A Texas appeals court held that property damage resulting from an occurrence was alleged in a suit against a home builder, so its insurer owed a possible duty to defend in Summit Custom Homes, Inc. v. Great American Lloyds Ins. Co., No. 05-05-00851-CV, 2006 WL 1985964 ( Tex. App.-Dallas, July 18, 2006).

 Summit Custom Homes constructed a home for Stephen and Helen Lazarus in 1996. In 2003, the Lazaruses filed suit against various companies alleging their home suffered damage due to construction defects in their Exterior Insulating and Finishing System (EIFS). The Lazaruses pleaded the discovery rule because the problems were "inherently undiscoverable in that defects in EIFS are latent."

 One of the defendants alleged that Summit 's conduct led to its liability. Summit filed a claim with its commercial general liability (CGL) insurers, Great American and Mid-Continent Casualty Company. Both insurers refused to defend or indemnify Summit .

 Great American provided CGL coverage to Summit from 1996 to 2000, and Mid-Continent provided coverage from 2000 to 2005. Mid-Continent's policy contained an EIFS exclusion; Great American's policy did not.

 Summit argued that the damage manifested itself in 1996, and thus, the Great American policy should apply. The court noted that, "missing from their factual allegations is any concrete reference to actual damages that occurred in 1996." On the other hand, the court also said, Great American failed to show that damages did not become manifest during its policy periods. Therefore, the court held that summary judgment would be appropriate regarding the duty to defend only if Great American established that no occurrence caused property damage. Finding that the Lazaruses did show that physical injury occurred to tangible property, and that the business risk exclusion did not apply, the court said that Great American could have a duty to defend, and that summary judgment in favor of the insurer was not appropriate.

 Mid-Continent, however, provided a policy that specifically excluded property damage arising out of the EIFS hazard. The court held that Mid-Continent did not have a duty to defend Summit , or a duty to indemnify.

 Regarding Great American's duty to indemnify, the court said, "Should the case proceed to trial, the facts established, falling within the purview of the policy, may invoke its duty to indemnify Summit ." Once again, summary judgment was not appropriate.