Part 1 of this series deals with the burden of proof of showing that a claim
initially was covered by the policy. Part
2 deals with the placement of the burden of proof for an exclusion.
Part 3 deals with placement of burden of proof on exceptions to exclusions
and whether the person making the claim was an insured. Part
4 addresses who has the burden of proof to show that a claim falls within
the policy period and the burden of proof on causation and allocation of
damages.
Coverage litigation presents some of the most challenging issues of any case
that can be tried. The complexities of the legal issues presented are often
beyond comprehension. However, the area where more mistakes are made and more
cases are lost is burden of proof. This tends to be overlooked more than any
other area. The published opinions are littered with litigants that had
excellent claims or excellent defenses but nonetheless lost because they failed
to recognize they had the burden of proof and to come forward with evidence to
meet that burden.
This article will address the respective burdens of proof that the insurer
and insured must carry during the course of insurance litigation in Texas. We
have attempted to identify all of the issues and stages when a burden of proof
issue may present itself. When possible, we have attempted to discuss the
origin, evolution, and reasoning behind the particular burden of proof to
address the rationale behind the rule and provide guidance when there are
subsequent attempts to change or extend the rule. This series will address the
respective burdens of proof in coverage litigation as they apply to the
different issues that present themselves in coverage litigation.
Insured's Initial Burden of Proof on Coverage
The first issue that must be addressed in any coverage case is who has the
burden of proving that there the policy covers a loss. While we will be
discussing the laws in Texas, it should be noted that all 50 jurisdictions
follow the rule that has been adopted in Texas. It is well established under
Texas law that the insured bears the initial burden of showing that there is
coverage under the insurance policy in question. Gilbert Tex. Constr. LP v. Underwriters at Lloyd's
London, 327 S.W.3d 118 (Tex. 2010) ("Initially, the insured has the
burden of establishing coverage under the terms of the policy.");
L.P. Employers Cas. Co. v. Block, 744 S.W.2d 940
(Tex. 1988) ("An insured cannot recover under an insurance policy unless
facts are pleaded and proved showing that damages are covered by his
policy."); Venture Encoding Servs., Inc. v.
Atlantic Mut. Ins. Co., 107 S.W.3d 729 (Tex. App.—Fort Worth 2003,
pet. denied); and Bethea v. National Cas.
Co., 307 S.W.2d 323 (Tex. Civ. App.—Beaumont 1957, writ
ref'd) ("[P]rimarily the burden rested on [assured] to plead and
prove facts showing that, special exceptions aside, the assured's death was
covered by the policy").
One of the earliest Texas cases suggesting that the insured had the initial
burden to prove coverage took place as a result of a hurricane. Pelican Ins. Co. v. Troy Co-op Ass'n, 13 S.W. 980 (Tex.
1890). The insured's house was destroyed during the hurricane, and evidence
suggested that the storm's winds blew down the house, causing a lamp to
fall, which in turn ignited a fire. The policy covered certain losses by fire
and building collapse but excluded damage resulting from fire caused by a
hurricane. While the supreme court devoted the bulk of its opinion to the issue
of a policy exclusion, the court noted that "[t]he burden of proof was on
the plaintiff to show not only that its property was destroyed by fire, but
also to show that the loss occurred from a fire which the defendant had insured
against." Id. Thus, the insured had the burden of establishing
that the loss occurred as a result of a fire that was contemplated by the
policy. While the insured prevailed at trial, the high court reversed and
remanded because of the failure of the trial court to give a jury charge on the
insured's burden to negate certain policy exclusions.
The Pelican case is also one of the earliest
Texas cases dealing with the burden of proof on policy exclusions.
Later, the Beaumont Court of Appeals expressly recognized that the insured
bears the burden of pleading and proving that the loss is covered by the
policy. Bethea v. National Cas. Co., 307 S.W.2d
323 (Tex. Civ. App.—Beaumont 1957, writ ref'd). The policy in
Bethea covered injury sustained "[w]hile
walking on a public street or sidewalk by being struck by a falling signboard,
awning, brick or stone from a building (except buildings in process of
construction, repair or demolition)." Id. at 324. The evidence
showed that the insured was killed when a bridge he was helping to construct
across the Brazos River collapsed. However, the plaintiff only alleged that the
insured had been killed by being struck by "falling material" and
only proved that the insured had been standing on a concrete bridge pier in the
river when the accident occurred.
The court stated that "[i]n order to be entitled to recover under the
policy for death caused by the assured's being struck by 'falling
material,' it was necessary that the plaintiff plead and prove that
'while walking on a public street or sidewalk' the assured was fatally
injured or killed by being struck by 'a falling signboard, awning, brick,
or stone from a building.'" Id. The plaintiff failed in this
respect and thus had not met her burden of proving coverage under the
policy.
