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Click here for the full text of this decision FACTS:In April 1997, Vincent and Janice DiMare entered into a contract to purchase a home constructed by Lamar Homes Inc. In March 2003, the DiMares filed suit against Lamar and its subcontractor in Texas state court claiming that Lamar was negligent and failed to design and/or construct the foundation of the DiMares’ residence in a good and workmanlike fashion in accordance with implied and express warranties. Lamar timely forwarded the suit to Mid-Continent Casualty Co. seeking defense and indemnification under a Commercial General Liability insurance policy issued by Mid-Continent for a policy period of July 1, 2001 to July 1, 2002. Mid-Continent refused to defend Lamar, and Lamar filed suit against Mid-Continent in Texas state court seeking a declaration that Mid-Continent’s policy covered the claim asserted against Lamar in the DiMare litigation and that Mid-Continent owed Lamar a defense in that suit. Lamar also argued that Mid-Continent’s failure to tender a defense violated Texas Insurance Code Article 21.55, known as the “Prompt Payment of Claims Statute.” Mid-Continent removed the case to federal court. Lamar and Mid-Continent filed cross-motions for summary judgment. At the motion hearing the parties agreed to limit the issue to whether Mid-Continent had a duty to defend Lamar in the DiMare litigation. The district court held that 1. the underlying claim for damages from construction errors essentially presented either a claim based on a breach of contract or breach of warranty; and therefore 2. Mid-Continent did not have a duty to defend under its CGL policy, because such construction errors are not covered by CGL policies as a matter of law. The district court reasoned that, because the gravamen of the underlying petition sought relief for a breach of contract resulting in pure economic loss, the insurer was not obligated to provide a defense under the CGL policy. The court stated that “[t]he purpose of comprehensive liability insurance coverage for a builder is to protect the insured from liability resulting from property damage (or bodily injury) caused by the insured’s product, but not for the replacement or repair of that product.” The court stated further that “[I]f an insurance policy were to be interpreted as providing coverage for construction deficiencies, the effect would be to”enable a contractor to receive initial payment for the work from the homeowner, then receive subsequent payment from his insurance company to repair and correct deficiencies in his own work.’” The court concluded that such a result would transform a liability policy into a performance bond. Thus, the court found that Mid-Continent was not obligated to provide a defense to Lamar in the underlying litigation. HOLDING:The court certifies three questions to the Texas Supreme Court: 1. When a homebuyer sues his general contractor for construction defects and alleges only damage to or loss of use of the home itself, do such allegations allege an “accident” or “occurrence” sufficient to trigger the duty to defend or indemnify under a CGL policy? 2. When a homebuyer sues his general contractor for construction defects and alleges only damage to or loss of use of the home itself, do such allegations allege “property damage” sufficient to trigger the duty to defend or indemnify under a CGL policy? 3. If the answers to certified questions 1 and 2 are answered in the affirmative, does Article 21.55 of the Texas Insurance Code apply to a CGL insurer’s breach of the duty to defend? OPINION:Per curiam; Davis, Jones and Garza, JJ.

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