Gilbert Texas Construction, L.P. v. Underwriters at Lloyd's London

Summary

The Supreme Court of Texas held that a contractual liability exclusion in a commercial general liability policy barred coverage for a construction contractor's settlement of a breach-of-contract claim arising from obligations assumed in its contract. The court also held that an exception for liability the insured would have absent the contract did not restore coverage, and that the insurer was not estopped from denying coverage because the insured was not prejudiced by the insurer's actions.

Holdings

1. The contractual liability exclusion unambiguously applies when the insured is obligated to pay damages because of liability assumed in a contract or agreement; it is not limited to indemnity or hold-harmless agreements. Because Gilbert's only remaining liability theory was breach of its contractual obligations to protect and repair adjacent property, the exclusion barred coverage.
2. The exception for liability that the insured would have in the absence of the contract does not restore coverage when the insured's actual adjudicated liability is based solely on the contract.
3. Gilbert could not recover its settlement payment under an estoppel theory because it was not prejudiced by Underwriters' conduct; coverage would have been unavailable regardless of whether Gilbert asserted governmental immunity.
4. Gilbert did not waive its challenge to the applicability of the contractual liability exclusion because the challenge arose from the court of appeals' judgment and was raised in a motion for rehearing and petition for review.

Questions Presented

1. Whether the contractual liability exclusion in the CGL policy excluded coverage for property damage liability arising solely from Gilbert's contractual obligations.
2. Whether the policy exception for liability that the insured would have in the absence of the contract restored coverage.
3. Whether Gilbert could recover its settlement payment under an estoppel theory based on Underwriters' conduct in the underlying defense.
4. Whether Gilbert waived its challenge to the contractual liability exclusion by failing initially to raise the issue in the court of appeals.

Disposition

affirmed