Texas: An Insurance Overview
Texas Construction Defect Disputes Increasingly Focus on Number of “Occurrences”
Disputes over the number of occurrences involved in construction defect claims are becoming more common in Texas, whether between insureds and their insurers or among primary and excess insurers. The issue of the number of occurrences is critical as limits of liability, as well as deductibles and self-insured retentions (SIRs), are often stated in liability policies in “per occurrence” terms, usually subject to a maximum aggregate limit.
How Texas courts evaluate the number of occurrences
Historically, Texas cases have typically applied a “cause” analysis in determining whether a particular factual scenario involves one or several occurrences. The number of occurrences is determined by focusing on the events that caused the injuries and that gave rise to the insured’s liability – not on the number of injurious effects. Some courts have said that the focus should not be on the alleged overarching cause but rather on the specific event or events that caused the loss. To determine the number of occurrences, a court must count the number of acts by the insured that give rise to liability. If all of the injuries arise from one continuous and unbroken cause, courts have usually found only one occurrence. However, if the injuries arise from multiple causes, they are typically multiple occurrences.
A common scenario arises when the insured is a general contractor charged with overseeing numerous subcontractors. The question becomes whether the general contractor’s failure to oversee several different trades constitutes several occurrences – ie, whether the failure to properly supervise the work of each particular subcontractor is a separate occurrence in itself, or whether the general contractor’s failure to ensure that the overall project was constructed correctly is a single occurrence. One federal court applying Texas law has held that the defective construction of a project by a general contractor and its various subcontractors, and the subsequent delivery to the owner of a defective project, were a single event causing harm to the owner and therefore constituted only one occurrence. At least two other federal courts, however, have concluded that claims of multiple construction defects in a project involving multiple buildings constituted multiple occurrences. According to one of these courts, the insurer’s single-occurrence argument incorrectly overlooked the insured’s various acts of faulty workmanship. The court reasoned that the damages caused by the insured were not the result of a single, uninterrupted cause, but rather resulted from different types of work on multiple areas of separate buildings over an extended period of time. The court concluded that multiple occurrences were therefore involved, and that the insurer’s maximum liability under the policy was the aggregate limit.
The issue can also arise where the insured is a subcontractor. The outcome of the number of occurrences question can be affected by the nature of the insured’s acts or omissions, the number of buildings or structures the insured worked on, the length of the time period over which the insured’s work was completed, and the number of people harmed by the result. In other words, the answer to the question can be complex and the analysis is usually fact-intensive.
Why this issue matters
While the question of single versus multiple occurrences may be interesting on an academic level, it also has real-world significance. The most common implications are with respect to deductibles and SIRs.
To review the basics: a primary policy typically caps payment at a stated limit per occurrence, subject to an aggregate. A single-occurrence loss means that only the per-occurrence limit applies. Multiple occurrences mean that the aggregate limit applies, which would increase the amount owed by the primary insurer before exhaustion. Thus, for example, the maximum liability of an insurer that issues a policy with a USD1 million per-occurrence limit and a USD3 million aggregate limit could be either USD1 million, USD2 million or USD3 million, depending on how many occurrences took place.
Under a standard commercial general liability policy, each occurrence triggers its own deductible or SIR. Imagine a tract of homes where the insured improperly installs windows that leak and damage other components. If this string of related claims is a single occurrence, the insured would be responsible for only one retention before coverage attaches. However, if each home constituted a separate occurrence, the insured would be responsible for dozens of SIRs before the primary policy has to pay. For high-frequency, low-severity losses, this analysis could be the difference between no loss in excess of the retention and the per-occurrence limit being exhausted. Take the USD1 million per-occurrence/USD3 million aggregate policy: if that policy had a USD500,000 per-occurrence deductible, an insured could be liable, and essentially uninsured, for USD500,000, USD1 million or USD1.5 million, depending on how many occurrences took place.
That, in turn, controls access to excess. Excess and umbrella policies attach only after the retentions, along with the primary’s applicable limit, whether per-occurrence or aggregate, are exhausted. Consider a contrasting scenario to the window installation example – a few high-value claims, such as structural collapse with multiple injured workers. If such a catastrophic event is one occurrence, the loss for a single claimant might exhaust the per-occurrence limit quickly to reach the excess layers. However, a multi-occurrence framing would slow exhaustion and delay, or even avoid, attachment of the excess policy.
The implications of this issue are significant. It can lead to tension not only between an insured and its primary insurer, but also among primary and excess insurers. Notably, under Texas law, excess carriers retain subrogation/contribution claims against underlying carriers, so this could lead to post-settlement litigation. This issue may also implicate an insurer’s duty under Stowers, the Texas case that held that an insurer has a duty to accept reasonable, within-limits demands made against its insured. Whether a USD2 million demand exceeds the primary limit – and therefore invokes the primary carrier’s duty – could turn on whether the loss is a single occurrence or multiple occurrences.
A recent example involving modified policy language
The Western District of Texas’s 2025 decision in Meritage Homes v AIG Specialty Insurance Co is significant in Texas on the “multiple occurrences” issue in the construction defect context because it confirms that Texas courts will continue to enforce clear policy language as it is written, even if the effect is that it arguably runs counter to prior Texas decisions.
The case arose out of more than 1,300 residential stucco construction defect claims against Meritage Homes in Texas and Florida. The central dispute was whether those claims constituted one or a series of separate occurrences under a series of umbrella policies issued by AIG. The answer carried major financial consequences because, like the examples above, it determined whether Meritage had to satisfy one SIR or multiple retentions over the course of a decade of policies before excess coverage would attach. Millions of dollars in retention were in play.
The policies all contained various versions of a “Single Occurrence Clause” by endorsement. The insured argued that these so-called “batching” endorsements have the effect of consolidating hundreds of individual construction defect claims into one occurrence, meaning that the insured must satisfy only one SIR. The carriers disagreed, asserting that the insured was misinterpreting the policies and the intent.
The Court agreed with the insured and held that more than 1,300 stucco defect claims across Texas and Florida constituted a single occurrence because they arose from “a series of related acts or causes” – namely, alleged systemic failures to comply with uniform ASTM stucco installation standards.
The decision is particularly important when viewed against earlier Texas occurrence jurisprudence, especially Lennar Corp v Markel American Insurance Co, which held that Texas courts must analyze very similar claims of damage on a home-by-home basis. This necessarily resulted in the finding that each house was a separate occurrence or separate property damage event. Meritage does not eliminate that framework, but it demonstrates how endorsement language can materially alter the analysis. Here, the “Single Occurrence Clause” superseded the base policy wording and allowed the court to aggregate claims that were logically and causally connected.
One of the clearest lessons from Meritage is the importance of carefully reviewing endorsement language at the underwriting and placement stage. Texas courts consistently emphasize that they will enforce policy wording as written. In Meritage, the court declined to rewrite the policy or imply limitations that the carrier argued were intended but never expressly stated. That approach ultimately drove the result. For carriers, brokers and policyholders alike, the case is a reminder that endorsements are not merely ancillary policy provisions – they can fundamentally alter risk allocation. If a batching endorsement is intended to apply narrowly, the policy must say so explicitly. Otherwise, Texas courts are likely to apply the endorsement according to its plain language, even where doing so dramatically expands available coverage.
Bottom line: this issue can have a significant effect on insureds and carriers. As Texas courts continue to enforce policies as written, those involved in evaluating claims should consider the occurrence question early. It shapes retention exposure, primary capacity, and excess tower attachment.