Texas Supreme Court Rejects Insurer Attempt to Expand Limited Insurance Exclusion for Liability Assumed by Contract, Holding that Insurer Must Defend Construction Defect Dispute Against Insured

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In a highly anticipated ruling earlier this month, the Texas Supreme Court rejected Amerisure Insurance Company’s attempt to radically expand the scope of a common exclusion for liability assumed by contract found in many comprehensive general liability insurance policies. See Ewing Constr. Co., Inc. v. Amerisure Ins. Co., No. 12-0661, 2014 WL 185035 (Tex. Jan. 17, 2014). The Court’s ruling reversed the insurer’s denial of coverage for claims arising out of a construction defect dispute. In rendering its decision, the Court emphasized the narrow scope of its prior ruling in the Gilbert Texas Construction case, which upheld the applicability of the same exclusion in “unusual circumstances” three years earlier. See Ewing Constr., 2014 WL 185035, at *4-5 (discussing Gilbert Texas Constr., L.P. v. Underwriters at Lloyd’s London, 327 S.W.3d 118 (Tex. 2010)).

Ewing Construction Company had entered into a standard construction contract with the Tuluso-Midway Independent School District, agreeing to build tennis courts and to perform its work in a “good and workmanlike manner.” Id. at *1, 6. Shortly after construction was completed, the tennis courts began flaking, crumbling, and cracking. Id. at *1. The school district filed suit against Ewing Construction for negligence and breach of contract. Id.

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