Key Case: Evanston Insurance Co. v. Home Builder in $78 Million Auto Accident Suit
A recent court ruling has affirmed that Evanston Insurance Co. had a duty to defend a home building and renovation company in a catastrophic automobile accident lawsuit, resulting in a nearly $78 million judgment against the insured. This decision, issued in a Texas federal court, highlights the broad scope of an insurer’s duty to defend under commercial general liability (CGL) policies, even when underlying claims involve auto-related incidents typically excluded from coverage.
Background of the Case
- The Underlying Incident: In 2019, an employee of Bellaire Glass & Mirror LLC (the insured, a Texas-based home renovation firm) was involved in a severe auto accident while driving a company vehicle. The crash caused life-altering injuries to the victims, leading to a lawsuit seeking damages for negligence, respondeat superior (employer liability for employee actions), and related claims.
- The Judgment: After a trial, the court entered a default judgment in favor of the plaintiffs totaling approximately $77.9 million, including economic and non-economic damages.
- Policy Details: Bellaire held a CGL policy from Evanston, which generally covers bodily injury and property damage but includes a standard “auto exclusion” barring coverage for liability arising from the use of automobiles owned, operated, or rented by the insured.
The Coverage Dispute and Court’s Ruling
- Insurer’s Position: Evanston initially defended Bellaire under a reservation of rights but later sought a declaratory judgment, arguing the auto exclusion absolved it of any duty to defend or indemnify. The insurer claimed the accident stemmed directly from the employee’s use of the company vehicle during work-related travel.
- Insured’s Argument: Bellaire countered that the complaint alleged broader theories of liability—such as negligent hiring, training, and supervision—that were not solely tied to the auto exclusion. These “non-auto” claims created a potential for coverage under the CGL policy.
- Court’s Decision: U.S. District Judge Lee H. Rosenthal ruled in favor of Bellaire, holding that Evanston owed a duty to defend because the underlying complaint raised allegations that “potentially” fell within the policy’s coverage. Under Texas law (which governs the policy), the duty to defend is triggered if any claim in the suit could be covered, even if others are excluded. The court emphasized:
- The “eight corners” rule: Coverage is determined solely by comparing the policy to the complaint, without considering extrinsic evidence.
- Ambiguities in exclusions are construed against the insurer.
- Evanston’s breach exposed Bellaire to the full $78 million judgment, potentially making the insurer liable for the entire amount plus defense costs.
This ruling aligns with established precedents like Lindenau v. State Farm Lloyds (Tex. App. 2012), reinforcing that insurers cannot cherry-pick exclusions to evade defense obligations when mixed allegations exist.
Implications for Insurers and Policyholders
- For Insurers: This case serves as a cautionary tale about the risks of denying a defense prematurely. Breaching the duty to defend can lead to uncapped liability, including indemnification for judgments far exceeding policy limits (here, the policy capped at $2 million per occurrence). Insurers should err on the side of providing a defense under reservation of rights while seeking declaratory relief.
- For Businesses: Entities like contractors and builders should review policies for gaps in auto coverage and consider endorsements or separate auto policies. Prompt notification of claims is critical to trigger the duty to defend.
- Broader Trends: Similar disputes are rising in 2025, with courts increasingly scrutinizing exclusions in high-stakes litigation. For instance, ongoing cases involve CGL policies in scrap metal theft suits and HR firm embezzlement claims, where duties to defend hinge on “occurrence” definitions.
If this isn’t the specific case you meant or you’d like details on related rulings (e.g., Fourth Circuit’s affirmation of a $4.3 million breach award), provide more context!