Lennar Corp., Et Al. V. Markel Am. Ins. Co., No. 11-0394 (Tex. Aug. 23, 2013): Texas Supreme Court Affirms 'All Sums' Allocation And Prejudice Requirement For 'Voluntary Payments' Under Texas Law

On August 23, 2013, in Lennar Corp., et al. v. Markel Am. Ins. Co., the Texas Supreme Court issued an opinion that confirms two important aspects of pro-policyholder insurance law, despite insurers' repeated attempts to reverse and/or limit them. In the 1990s, Lennar Corporation built hundreds of homes using an exterior insulation and finish system ("EIFS"), marketed as an attractive alternative to traditional stucco. However, when installed on wood-frame homes, EIFS traps water in walls, causing rot, mildew, mold and termite infestations. After being inundated with consumer complaints, Lennar investigated and decided to replace all EIFS it had installed on homes and repair any damage in the homes caused by EIFS. Lennar spent several million dollars in this program, which took several years to complete.

Lennar notified its insurers that had issued liability policies in effect during the time EIFS had been in place and damaged homes, that it would seek indemnification of the program's costs. None of the insurers consented to Lennar's proactive and comprehensive efforts to...