Arguments before the Texas Supreme Court on April 11 focused on whether an insurance company that mistakenly agreed to pay to defend an insured whose policy had expired is liable for those costs even though the insurer had no say about the defense.

Closely watched by lawyers for insurers and policyholders, Ulico Casualty Co. v. Allied Pilots Association provides the state Supreme Court an opportunity to decide whether an exception exists to the general rule that waiver and estoppel cannot be used to create insurance coverage when none exists under the insured’s policy. Austin, Texas’ 3rd Court of Appeals adopted the exception in 1980′s Farmers Texas County Mutual Insurance Co. v. Wilkinson, and other state intermediate appeals courts and federal courts in Texas have recognized the so-called Wilkinson exception over the past 26 years. But the Supreme Court has never adopted that doctrine.

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