The Waco Court of Appeals has ruled that an insurer had a duty to defend under a CGL policy in a third-party liability case in which the plaintiff’s worker status arguably fell outside a broad exclusion for employee lawsuits.
Admiral Insurance Company v. Lippert Components, Inc., Kinro Texas Inc., Kinro, Inc., LCI Industries f/k/a Drew Industries, Inc. (No. 10-23-00250-CV; March 12, 2026) arose from a dispute between an insurer and its insureds over a commercial general liability insurance policy. Admiral issued the policy to Lippert, which covered Lippert and its subsidiaries. When Lippert was sued for personal injury and tendered the defense to Admiral, Admiral denied it pursuant to the policy’s “Injury to Workers” exclusion. Admiral sought declaratory relief against the insureds, as well as nonparties Liberty Mutual and the plaintiff in the underlying personal injury suit, asserting no duty to indemnify or defend. Lippert filed a counterclaim for declaratory judgment asserting just the opposite. Both parties moved for partial summary judgment. The trial court denied Admiral’s motion and granted Lippert’s, finding that the policy required Admiral to defend the lawsuit. It also excluded Admiral’s “work status” evidence. Admiral appealed.
In an opinion by Chief Justice Johnson, the court of appeals affirmed. It began by observing that under the eight-corners rule, “[a] third-party plaintiff’s factual allegations that potentially support a covered claim are all that is needed to invoke the insurer’s duty to defend” (citation omitted), even “if the allegations in the third-party plaintiff’s petition are groundless, false, or fraudulent” (citation omitted). Additionally, the court continued, “[i]t is not the cause of action alleged which determines coverage but the facts giving rise to the alleged actionable conduct” (citation omitted). But if the pleadings leave some question about whether a policy obligates the insurer to defend, “the insurer is obligated to defend if there is any potential claim under the pleadings that falls within the coverage of the policy” (citation omitted). A court may also “draw inferences from the petition that may lead to a finding of coverage” (citation omitted).
The issue was whether the CGL’s policy’s exclusion for certain workers barred coverage. Under the policy, there was no coverage for “bodily injury to any ‘employee’ of ‘any insured’ arising out of and in the course of employment by any insured, or performing duties related to the conduct of any insured’s business ….” It further defined “employee” to include a “leased worker” obtained by an insured pursuant to an agreement between the insured and a labor leasing firm. The policy likewise barred coverage for bodily injury to independent contractors, temporary and volunteer, or casual workers. Admiral contended that “reasonable inferences” from Plaintiff’s petitions “establish that [Plaintiff] was at least an employee or leased worker of Kinro (a named insured), or otherwise fell within one of the enumerated worker categories while assigned to work at the Kinro facility ….” Lippert countered that “the operative petition controls and, when read liberally in favor of coverage, does not unambiguously place [Plaintiff] within any [excluded] category ….” Plaintiff alleged that he was employed by another entity, the insureds denied him workers’ compensation coverage as a non-employee, and his only relationship with the insureds was an invitee at the Kinro facility.
The alleged injury occurred when Plaintiff was moving large glass plates in a cart when they shifted and fell on him. The injury occurred within the policy period at Kinro’s Waxahachie location. Looking to the language of the exclusion, the court observed that Plaintiff’s petition identified him as the employee of a third-party, did not allege the existence of a staff leasing agreement, nor did he allege that was a temporary, volunteer, causal worker, leased worker, or independent contractor. Admiral pointed to Plaintiff’s allegation that Kinro and Liberty Mutual “fraudulently conspired to create workers’ compensation coverage to invoke the statutory bar” as evidence that Plaintiff was actually Kinro’s employee.
The trial court couldn’t decide who was telling the truth, so it construed the exclusion against Admiral. Its allegation regarding eligibility for workers’ compensation benefits, the court noted, “does not constitute a factual allegation regarding [Plaintiff’s] worker status.” Instead, Plaintiff’s petition permits an inference that Plaintiff’s work duties were directed by his third-party employer and his injuries occurred in the course and scope of this employment. Agreeing with the trial court, the court determined that Plaintiff’s petition didn’t contain factual allegations that triggered the exclusion, but showed instead that Plaintiff was employed by a third-party. “Because the [exclusion] does not bar suits by invitees,” the court determined, “we reject Admiral’s argument that [Plaintiff’s] allegations support an inference that he was an employee of the insureds.”
Finally, the court declined Admiral’s invitation to go outside the eight-corners rule and consider extrinsic evidence of Plaintiff’s worker status. Under Monroe Guaranty Insurance Company v. BITCO General Insurance Corporation, 640 S.W.3d 195 (Tex. 2022), a court may consider extrinsic evidence when (1) there is a “gap” between the operative petition that prevents the court from conducting a standard eight-corner analysis, (2) the extrinsic evidence does not contradict the facts alleged in the petition, and (3) the issue on which movant wishes to invoke the exception doesn’t “overlap with the merits of the underlying liability dispute.” None of that was present here. The operative petition and the policy controlled. Because the petition didn’t unambiguously trigger the exclusion and established the potential for a covered claim, Admiral had a duty to defend.
