Had the district court's decision remained successfully unchallenged, subcontractors, home builders and other builders would have been left to defend themselves against lawsuits for accidental injuries and property damage that they thought were covered by their CGL policies.

In their brief, ASA and ASAT pointed out that many businesses believe they are protected by standard CGL language: "That policy provides coverage for virtually all players in the construction industry, including ASA members and general contractors, together with all other parties that are affected by defective construction - including project owners and homeowners."

In their Feb. 1, 2006, brief to the Texas Supreme Court, ASA and ASAT noted: "All of the prerequisites for the application of the subcontractor provision to the property damage caused … apply here and cannot be ignored. That property damage occurred after completion and arose out of the work of subcontractors and coverage for that exposure is preserved under the your work exclusion."

In a 6-3 decision, the Texas Supreme Court agreed: "By incorporating the subcontractor exception into the 'your-work' exclusion, the insurance industry specifically contemplated coverage for property damage caused by a subcontractor's defective performance. [citation omitted] More recently, the Insurance Services Office has issued an endorsement that may be included in the CGL to eliminate the subcontractor exception to the 'your-work' exclusion."

The court concluded that "allegations of unintended construction defects may constitute an 'accident' or 'occurrence' under a CGL policy and that allegations of damage to, or loss of use of, the home itself may also constitute 'property damage' sufficient to trigger the duty to defend under a CGL policy."