Texas “property damage” caused by an “occurrence,” trigger, duty to defend, and allocation

In Landstar Homes Dallas, Ltd. v. Mid-Continent Casualty Co., No. 3:10-CV-0014-K (N.D. Tex. Dec. 13, 2010), insured homebuilder Landstar was sued by Cameron, a purchaser of a Landstar home, for negligence, breach of contract, and breach of warranty, seeking damages because of physical injury to the home caused by a defective foundation.  Landstar’s CGL insurer, Mid-Continent, denied a defense on the basis that the Cameron complaint did not allege any dates indicating when the alleged property damage occurred.   Mid-Continent subsequently agreed to defend an amended complaint that alleged that the foundation was poured and the home was purchased during a Mid-Continent policy period.    A judgment was subsequently entered against Landstar for damages for diminution in value of the home, costs for repair of cosmetic items, and attorneys feels.   Mid-Continent refused to pay the judgment and Landstar sued Mid-Continent for breach of contract.  The federal district trial court granted Landstar’s motion for summary judgment and denied Mid-Continent’s motion for summary judgment.  Applying Texas law, the court first held that, because it attached an expert affidavit indicating that Landstar participated in the defective design of the foundation during the policy period, the original Cameron complaint alleged the potential for “property damage” caused by an “occurrence” sufficient to trigger a duty to defend.  In next holding that Mid-Continent had duty to indemnify, the court found that (1) there was sufficient evidence of physical injury during a Mid-Continent policy period, (2) Landstar presented sufficient evidence that it did not intend for the foundation to shift, thus is constituted an “occurrence”, and (3) diminution in value based on the shifting foundation constituted damages because of “property damage.”  Mid-Continent also argued that there was no indemnity obligation under its later policies which eliminated the subcontractor work exception to the “your work” exclusion.  The court rejected this argument, finding that Mid-Continent failed to present any evidence as to what amount, if any, of the judgment was for property damage occurring after the inception the later policies.