Court of Appeals of Texas, San Antonio.

CONSTITUTION STATE INSURANCE COMPANY, Appellant,

v.

MICHIGAN MUTUAL INSURANCE COMPANY, Appellee.

No. 04-95-00197-CV.

|

July 10, 1996.

Before LÓPEZ and GREEN, JJ., and BUTTS, J.¹.

AFFIRMED

LOPEZ.

*1 This appeal is taken from a summary judgment order denying Constitution State Insurance Company’s (Constitution) claims for subrogation against Michigan Mutual Insurance Company (Michigan Mutual). Both companies insured Abercrombie, Simmons and Clarke, Inc. (Abercrombie), a claims adjusting firm. Constitution carried the errors and omissions policy on a “claims made” basis, covering claims actually filed during the policy period. Michigan Mutual carried the general liability insurance on an “occurrence” basis, covering claims that actually occurred during the policy period.

Henry Vickers filed suit against Abercrombie on August 8, 1989, for work related injuries while employed by J.J. Flanagan, Stevedores (Flanagan). Abercrombie was handling workers compensation claims for Flanagan. Vickers’ injury occurred on September 19, 1985. The petition alleged injuries ongoing from the 1985 occurrence because Mr. Vickers was continually denied adequate medical attention. Michigan Mutual refused to defend the suit, claiming that it had no duty to defend because the injury occurred outside the policy period. Constitution provided the defense for Abercrombie and subsequently filed this suit against Michigan Mutual for subrogation of the defense costs.

The trial court granted Michigan Mutual’s motion for summary judgment finding that they did not have a duty to defend Abercrombie in the Vickers suit. We affirm the trial court’s decision.

In its first point of error, Constitution asserts that the trial court erred in overruling its summary judgment motion because Michigan Mutual had a duty to defend Abercrombie as a matter of law. In its second point of error, Constitution claims that Michigan did not present adequate evidence to establish that it had no duty.

Constitution contends that because the injury claimed was ongoing, bodily injury did occur during Michigan Mutual’s policy period, thereby requiring them to defend Abercrombie. Constitution also claims that its coverage was secondary to the Michigan Mutual policy. Michigan Mutual argues that the summary judgment evidence shows the last action by Abercrombie was prior to the inception date of their policy. They also assert that the language of the policies established that Constitution was the primary carrier for this type of loss.

The party presenting the motion for summary judgment has the burden of showing that no genuine issue of material fact exists and that it is entitled to judgment as a matter of law. Tex.R.Civ.P. 166a(c); Nixon v. Mr. Property Management Co., Inc., 690 S.W.2d 546, 548 (Tex.1985); Swilley v. Hughes, 488 S.W.2d 64, 67 (Tex.1972). In deciding whether a disputed material fact issue exists, thereby excluding summary judgment, the reviewing court will take as true all evidence favoring the non-movant. Nixon, 690 S.W.2d at 548-49; Montgomery v. Kennedy, 669 S.W.2d 309, 311 (Tex.1984). All reasonable inferences from the evidence will be weighed in favor of the non-movant, and any doubts will be resolved in the non-movant’s favor. Nixon, 690 S.W.2d at 549; Montgomery, 669 S.W.2d at 311.

*2 The duty of an insurer to defend its insured is broader than and distinct from the duty to indemnify. American Alliance Ins. Co. v. Frito-Lay, Inc., 788 S.W.2d 152, 153 (Tex.App.-Dallas 1990, writ dism’d); see Heyden Newport Chem. Corp. v. Southern Gen. Ins. Co., 387 S.W.2d 22, 24-25 (Tex.1965). When there is a possibility that coverage exists, the duty to defend arises. Cluett v. Medical Protective Co., 829 S.W.2d 822, 829-30 (Tex.App.-Dallas 1992, writ denied).

Generally, the insurance company’s responsibility to defend is determined by the language of the policy and the allegations in the petition. Liberty Life Ins. Co. v. Commercial Union Ins. Co., 857 F.2d 945, 949 (4th Cir.1988); Argonaut Southwest Ins. Co. v. Maupin, 500 S.W.2d 633, 635 (Tex.1973); Two Pesos, Inc. v. Gulf Ins. Co., 901 S.W.2d 495, 499 (Tex.App.-Houston [14th Dist.] 1995, no writ). There must be facts alleged in the petition that potentially state a claim within the policy, but there is no requirement to defend if the factual allegations fall outside the policy coverage or time period. Two Pesos, Inc., 901 S.W.2d at 502. If the injury occurs prior to the policy period and only damages from the same injury continue into the policy period, the insurer is not obligated. Id.

When an insured is denied coverage, the “injury” occurs upon the date of denial. See Tectonic Realty Inv. v. CNA Lloyd’s of Texas Ins. Co., 812 S.W.2d 647, 652-54 (Tex.App.-Dallas 1991, writ denied). Insurance coverage is designed to protect against unknown risks, not an injury that has already accrued and is known to the insured. Appalachian Ins. Co. v. Liberty Mut. Ins. Co., 676 F.2d 56, 63 (3rd Cir.1982); Two Pesos, Inc., 901 S.W.2d at 502.

