Texas Supreme Court Provides Framework For Determining Whether An Excess Liability Policy Covers Defense Expenses

On December 20, 2024, the Texas Supreme Court issued an interesting decision addressing whether an insured was entitled to coverage under its excess liability policy for legal expenses it incurred in defending an underlying suit. Ohio Casualty Insurance Company v. Patterson-UTI Energy, Inc.

BACKGROUND

The coverage dispute arose from a drilling rig incident that resulted in multiple lawsuits against the insured. The amounts paid for the defense and settlement of the lawsuits exhausted the limits of the insured's primary policy and lower-level excess policies. The insured then sought coverage under its higher-level excess policy. The excess insurer paid portions of the settlement amounts, but declined coverage for the defense amounts. Coverage litigation ensued.