Great American Insurance Company d/b/a Great American Insurance Companies v. Glen Hamel and Marsha Hamel

Summary

The Texas Eighth Court of Appeals considered an insurance coverage and indemnity dispute arising from construction defects and water damage to the Hamels’ home. Great American challenged a trial court judgment in favor of the Hamels, including coverage-related claims based on policies issued to the contractor and an EIFS exclusion. The court sustained one appellate issue, modified the judgment, and affirmed it as modified.

Holdings

1. An insurer that wrongfully refuses to defend its insured cannot insist on compliance with an insurance policy's actual-trial requirement. The underlying bench trial was an actual and fully adversarial trial, and Great American was bound by the resulting judgment and relevant findings.
2. TMB's post-judgment assignment of its claims against Great American was not invalid under State Farm Fire & Casualty Co. v. Gandy.
3. The trial court did not abuse its discretion by admitting the testimony of Donald Yeandle and Robert Nicholas concerning the timing and progression of wood rot.
4. The Hamels established that covered injury-in-fact occurred during the first Great American policy period, and the EIFS exclusion in the later policies did not apply. The damages did not have to be allocated among the policies under the circumstances presented.
5. The policies did not cover the Hamels' $50,000 mental-anguish award because the underlying property damage was caused by negligence, not intentional, malicious, or grossly negligent conduct, and mental anguish based solely on negligently caused property damage is not compensable as a matter of law.

Questions Presented

1. Whether the underlying construction judgment resulted from an actual and fully adversarial trial such that Great American could not invoke the policy's actual-trial condition.
2. Whether TMB's post-judgment assignment of its claims against Great American was invalid under State Farm Fire & Casualty Co. v. Gandy.
3. Whether the trial court abused its discretion by admitting expert testimony concerning the timing and progression of wood rot.
4. Whether the Hamels proved covered damage during a Great American policy period and whether the damage had to be allocated among policy periods or segregated from excluded damage.
5. Whether the EIFS exclusion applied to the damages awarded.
6. Whether the policies covered the $50,000 mental-anguish award arising from negligently caused property damage.

Disposition

affirmed