An additional insured endorsement to an insurance policy entitled the Texas Department of Transportation (TxDOT) to a defense by the Contractor’s insurance company. St. Paul Insurance Company did not deny that it owed some coverage to TxDOT, but it refused to defend the agency, claiming that TxDOT would be adequately protected from vicarious liability by the defenses asserted by the contractor.

In a letter to TxDOT, St. Paul stated “St. Paul also expressly reserves its rights to allocate defense costs between any covered and non-covered claims and to recover from TxDOT the defense costs allocable to the defense of non-covered allegations. In particular, the defense costs allocable to the defense of TxDOT against the allegations that it negligently designed this project would not be covered under the St. Paul policy.”

In its motion for summary judgment asking the court to declare St. Paul responsible for defending it, TxDOT argued that the Texas law requires an insurer to defend the entire suit if any of the insured’s claims are covered. The trial court granted the agency’s motion, declaring that the agency was entitled to “a reasonable non-conflicted legal defense.”

On appeal, the appellate court stated the principle that the duty to defend is broader than the duty to indemnify and that once coverage has been found for any portion of a suit, an insurer must defend the entire suit. The court states that “this is because the insurance contract obligates the insurer to defend its insured, not to provide a partial defense.” The court further stated that “where the complaint does not state facts sufficient to clearly bring the case within or without the coverage, the general rule is that the insurer is obligated to defend if there is, potentially, a case under the complaint within the coverage of the policy. Stated differently, in case of doubt as to whether or not the allegations of a complaint against the insured state a cause of action within the coverage of a liability policy sufficient to compel the insurer to defend the action, such doubt will be resolved in the insured’s favor.”

According to the court, the pleadings in this case can be read to allege that the contractor constructed a highway with inadequate flood-control measures, that TxDOT supervised the construction and that both defendants’ acts and omissions caused injury to the plaintiffs. Because the contractor’s work was done pursuant to its contract with TxDOT, the court concluded that these allegations fell squarely within the terms of the policy. The court rejected St. Paul’s argument that only allegations of vicarious liability against TxDOT would trigger the duty to defend. An allegation that TxDOT itself was directly negligent would trigger the duty to defend, according to the court.

One final note about this dispute is that St. Paul also argued that the policy’s “professional services” exclusion negates its duty to defend. That exclusion precludes coverage for claims arising out of the contractor’s provision or receipt of professional services. But the policy did not specifically define “professional services.” Moreover, the court focused on language of the endorsement that stated it provides coverage for the insured’s work for the additional insured or the additional insured’s general supervision of that work. This endorsement was preceded by the statement: “This change broadens coverage.”

The court stated: “We fail to understand how St. Paul can broaden its policy coverage to specifically include supervision and then claim that such activity is excluded as a “professional service.” For these reasons, the court held that TxDOT was entitled to be defended by St. Paul.

St. Paul Insurance Company v. Texas Department of Transportation, 999 S.W. 2d 881, 1999 TX. App. LEXIS 6338.

About the author: Article written by J. Kent Holland, Jr.,  a construction lawyer located in Tysons Corner, Virginia,  with a national practice (formerly with Wickwire Gavin, P.C. and now with Construction Risk Counsel, PLLC) representing design professionals, contractors and project owners.  He is founder and president of a consulting firm, ConstructionRisk, LLC, providing consulting services to owners, design professionals, contractors and attorneys on construction projects.  He is publisher of Report and may be reached at or by calling 703-623-1932.  This article is published in Report, Vol. 2, No. 2 (Feb 2000).

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