Can Insurance Company Refuse to Defend An Insured Person ?
The Supreme Court has established the following test for determining whether an insurance company has a duty to defend its insured in a particular case:
Where the complaint does not state facts sufficient to clearly bring the case within or without the coverage, the general rule is that the insurer is obligated to defend if there is, potentially, a case under the complaint within the coverage of the policy.
Stated differently, in case of doubt as to whether or not the allegations of a complaint against the insured state a cause of action within the coverage of a liability policy sufficient to compel the insurer to defend the action, such doubt will be resolved in insured's favor. Id. (quoting Heyden Newport Chem. Corp. v. Southern Gen. Ins. Co., 387 S.W.2d 22, 26 (Tex. 1965)).
The exception to this general rule occurs "when the petition in the underlying lawsuit does not allege facts sufficient for a determination of whether those facts, even if true, are covered by the policy." State Farm Fire & Cas. Co. v. Wade, 827 S.W.2d 448, 452 (Tex. App.--Corpus Christi 1992, writ denied); accord Gonzales v. American States Ins. Co., 628 S.W.2d 184, 186 (Tex. App.--Corpus Christi 1982, no writ).
In this circumstance, "the evidence adduced at the trial in a declaratory judgment action may be considered along with the allegations in the underlying petition." State Farm Fire & Cas. Co., 827 S.W.2d at 452; accord Gonzales, 628 S.W.2d at 186.