If the petition does not allege facts sufficient to determine coverage, extrinsic evidence can be examined. Western Heritage Ins. Co. v. River Entertainment, 998 F.2d 311, 313 (5th Cir.1993); State Farm Fire & Cas. Co. v. Wade, 827 S.W.2d 448, 452-53 (Tex.App.-Corpus Christi 1992, writ denied); Gonzales v. American States Ins. Co., 628 S.W.2d 184, 187 (Tex.App.-Corpus Christi 1992, no writ).

A policy on a “claims made” basis covers any claims filed during the policy period, regardless of the date of injury or occurrence, while an “occurrence” policy covers only claims that actually occurred during the policy period. Appalachian Ins. Co., 676 F.2d at 59.

To determine which carrier holds the primary coverage on a claim, we look to the cause of the loss and the general or specific coverages provided for in the policy. See Maryland Casualty Co. v. Neiman-Marcus Co., 186 F.2d 140, 143 (5th Cir.1951); Carrabba v. Employers Casualty Co., 742 S.W.2d 709, 713 (Tex.App.-Houston [14th Dist.] 1987, no writ); Liberty Mut. Ins. Co. v. United States Fire Ins. Co., 590 S.W.2d 783, 785 (Tex.App.-Houston [14th Dist.] 1979, writ ref’d n.r.e.).

The summary judgment evidence pertinent to the duty to defend includes the Vickers amended petition, the Michigan Mutual insurance policy, the Constitution errors or omissions policy, and an affidavit by Tom Abercrombie.

*3 The Vickers petition alleges an injury on September 19, 1985, from which stemmed further injury due to denial of necessary medical treatment by the defendants, including Abercrombie. No final date of injury is pleaded. The causes of action include breach of good faith and fair dealing, deceptive trade practices act violations, Texas Insurance Code violations, negligent handling of claims, breach of contract, conspiracy, and emotional distress issues. All allegations stem from the defendants’ mishandling of the worker’s compensation claim.

The Michigan Mutual policy included property and general liability coverage from May 23, 1988 to May 23, 1989. In the insuring agreement, Michigan Mutual agrees to pay for “ ‘bodily injury’ and ‘property damage’ which occurs during the policy period. The ‘bodily injury’ or ‘property damage’ must be caused by an ‘occurrence.’ ” The policy specifically excluded “work or operations” covered by other insurance. The Michigan Mutual policy expressly states that it “is excess over any of the insurance, whether primary, excess, contingent or on any other basis that is Fire, Extended Coverage, Builder’s Risk, Installation Risk or similar coverage for “your work; …” “Your work” is defined as “work or operations performed by you or on your behalf.”

The Constitution policy provided coverage for “specialty errors or omissions liability” on Abercrombie’s services of “insurance claims investigation, adjusting and management for insurance companies.” Claims made between October 20, 1988 and October 20, 1989 were covered, with a retroactive date of October 20, 1983. The policy also sets forth that it is “excess over any other valid and collectible insurance available to the insured, except insurance specifically arranged by the named insured to apply in excess to this insurance.” The parties stipulated that Constitution’s policy limits were not exhausted in defending the suit.

Mr. Abercrombie’s affidavit provides a chronology of events regarding his firm’s handling of the Vickers’ case. He expressed that his firm’s last actions on the Vickers’ claim were on or before April 28, 1988. It appears that coverage for Mr. Vickers surgery was denied and therefore postponed from September 21, 1986 until the end of February 1988. There were conflicting reports from doctors as to whether surgery was necessary. It is clear from the affidavit that an attorney for Vickers was involved in settlement negotiations on the claim as early as April 15, 1987.

We find that the summary judgment evidence does not raise a genuine issue of material fact. The clear language of the policies establishes the dates and types of coverage. See Liberty Life, 857 F.2d at 949; Heyden Newport, 387 S.W.2d at 25; Two Pesos, Inc., 901 S.W.2d at 499. Constitution’s policy was purchased specifically to cover losses from mishandling of claims and definitely encompasses the time period of the Vickers claim. Michigan Mutual’s policy excluded “work or operations” covered through other insurance and the affidavit confirmed that the injuries claimed in the Vicker’s petition did not fall within Michigan Mutual’s policy period. Therefore, we find that Michigan Mutual established that it did not have a duty to defend Abercrombie because the occurrence was not within the policy period and the coverage was secondary. See Maryland Casualty Co., 186 F.2d at 143; Tectonic Realty, 812 S.W.2d at 652-54; Liberty Mutual, 590 S.W.2d at 785. Both points of error are overruled and the summary judgment is affirmed.

	Footnotes
1		Assigned to this case by the Chief Justice of the Supreme Court of Texas pursuant to Tex. Gov’t Code Ann. § 74.003(b) (Vernon 1988).