The Supreme Court of Texas has ruled against Amerisure Insurance Company in a closely-watched case involving builders' liability coverage, the Austin Statesman reports (see: "Texas Supreme Court limits liability insurance exclusions," by Chris Tomlinson/Associated Press).

In a case involving a faulty tennis court, the insurance company had refused to pay a liability claim filed by the contractor because the contractor's agreement with the customer, a school district, included a provision that the contractor would assume any liability. "Most general liability policies have a clause that allows the insurance company to exclude liability claims when a contractor assumes liability 'in a contract or agreement,'" the Statesman story notes. "Insurance companies often require contractors to buy additional coverage when they take on greater risk."

But the court ruled that the insurance company was still on the hook for the damage. According to the ruling, insurance companies can't use a contract provision between the contractor and the customer to avoid liability, if the liability would have existed anyway in the absence of the contract provision.

The Texas court's decision is published online (see: Ewing Construction Company, Inc., v. Amerisure Insurance Company). The court's main point: the fact that a builder's contract includes a promise to perform a workmanlike job does not mean the builder has taken on an extra liability that the insurance company can avoid shouldering.

"If the Texas Supreme Court had ruled in favor of the insurance company," reports the Statesman, "coverage of construction mistakes in Texas would have virtually disappeared."