In a case involving policy exclusions purporting to exclude commercial losses stemming from the COVID-19 pandemic, the Dallas Court of Appeals has in large part reversed and remanded a summary judgment in favor of the excess insurers. While the court upheld summary judgment in favor of Chubb, the lead insurer, based on the language of the policy’s contamination exclusion. Two excess insurers that issued follow-form policies also got out the case since their policies expressly adopted the exclusion. The rest of them, however, did not preserve for appeal certain issues involving the interpretation of their exclusions and remanded for another try.
TRT Holdings, Inc. and Omni Hotels Management Corporation d/b/a Omni Hotels and Resorts v. ACE American Insurance Company, Certain Underwriters at Lloyd’s, London and London Market Companies Subscribing to Policy No. B0180PG190304, Certain Underwriters at Lloyd’s London Subscribing to Policy No. B0180PG1902559, XL Insurance America, Inc., Westport Insurance Corporation, and Interstate Fire & Casualty Company (No. 05-23-00868-CV; September 18, 2025) arose from an insurance coverage dispute arising from the COVID-19 pandemic. Omni insured its hotels and resorts through a commercial insurance program with multiple insurers, including a primary layer of $25 million and an excess layer of $225 million. ACE (Chubb) issued the lead policy. Interstate, four sets of London Market Underwriters, Westport, and XL Insurance each issued a follow-form policy. Chubb, Interstate, and the London Market Underwriters co-insured the primary layer, while Westport and XL co-insured the excess lawyer. The follow-form policies generally followed Chubb’s lead policy but contained variations and additional endorsements. All policies, however, were written on an all-risk basis that insured against all risks of direct physical loss of or damage to insured property, except for specifically excluded risks.
In April 2020 Omni submitted a claim for alleged business-interruption and extra-expense losses arising from the pandemic. Omni claimed that its losses directly resulted from COVID-19-related property damage at each insured property, as well as as the associated shut-downs the stay-at-home orders. The insurers denied the claim. Omni filed suit for breach of contract, alleging that the virus was actually present at each insured property and that it directly caused a covered loss. It pointed to Chubb’s lead policy, which Omni alleged did not contain a virus exception. Omni also asserted derivative claims, including breach of the duty of good faith and fair dealing, Insurance Code violations, and civil conspiracy. The insurers moved for traditional summary judgment on the basis that COVID-19 did not cause direct physical loss of or damage to property, but reserved its argument that the contamination exclusion in the Chubb policy excluded coverage and was incorporated into the other policies. Omni responded that each policy must be considered separately, especially the policies issued by Westport and the London Market Underwriters, which they argued covered for communicable diseases, cancellation of bookings, and prevention of access to the properties. It argued further that Chubb’s contamination exclusion did not unambiguously exclude coverage for COVID-19. The trial court granted summary judgment and dismissed with prejudice. Omni appealed.
In an opinion by Justice Miskel, the court of appeals affirmed in part and reversed and remanded in part. As the court pointed out, SCOTX has recently held that “[c]haracterizing an excess policy as a ‘follow-form’ policy … confirms only that the excess policy will to some degree incorporate the provisions of the underlying policy—the degree of incorporation is determined by the excess policy’s text.” Ohio Cas. Ins. Co. v. Patterson-UTI Energy, Inc., 703 S.W.3d 790, 793 (Tex. 2024). Consequently, since Defendants ended up basing their summary judgment argument on the exclusion in the Chubb policy, the question became whether those other policies modified or changed the exclusion. But first the court had to determine whether the contamination exclusion in the Chubb policy excluded coverage for COVID-19. Observing that the text of the exclusion broadly specifies “certain mechanisms by which a contaminant or pollutant must have caused the harm, namely by its release, discharge, escape, or dispersal,” the court ruled (in agreement with the Houston[14th] Court of Appeals) that there was no fact issue that Omni’s COVID-19 losses resulted from one of the contamination exclusion’s enumerated mechanisms. In response to Omni’s contention that the exclusion only applied to “pollution events” and not to a pandemic, the court, the court noted that the plain language of the policy included “viruses” in the definition of “Contaminants and Pollutants.” But, because Omni didn’t preserve its argument that the term “virus” in the exclusion applied only to substances listed in specified federal environmental statutes, it waived that argument. Omni also failed to preserve its argument that Chubb’s policy included a “cancellation of bookings” provision that expressly provided coverage for damage resulting from viruses (Omni also failed to provide the court with a citation to this language in the policy.) The court thus affirmed the trial court’s grant of summary judgment to Chubb.
Turning to the remaining policies, the parties stipulated that XL’s and Interstate’s policies adopted the contamination exclusion. Consequently, the court upheld summary judgment as to those policies. As to Westport’s policy, Omni stipulated that the policy adopted Chubb’s exclusion but contained three endorsements that modified it. Westport conceded that the endorsements created “stand-alone coverage” but argued that Omni’s claim didn’t come within the conditions of the endorsements. But, as happened with some of Omni’s arguments, Westport didn’t move for summary judgment on that basis (only that the Chubb contamination exclusion applied). It thus never conclusively established that Omni’s breach of contract and extracontractual claims failed as a matter of law. Summary judgment reversed and remanded.
The London Market Underwriters’ policies presented a different problem. Their policies defined “seepage, pollution, and contamination” to include specified hazardous or toxic substances and “anything which endangers or threatens to endanger the health, safety, or welfare of persons or the environment.” In short, Omni argued that Chubb’s exclusion included the term “virus” the Underwriters’ policies did not. And since, like Westport, the Underwriters’ didn’t move for summary judgment on the contamination exclusion in their own policies (only Chubb’s), they failed to establishe their entitlement to judgment as a matter of law. Failing to show that their policies “clearly incorporated” the Chubb exclusion, the Underwriters were sent back to the trial court.
This case illustrates the pitfalls of failing to ensure that one’s summary judgment motion covers all the possible grounds that would support the judgment. While Westport and the Underwriters may ultimately prevail on the basis of their own policies’ language, they will have to go around the mulberry bush again to do it. But with more than $200 million on the line, we think it more likely than not that the court of appeals will see this case again.
