Everything is Bigger in Texas: Can the Duty to Indemnify Be Broader Than the Duty of Defense?


By: Shawn Bingham

Whoever came up with the marketing slogan “everything is bigger in Texas” was probably not thinking of insurance law. Yet, as we are reminded by a recent Fifth Circuit opinion, the phrase may, under limited circumstances, describe an insurer’s duty to indemnify in the Lone Star State. In Liberty Mutual Fire Insurance Company v. Copart of Connecticut, Inc., No. 21-10938, 2023 WL 4862793 (5th Cir. July 31, 2023), the court found that although the insurer had no duty to defend, it could have a duty to indemnify.  

Liberty Mutual sought a declaration from the U.S. District Court for the Northern District of Texas that it owed no defense or indemnity to Copart, an on-line auctioneer, in the underlying tort action in South Carolina federal district court. Eight plaintiffs who owned land adjacent to a Copart facility alleged that stormwater runoff mixed with fluids from salvaged vehicles, causing continuous damage to their land.  

The Texas District Court granted summary judgment to Liberty Mutual, finding that the policy’s pollution exclusion applied and there was no duty of defend Copart in the South Carolina case. The Court then summarily concluded that because the insurer had no duty to defend in the underlying suit, it followed that the insurer also had no duty to indemnify. 

On appeal, the Fifth Circuit, applying Texas law, affirmed the trial court’s ruling that there was no duty to defend because the allegations in the complaint necessarily implicated the pollution exclusion. When it came to the duty to indemnify, however, the court found summary judgment to have been premature.  

Citing a 2009 Texas Supreme Court decision, D.R. Horton-Texas, Ltd. v. Markel Int’l Ins. Co., 300 S.W.3d 740 (Tex. 2009), the Fifth Circuit noted that, notwithstanding the allegations in the complaint, the evidence presented at trial in the South Carolina case could show damages that do not fall within the pollution exclusion of the policy. For example, the evidence could show that the property damage was caused by substances that, under Texas law, would be considered non-pollutants, such as unadulterated silt, sediment, or water. If that happened, the insurer may be responsible to indemnify its insured in whole or part for the judgment even though the four corners of the complaint never required a defense.  

The Court noted, the lack of a duty to defend may, in some cases, also dispose of the duty to indemnify because it may be impossible that later facts can be developed to bring the liability claim within coverage. Thus, determining an indemnity obligation, at least in Texas, may require taking a step beyond the eight-corners doctrine to imagine what facts, if any, outside of the pleadings could be developed in the litigation to show coverage.  

For more information, please contact Shawn Bingham at or your local FMG attorney.