State Farm Fire & Casualty Co. v. Gandy

in which PHILLIPS, Chief Justice, and GONZALEZ, CORNYN, SPECTOR, OWEN, BAKER and ABBOTT, Justices, join.

Julie Gandy sued her stepfather, Ted Pearce, for sexually abusing her as a child. State Farm Fire and Casualty Company, which at one time had issued Pearce a homeowner’s policy, agreed to pay an attorney chosen by Pearce to defend him but reserved the right to deny coverage. While the case was pending, Pearce pleaded nolo contendere to criminal charges initiated by Gandy and *698was given a probated sentence of five years’ imprisonment.

Without notice to State Farm, Pearce settled with Gandy by…