and courts have repeatedly found that depositions are not appropriate substitutes for EUOs when the request is made before suit is filed.”
The court agreed with Arch that it was entitled to abatement of the lawsuit pending the insureds’ cooperation with Arch’s efforts to investigate the claim, including the right to proceed with EUOs. Accordingly, the lawsuit was abated pending the insured’s submission to EUOs.
NOT REALIZING LIMITATIONS HAS STARTED TO RUN IS NOT ENOUGH TO PROVE IT WAS IMPRACTICABLE TO PROVIDE REQUIRED PRE-SUIT NOTICE UNDER SECTION 542A.003
Recently, the Northern District affirmed an insurer’s right to seek limitation of attorneys’ fees.
Ogboru v. Allstate Vehicle, 2025 U.S. Dist. LEXIS 41378 (N.D. Tex.––March 7, 2025). The insured’s property was damaged by hail and despite initially reporting the damage, the insured waited two years to send a demand letter to its insurer. After realizing a response from the insurer two years prior may have started the limitations period and sending the demand letter, the insurer failed to provide the requisite 61-day notice under Section 542A.003, prompting the insured to file a motion to limit attorney’s fees. “The fact that [the insured] did not realize that the statute of limitations may have started…is not sufficient to show that giving pre-suit notice was impracticable…[and] does not excuse the lack of timely pre-suit notice in this case.” Finding that Texas law applies to the case and the insured had plenty of time to comply with pre-suit notice requirements, the Northern District granted the motion in favor of the insurer.
NORTHERN DISTRICT AFFIRMS THAT AN INSURER IS NOT LIABLE FOR BAD FAITH WHEN A REASONABLE BASIS EXISTS FOR DENYING COVERAGE
The Northern District recently confirmed that an insurer is not liable for bad faith in cases involving a reasonable basis for denying coverage.
Missions v. Church Mut. Ins. Co., 2025 U.S. Dist. LEXIS 41367 (N.D. Tex.––March 7, 2025). An insurer provided a policy to a non-profit organization, and after experience property damage, the insurer declined any coverage for the purported event. The insurer demanded payment and eventually filed suit for several things, including allegations of bad faith. The Court reiterated previous opinions that “as long as the insurer has a reasonable basis to deny or delay payment of a claim, even if that basis is eventually determined by the fact finder to be erroneous, the insurer is not liable for the tort of bad faith.” The Northern District held that a bona fide coverage dispute bars recovery of extra-contractual claims involving bad faith, malice, or similar ill intent.
ST. PAUL’S COVERAGE DUTIES FOR WASTEWATER PARTIALLY DISCHARGED BY WESTERN DISTRICT
Towards the end of February, the U.S. District Court for the Western District of Texas granted summary judgment and denied St. Paul Insurance’s duty to defend an insured, while allowing the lawsuit to continue to later determine its duty to indemnify the insured.
In St. Paul Fire & Marine Ins. Co. v. LP Operating, LLC, 2025 U.S. Dist. LEXIS 36504 (W.D. Tex. Feb. 27, 2025), St. Paul insured LP Operating (LPO) with a policy covering its oil field byproduct wastewater disposal well for the period of January 12, 2021, to January 12, 2022. LPO learned it had two occasions in which it discharged wastewater into neighboring land, on June 14, 2021 and August 27, 2021. In April 2023 some neighboring landowners of LPO’s land sued LPL in state court alleging that the discharges of wastewater for LPO’s property damaged their land. St. Paul filed suit in the Western District for a declaratory action declaring that it owed LPO no duty to defend or indemnify it in the state court action.
St. Paul asserted that the wastewater damages were not covered due to operation of the policy’s pollution exclusion, which the policy defined as “any actual, alleged, or threatened discharge, dispersal, escape, migration, release, or seepage of any pollutant.” Despite LPO’s arguments that it had discharged both “water” and “pollutants” and not solely pollutants, the Court held that the state court petition clearly referred to wastewater as a whole, singular pollutant that was excluded from the policy. It accordingly granted St. Paul’s summary judgment and held it had no duty to defend the underlying suit.
Despite that holding, the Court also noted that the parties had not properly given it reason to deviate from the rule that the duty to indemnify is not generally justiciable until the underlying suit is concluded, and it denied St. Paul’s motion on that issue.
Necessary cookies enable core functionality such as security, network management, and accessibility. You may disable these by changing your browser settings, but this may affect how the website functions.
Analytical Cookies
Analytical cookies help us improve our website by collecting and reporting information on its usage. We access and process information from these cookies at an aggregate level.
