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McClain v. State Farm Fire And Casualty Co.

Court of Appeals of Texas, Second District, Fort Worth

March 2, 2017

EUGENE AND MARY MCCLAIN APPELLANTS
v.
STATE FARM FIRE AND CASUALTY COMPANY APPELLEE

         FROM COUNTY COURT AT LAW NO. 2 OF TARRANT COUNTY TRIAL COURT NO. 2016-000955-2

          PANEL: WALKER, MEIER, and GABRIEL, JJ.

          MEMORANDUM OPINION[1]

          LEE GABRIEL JUSTICE.

         Appellants Eugene and Mary McClain (the McClains) appeal the trial court's orders granting appellee State Farm Fire and Casualty Company (State Farm) judgment as a matter of law on the McClains' claims that State Farm had a duty to defend. Concluding that State Farm had no duty to defend the McClains as a matter of law, we affirm the trial court's summary-judgment orders.

         I. FACTUAL BACKGROUND

         A. The Underlying Lawsuit and Request to Defend

         Jose Luis Ramirez and Ofelia Ramirez (the Ramirezes) bought a home from the McClains (the property). The Ramirezes paid the McClains $7, 500 and signed a promissory note, agreeing to pay the McClains the remainder of the purchase price-$60, 500-in monthly installments for eighteen years. The Ramirezes' promissory note for the balance was secured by a deed of trust to the property. After the Ramirezes paid on the note for eight years, the McClains declared the note in default, accelerated the debt, and posted the property for foreclosure. On April 1, 2014, the McClains bought the property at the foreclosure sale for $42, 000.

         On August 15, 2014, the Ramirezes filed suit against the McClains, [2]raising claims for wrongful foreclosure; for breach of contract, i.e., the promissory note; for negligence per se based on their violations of the finance code, the property code, and a federal administrative regulation; and seeking a declaration of rights under the foreclosure-sale deed. The Ramirezes sought actual and exemplary damages.

         The McClains requested that their insurer, State Farm, defend them against the Ramirezes' suit. State Farm had issued a commercial-liability, umbrella-coverage policy to the McClains.[3] As relevant to this case, the policy provided that State Farm would have "the right and duty to defend" the McClains against any "suit" seeking specified damages-"bodily injury, " "property damage, " or "personal and advertising injury"-caused by an "occurrence." An occurrence was defined in the policy as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." Each of the resultant type of damages also was specifically defined in the policy:

• Bodily injury was defined as "bodily injury, sickness, or disease sustained by a person, " which included "mental anguish or other mental injury caused by the 'bodily injury.'"
• Property damage was defined as "[p]hysical injury to tangible property, including all resulting loss of use of that property."
• Personal and advertising injury was defined as an "injury, including consequential 'bodily injury, ' arising out of . . . the wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling[, ] or premises that a person occupies, committed by or on behalf of its owner, landlord or lessor."

         Within these specified damages, the policy contained exclusions from coverage. First, the policy did not apply to bodily injury or property damage that was "expected or intended to cause harm as would be expected by a reasonable person" or was "the result of willful and malicious or criminal acts of the insured." Second, personal and advertising injuries were not covered if they were (1) "caused by or at the direction of the insured with the knowledge that the act would violate the rights of another and would inflict 'personal and advertising injury'" or (2) arose out of a breach of contract.

         B. State Farm Denies Coverage and the ...


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