LITIGATION ALERT: TEXAS INSURANCE LAW UPDATE — Is the Duty to Indemnify dependent on the Duty to Defend?

Invariably, when an insured tenders a third-party claim, the first two questions asked by the insurance company are: (1) does it have a duty to defend this claim under the terms of the applicable policy; and (2) does it have a duty to indemnify its insured against any losses stemming out of the claim?  Until a recent Texas Supreme Court case, it was unclear under Texas law whether answering "no" to Question No. 1 implicitly required the same answer to Question No. 2.  However, on December 11, 2009, the Texas Supreme Court issued its opinion in D.R. Horton-Texas, Ltd. v. Markel International Insurance Company, Ltd., wherein it resolved this question when holding that the duty to indemnify is not dependent on the duty to defend, and that an insurer may have a duty to indemnify on a given set of facts, even if the duty to defend never arises.

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