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Insurance Law
South Texas College of Law Houston
Platts Jr., Henry S.

Insurance Outline – Platts, Fall 2001
Everything highlighted he said would be on exam

I. Commercial General Liability Policy
A. Rules for Contract Construction – Ambiguities
1) 1st Party – Covers the insured’s own damages
(a) examples: homeowner’s, collision, life insurance, medical insurance
2) 3rd Party – Covers a third party’s damage for which the insured is liable
(a) example: Liability Car Insurance
(b) 2 types of 3rd Party Coverage
· Defense – insurance company defends the insured
· Indemnity – insurance company pays your expenses
3) Gen Rule: Contra Proferentum – Construe against the drafter
4) Insurance policies are contracts and controlled by the rules of construction applicable to all contracts
5) Insurance policies are contracts of adhesion b/c they are take it or leave it contracts – ie take it or leave it from the insured
6) Doctrine of Reasonable Expectations – Texas has not adopted. It holds that with uncertainty in the contract, the court will look at the reasonable expectations of the insured.
7) If unambiguous, then enforced as written and court may not resort to the construction rules. If ambiguous, then construe the ambiguity in favor of the non-drafting party, so long as that interpretation is reasonable.
8) Ambiguity exists if more than one reasonable expectation exists in the contract.
9) 2 Kinds of Ambiguity exists
(a) Patent – where the ambiguity can be determined from the face of the instrument
(b) Latent – where the ambiguity cannot be determined on the face of the instrument, but where ambiguity results after determining additional information or facts
10) Each part of policy should be given effect when construing, so reasonableness is measured for contract as a whole
11) For exclusions, a super strict construction is applied and ANY reasonable interpretation will be applied in favor of the insured
12) Use policy definitions, but if undefined, then use commonly accepted meaning, generally the first meaning in the dictionary
13) Intent to exclude must be expressed in clear and unambiguous language
B. Requirements/Elements
1. 3 Types
a. Notice
b. Occurrence
c. Covered Damages
2. Notice
a. Notice is required under the CGL and any 3rd party coverage
b. Notice means properly served on insured – service of citation. Copy of petition alone is not good enough
c. Insurance company cannot deny coverage for breach of prompt notice provision unless suffered prejudice
d. Prejudice is a question of fact for the jury to decide
e. The Texas Homeowner’s Policy currently does not require prejudice and Chiles held it does not, but if litigated again, the courts will probably require it
f. When notice is first recieved after a default judgment has become FINAL (after plen power), then presumed prejudice as a matter of law
3. Occurrence
a. Occurrence is an accident, which is an unexpected happening or event
b. Where acts voluntary or intentional and injury is natural result, then injury is not an accident or occurrence. (eg intentionally taking dirt is not accident). Furthermore, conduct is not an accident where dmgs are natural result or where injuries reasonably anticipated from the insured’s actions. Thus a hunting accident will be covered b/c it is not the natural result of the actions.
c. Time of occurrence is when dmgs occurred, not when negligent act took place
d. Sexual molestation is intentional as a matter of law in all 50 states
e. more than one occurence allowed out of one event
f. misrepresentations do not occur out of an occurence, unless it causes unexpected accidents
4. Damages Covered/Not Covered
a. Bodily Injury & Property Damage
1) CGL & Homeowners – only occur from bodily injury or property dmg
2) Ment anguish by itself does not const bod injury
3) 2 exceptions: 1) ment anguish results in phys dmg or 2) mental anguish from phys dmg
4) Bod injury is dmg to phys struct of human body
5) Injury to property means phys injury to tangible property. Same under both policies, even w/ diff language
6) Econ losses alone do not result in property dmg. Except: When loss of property results in “loss of use of phys property” like rent. (IE WHEN LOSS OF USE IS A MEASURE OF DMG)
b. Punitive Damage
1) Current TX law: Punitive damages are covered under CGL, unless specifically excluded, even in endorsement

hat he believes that they are substantially certain to follow.
This is almost always a question of Fact, i.e. whether insured was substantially certain of the result (SUBJECTIVE TEST)
b. State Fm v. SS & GW
1) THE TEST IN TEXAS FOR WHEN INTENTIONAL INJURY EXEMPTION APPLIES: (p.3 of Case) Intent present if 1) he intends the consequences of his act or 2) that he believes that they are substantially certain to follow. This is almost always a question of Fact, i.e. whether insured was substantially certain of the result (SUBJECTIVE TEST)
2) Exclusion different than whether there was an occurrence but much controversy as to whether or not. Usually will only have both or neither, but courts generally do not address both in the same opinion.
3) Regardless occurrence and exemption are two different issues and MUST be addressed separately
4. Injury to an Employee
a. After reading the following three employee cases, courts generally will not use a reasoned analysis to construe against the insurance co. b/c of workers comp ins., which really should be bought for this purpose.
5. Motor Vehicle Exclusion – bars consequences. Purpose is to carve out general policy insurance from auto insurance
E. Miscellaneous Provisions
1. 4 Types
a. Duty to Defend
b. Reservation of Rights
c. Declaratory Judgments
d. Burden of Proof
2. Duty to Defend
a. GEN RULE: “8 Corners” or “Complaint Allegation” Rule
1) look to allegations in the petition, assume that all are true, and ask if anything is covered in terms of policy. Give those coverages liberal interpretation and construe against drafter, per Haden v. Newport. (ie 8 corners rule: compare allegation in petition against coverage. Doubts in favor of insured.
2) McManus – Fa