Last month, the U.S. Court of Appeals for the Fifth Circuit in Graper v. Mid-Continent Cas. Co. v. Floyd affirmed summary judgment in favor of an insurer that had fulfilled its duty to defend its insureds by tendering its chosen attorney, rather than reimbursing the fees charged by the attorney chosen by the insureds. The Fifth Circuit found that, under Texas law, no conflict of interest exists between an insurer and its insured when the insurer defends a claim subject to a reservation of rights, if the issues to be litigated in the underlying action are separate and distinct from issues that determine insurance coverage.

According to the court’s opinion,Mid-Continent issued successive general liability policies to Hallmark Design Homes, a Texas homebuilder, and Hallmark Collection of Homes, its general partner, covering the time period from May 2004 to January 2009. In March 2009, Kipp Flores Architects sued Hallmark and Joe Partain, as principal of the company, alleging that Hallmark had violated several of its copyrights in its architectural designs. Laura and William Graper, also principals of Hallmark, were later added to the suit. The complaint alleged that Hallmark had used the architects’ copyrighted designs when constructing homes and used those same designs in the homebuilder’s advertising material.

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