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Construction Alert: "Fifth Circuit Withdraws Ewing Opinion"

Refers Questions to Texas Supreme Court

In June, the United States Court of Appeals for the Fifth Circuit issued an opinion that was inconsistent with prior law and caused quite an uproar in the construction industry. The opinion purported to eliminate coverage under Commercial General Liability (CGL) policies for construction defect claims in Texas. We previously reported on Ewing Construction Company, Inc. v. Amerisure Ins. Co. (Cause No. 11-40512). See Fifth Circuit Ruling on Commercial General Liability Policies Could Have a Significant Impact on the Texas Construction Industry.

The impact of the Ewing opinion was that there could never be coverage (or payment for defense costs) for property damage to any part of the project where work was performed pursuant to a contract. The opinion essentially made the subcontractor exception to the “your work” exclusion meaningless.

Yesterday, the Fifth Circuit withdrew its June opinion and has referred the questions to the Texas Supreme Court. This is good news for contractors and other insureds in the construction industry. However, the case is not over. The Texas Supreme Court will now get to decide the key issues. So there remains some uncertainty in this part of the insurance market, but the good news is that the adverse Fifth Circuit opinion has been withdrawn, and thus has no precedential value.

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