An appellate court in Texas upheld a trial court opinion that judgment was rendered in a “fully adversarial trial” where there was a full defense of the underlying claims at a bench trial. Great Am. Ins. Co. v. Hamel, 2014 WL 4656618 (Tex. App.—El Paso, Sept. 19, 2014).
A builder that built a custom home was sued for negligence and other claims arising out of defective installation of synthetic stucco to a home. The builder tendered the defense and indemnity of the suit to its CGL insurer, which was denied. The suit against the builder was tried to a judge, resulting in a judgment against the insured, which assigned its claims against its insurer to the underlying plaintiffs. The underlying plaintiffs then sued the insurer as assignees alleging that the insurer was obligated to pay the judgment. The trial court found in favor of the plaintiffs, and the insurer appealed.
The insurer argued that it was not responsible for payment of the judgment because the judgment did not arise from a “fully adversarial trial” as required by the Texas Supreme Court in State Farm Fire and Cas. Co. v. Gandy, 925 S.W.2d 696 (Tex. 1996) (which found such assignments generally against public policy absent a “fully adversarial trial”). The Court of Appeals found that the judgment did arise from a "fully adversarial trial" because the insured conducted a full defense of the underlying claim at a bench trial. Furthermore, in response to the argument that certain pre-trial stipulations were made between the parties, the court determined that the insurer did not demonstrate that the stipulations were used in the trial of the construction case to affect the outcome.