Contract Exclusion Bars Coverage for Texas Property Manager’s Failure to Report HOA Claim

A Texas federal court, applying Texas law, has held that an insurer owed no duty to defend a property management company against a homeowners association’s lawsuit because the claim arose solely from the insured’s alleged breach of a written management agreement, and coverage therefore was barred by the policy’s express contract exclusion. Harbor Lakes Homeowners Ass’n, Inc. v. Travelers Cas. & Sur. Co. of Am., 2026 WL 498098 (E.D. Tex. Feb. 18, 2026).

The insured property management company entered into a written management agreement with a homeowners association that required the company to report claims made against the association to the association’s insurer on the association’s behalf. A homeowner later sued the association for breach of contract. The company did not notify the association’s insurer of the lawsuit, and the association ultimately resolved the lawsuit without an insurance defense. The association then sued the company for breach of the management agreement, alleging that its failure to report the claim caused it to lose insurance coverage. The company sought coverage for the association’s lawsuit under its own liability policy. The insurer denied coverage based on an exclusion barring coverage “for any liability of the Insured Organization under any express contract or agreement,” (the “express contract exclusion”) defining an express contract as “an actual agreement among the contracting parties, the terms of which are openly stated in distinct or explicit language, either orally or in writing, at the time of its making.” The company sued its insurer.

The court granted summary judgment to the insurer, holding that the express contract exclusion unambiguously barred coverage for the association’s lawsuit because it sought to hold the company liable solely for breaching its written management agreement. The court rejected the company’s argument that the exclusion did not apply because the contractual obligations at issue lack “explicit or distinct language.” The court explained that the underlying pleading alleged a clear failure to comply with express reporting duties set forth in a written contract. The court held that, because coverage was barred by the contract exclusion, the insurer had no duty to defend.