In 1965, the Texas Supreme Court suggested that the insured bore the initial
burden of proof on coverage. Royal Indem. Co. v.
Marshall, 388 S.W.2d 176 (Tex. 1965). There, the plaintiff-insured sued
Royal after three of the plaintiff's used automobiles were damaged by fire
while in a garage owned by another and not a place of business used by the
plaintiff or named in the insurance policy. The policy did not provide coverage
for cars held at an "unnamed location" beyond 7 days. Id. at
178. The evidence showed that the cars had been held at this unnamed location
for more than 7 days prior to the fire. The insured argued for a broad
definition of "location" so as to cover the cars damaged at the third
party's garage and further argued that having cars at third-party locations
for makeready purposes is a standard practice in the used car business; thus,
the policy should be construed to afford coverage. Finally, the insured argued
that the policy's provisions defining "location" were an
exception to general coverage of all of the insured's automobiles.
The court rejected these arguments by first stating that courts must enforce
insurance contracts as written and cannot construe policies to provide coverage
that was not intended by the parties. The court noted that the provisions
regarding "location" were not exceptions and agreed with the insurer
that the plaintiff had the burden "to plead and prove facts showing that
the damages done to his used automobiles [were] within the coverage provided in
the insurance policy." Id. at 181. Because the plaintiff failed
to show such coverage, the court reversed and rendered judgment that the
plaintiff takes nothing.
The decision in Employers Cas. Co. v. Block,
744 S.W.2d 940 (1988), appears to mark the first time that the Texas Supreme
Court expressly stated the rule that the insured bears the burden of pleading
and proving coverage under an insurance policy. There, a roofer installed a
roof on the Blocks' home, which began leaking. The roofer repaired the
leaks, but Hurricane Allen caused more leakage. The roofer subsequently turned
to its insurer, Employers Casualty, to defend a suit by the Blocks. The issue
concerned the date on which the damage occurred. The court of appeals held that
the insurer was required to affirmatively plead that the damages were not
covered under the provisions of the policy.
However, the supreme court disagreed, noting that the insurer only argued
that the damage occurred outside the policy period, which was not an argument
for an exception to the policy. Rather, the court stated, the time of the
insured's damage is a precondition to coverage, and the insureds had the
burden to prove that the house was damaged during the policy period. ("An
insured cannot recover under an insurance policy unless facts are pleaded and
proved showing that damages are covered by his policy," citing
Royal Indem. Co. v. Marshall, 388 S.W.2d 176
(Tex. 1965); and Bethea v. National Cas. Co.,
307 S.W.2d 323 (Tex. Civ. App.—Beaumont 1957, writ ref'd)).
The Texas legislature
added article 21.58 to the Insurance Code in 1991 and shifted the burden of
proof regarding policy exclusions. TEX. INS. CODE ANN. art. 21.58 (Vernon
1991). By its plain language, the statute was directed at the insurer's
burden, but by negative implication, the insured retained the burden to
otherwise prove coverage. Shortly after the introduction of the statute, the
Fifth Circuit described an instance where the insured still bore the burden of
proof as to coverage, in spite of the insured's argument that the policy
language was an exclusion. Sentry Ins. v. R.J. Weber
Co., 2 F.3d 554 (5th Cir. 1993). Weber had an insurance policy through
Sentry that covered "advertising injury," but only if it occurred in
the course of advertising goods, products, or services. Caterpillar sued Weber
alleging copyright infringement but did not allege that such infringement
occurred in the context of advertising. Weber argued that the policy provision
defining "advertising injury" was a limitation that, under the
Insurance Code, Sentry was required to prove inapplicable. Id. at
556.
The court disagreed, stating that the language was not a policy limitation
or exclusion but rather a provision that defined policy coverage. Thus, Weber
had the burden to prove that its injuries to Caterpillar were covered by the
policy. Because the underlying complaint made no mention of advertising
activities, Weber could not meet its burden to show that the copyright
violations came within the policy's coverage.
Conclusion
This rule is consistent with the placement of burden of proof in most every
other type of litigation. In most every type of litigation, the plaintiff—that
is, the party seeking recovery—has the burden of proof. This rule goes back to
the earliest dates of Texas jurisprudence, even during the Republic. If a party
seeks a recovery from a court or jury, that party carries the burden of proof.
Therefore, in coverage litigation, it is incumbent on the insured to plead
facts creating coverage, present evidence at trial of facts that would
establish coverage, and obtain the necessary jury findings to show that there
is a claim that falls within the coverage of the policy.
The next part in this series will address exclusions and the burden of
pleading, proving, and obtaining factual findings on the particular exclusions
that are being relied upon.
Note: See Part
5 of this article.