The Dallas Court of Appeals has affirmed a trial court order granting summery judgment to a group of insurers that issued all-risk policies with certain exclusions to Texas Instruments.
Texas Instruments Incorporated v. Great Lakes Insurance SE, SCOR (UK) Co. Limited, 1183 Talbot Lloyd’s Syndicate, Westport Insurance Corporation, AIG Specialty Insurance Co., Endurance American Specialty Insurance Co., XL Insurance American, Inc. , Ascot (Lloyd’s Syndicate 1414) and Tokio Marine America Insurance Company (No. 05-24-01375; July 28, 2026) arose from a 2021 accident at TI’s wafer fabrication facility in which a pressurized pipe burst, releasing hydrogen chloride gas into a clean room. TI notfied Defendants, its insurers, who sent an initial reservation of rights letter citing exclusions in the policies for corrosion and contamination, which TI alleged had occurred. The insurers paid TI based on a $5 million accidental liquid gas and liquid discharge extension, but didn’t pay anything else. TI filed suit, alleging breach of contract, extracontractual claims, and attorney’s fees. Defendants moved for summary judgment, which the trial court granted. TI appealed.
In an opinion by Justice Breedlove, the court of appeals affirmed. Defendants cited three policy exclusions justifying the denials of TI’s claim: (1) “‘deterioration, depletion, rust, corrosion or erosion, wear and tear, inherent vice or latent defect’ (the corrosion exclusion), (2) faulty workmanship, and (3) contamination. TI countered that the exclusions were modified “by certain exceptions that provide some degree of coverage for specified coverage related to those categories.” As the court observed, the corrosion and faulty workmanship exclusions applied no matter the cause of the peril but allowed coverage for resulting ‘physical damage’ not otherwise excluded under the policy. The contamination exclusion contained an exception that restored coverage if the contamination “directly results” from non-excluded physical damage. TI argued that the “non-excluded physical damage” was damage to the hydrogen chloride itself when it was released in the form of a gas. It further contended that the corrosion exclusion applied only to “conditions that exist or occur gradually or involve the passage of time” and that the faulty workmanship exclusion didn’t apply at all.
First, the court took up the corrosion exclusion. TI argued that the damage to its equipment occurred immediately and didn’t develop over a period of time. Consequently, the corrosion exclusion didn’t apply. Since, as the court observed, the policy didn’t define “corrosion,” the common, plain meaning would have to do. The parties disagreed over the plain meaning, TI contending that corrosion referred to a gradual process, Defendants that Texas courts have long held that corrosion doesn’t include an element of time. The court sided with Defendants, concluding that “under the policy, ‘corrosion’ is not limited to a process that manifests over time.’” The exclusion thus applied to some of the damage TI claimed. The burden then shifted to TI to produce evidence to “afford a reasonable basis for estimating the amount of damage or proportionate amount of damage caused by a risk covered by the insurance policy.”
This proved hard to do. According to the concurrent-causation doctrine, “when covered and excluded events combine to cause a plaintiff’s loss and the two causes cannot be separated, the concurrent-causation doctrine applies and the insured may recover only for the damages covered by the policy” (citations omitted). TI argued that the doctrine didn’t apply because the HCl release was the only peril, but the court disagreed. “We conclude,” it stated, “that the concurrent causation doctrine applies here, where TI alleged the HCl spill caused both corrosion damage to the tools and materials and contamination of the facility.” TI had the burden of segregating its damage attributable to corrosion and “to produce evidence raising a fact issue on its claim that it suffered property damage from the spill in excess of the policy deductible that is unrelated to the corrosion experienced in the facility.” TI produced some evidence, but even its own expert admitted that the time spent addressing corrosion was “de minimis.” TI’s corporate representative further testified that though TI employees saw corrosion, “the bulk of [their] time” was spent “working on preventing corrosion from happening.” But he couldn’t put any estimate on how much time was spent on it. The court, consequently, concluded that “TI failed to meet its burden to raise a genuine issue of material fact on its claim that it suffered property damage in excess of the deductible that is unrelated to the corrosion, which is excluded from the policies’ covered perils.”
The court next turned to TI’s argument that the trial court erred in granting summary judgment on its extracontractual claims for delay damages and attorney’s fees. TI also claimed damages under Chapter 542, Insurance Code, the prompt-payment statute. Defendants argued that the trial court’s ruling was proper because those claims were derivative of TI’s breach of contract claim. Because the court had ruled that TI had no right to recover policy benefits beyond those Defendants had already paid, the trial court’s ruling was correct on that issue as well.
