Breach of Restrictive Covenant Claim Did Not Trigger CGL Duty to Defend

In a recent opinion, the Dallas Court of Appeals held that a breach of restrictive covenant claim against a condominium owner did not trigger a duty to defend under the condominium association’s commercial general liability policy.  Brown v. American Western Home Ins. Co., 2013 WL 873824 (Tex. App.—Dallas 2013).  In the Brown case, husband and wife condominium owners sued their association for failure to maintain the property.  The association counterclaimed for breach of restrictive covenant due to the owners’ failure to obtain written consent from the association prior to making structural improvements.  The owners then added individual board members from the association board of directors and the association’s insurance company as defendants in the lawsuit.


The insurance company obtained a summary judgment in its favor from the trial court arguing that the owners were not a named insured under the policy and the association’s counterclaim against the insured did not constitute an “occurrence” under the policy triggering the duty to defend.  Without deciding whether the owners were a named insured under the policy, the Dallas Court of Appeals upheld the summary judgment in favor of the insurance company.  The Court based its ruling on the conclusion that the breach of restrictive covenant counterclaim against the owners was not an “occurrence” under the policy.


The Court applied the 8 corners rule and examined the 4 corners of the insurance policy, and the 4 corners of the pleading containing the allegations that could potentially trigger a duty to defend.  The pleading allegations in the counterclaim were that the owners had violated restrictive covenants by making improvements without prior consent.  The insurance policy language provided coverage for an “occurrence,” which was defined in the policy as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.”  Coverage did not apply to injury or damage “expected or intended from the standpoint of the insured.”  The Court noted that an accident is generally understood to be unexpected and unintended.  The counterclaim was based upon the intentional violation of the owners in making alterations without prior consent.  The Court ruled in favor of the insurance company because the violation was intentional and not an accident.

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