Texas 14th Court of Appeals Holds Pollution and Contamination Exclusion Bars COVID-19 Business Interruption Coverage

Houston Livestock Show & Rodeo, Inc. v. National Fire & Marine Insurance Co., 2026 Tex. App. LEXIS 2965 (Tex. App.—Houston [14th Dist.] Mar. 31, 2026)

By Ramy E. Elmasri, Shareholder and Managing Partner – Texas

Clausen Miller P.C.  |  Houston, Texas  |  [email protected]  |  346.229.4612

On March 31, 2026, the Texas Fourteenth Court of Appeals delivered another decisive win for property insurers defending against COVID-19 business interruption claims. In Houston Livestock Show & Rodeo, Inc. v. National Fire & Marine Insurance Co., the court affirmed summary judgment in favor of the carrier, holding that a commercial property policy’s Pollution and Contamination Exclusion unambiguously bars coverage for losses tied to the SARS-CoV-2 virus — including losses sought under civil-authority and ingress/egress coverage extensions.

The decision builds directly on the same court’s 2024 opinion in Baylor College of Medicine v. XL Insurance America, Inc., and gives Texas carriers, adjusters, and coverage counsel a clean, citable appellate ruling that closes off two of the most common end-runs insureds have attempted in pandemic-era property litigation.

The Case in Brief

Houston Livestock Show and Rodeo (HLSR), a Texas non-profit and the operator of one of the largest livestock shows and rodeos in the world, holds the annual event at NRG Park under a lease from the Harris County Sports & Convention Corporation. HLSR was an additional insured on the Convention Corporation’s commercial property policy issued by National Fire & Marine.

The 2020 event opened on March 3, 2020 and was scheduled to run through March 22. On March 11, 2020, a rodeo patron tested positive for COVID-19, and the City of Houston issued a property-specific quarantine order shutting down NRG Park. HLSR alleged millions in lost income and sought coverage as an additional insured under two extensions of coverage: Section 2B (civil authority) and Section 2C (ingress/egress).

The trial court granted summary judgment for the carrier on both the breach-of-contract and extra-contractual claims. The Fourteenth Court affirmed.

Key Holdings

The court’s analysis turned on three pillars, each of which has independent value for carrier-side practitioners:

1.  A virus is a “contaminant or pollutant.” Applying the four-corners rule, the court read the endorsement’s definition together: a “solid, liquid, gaseous or thermal irritant or contaminant” that, after release, can threaten human health “including but not limited to, bacteria, fungi, virus.” The court held the only reasonable reading is that bacteria, fungi, and viruses are additional examples of qualifying contaminants — not a separate category. SARS-CoV-2 therefore falls squarely within the exclusion.

2.  Policy-wide exclusions reach coverage extensions unless the extension says otherwise. HLSR argued that the civil-authority and ingress/egress extensions in Sections 2B and 2C reference only “Clause 6” exclusions, and that no other exclusion could apply. The court rejected the argument and held the Clause 6 reference is descriptive of what triggers the extension — not a carve-out from the rest of the policy. Because the Pollution and Contamination Exclusion expressly applies to the entire policy and the extensions do not displace it, the exclusion controls.

3.  No coverage means no extra-contractual liability. Citing USAA Texas Lloyds Co. v. Menchaca, 545 S.W.3d 479 (Tex. 2018), the court reaffirmed that where the insured cannot establish coverage and has not alleged any injury independent of the policy benefits, statutory and common-law extra-contractual claims fail as a matter of law. The court did not need to reach the carrier’s alternative “bona fide coverage dispute” argument.

Why This Decision Matters

HLSR is not the first Texas appellate decision to apply a pollution-and-contamination exclusion to COVID-19 losses, but it is among the most useful for carrier-side practitioners for several reasons.

It reinforces the Fourteenth Court’s line of authority. HLSR expressly relies on Baylor College of Medicine v. XL Insurance America, Inc., 2024 Tex. App. LEXIS 929 (Tex. App.—Houston [14th Dist.] Feb. 6, 2024), which interpreted a substantially similar exclusion. With two published-track opinions from the same intermediate appellate court reaching the same conclusion, carriers now have a settled pattern of authority for the Houston region’s busiest civil docket.

It addresses the “coverage extension” end-run. Many insureds, faced with adverse “direct physical loss or damage” rulings, have pivoted to civil-authority and ingress/egress extensions. HLSR forecloses the argument that such extensions are insulated from broad policy-wide exclusions absent express language to that effect.

It models a clean coverage-first defense. The court expressly bypassed the carrier’s alternative arguments — the “direct physical loss” issue, the Biological or Chemical Substances Exclusion, and the carrier’s mutual-mistake theory. Practitioners can take the cue: where the pollution-and-contamination language is on point, lead with it.

It is consistent with the national trend. HLSR aligns Texas with the substantial majority of state and federal appellate decisions nationwide that have applied virus, pollution, or contamination exclusions to bar COVID-19 business interruption claims, while declining to follow the narrow minority of decisions that have construed similar exclusions against the carrier.

Practical Takeaways for Adjusters, Carriers, and Coverage Counsel

• Audit the exclusion language. HLSR turns on the specific wording — “solid, liquid, gaseous or thermal irritant or contaminant … including but not limited to, bacteria, fungi, virus.” Exclusions that list “virus” as an enumerated contaminant, or that incorporate it through an “including but not limited to” construction, are squarely within the holding.
• Anchor the denial in the four-corners rule. The court relied on Fiess, Balandran, and Gilbert Texas Construction to enforce the policy as written. Coverage opinions and reservation-of-rights letters should track that framework and quote the operative exclusion language verbatim.
• Don’t concede coverage extensions automatically. Civil-authority and ingress/egress extensions remain subject to the policy’s exclusions unless the extension expressly says otherwise. The references in Sections 2B and 2C to a specific exclusion clause did not narrow the universe of applicable exclusions.
• Tee up Menchaca early. Where the insured has no actionable injury independent of policy benefits, extra-contractual claims under Chapter 541, Chapter 542, and the common-law duty of good faith and fair dealing fall with the contract claim. Address the independent-injury question in the initial dispositive motion.
• Watch the “scrivener’s error” footnote. The HLSR opinion candidly acknowledges that the policy contained several apparent drafting glitches, including unclear cross-references to “Clause 6.” The court declined to let those glitches override the exclusion’s plain text. Carriers facing similar policy-construction arguments should brief that point head-on.

Bottom Line

HLSR is a clean, well-reasoned affirmance that gives Texas property insurers a strong, citable appellate ruling at both the coverage and extra-contractual stages. Together with Baylor College of Medicine, it establishes the Houston Fourteenth Court of Appeals as a reliable forum for principled enforcement of pollution-and-contamination exclusions in pandemic-related business interruption claims — and signals to Texas insureds that coverage-extension arguments will not be allowed to swallow the rest of the policy.

ABOUT THE AUTHOR

Ramy E. Elmasri is the Shareholder and Managing Partner of Clausen Miller P.C.’s Texas office in Houston. His practice focuses on insurance defense and coverage litigation across Texas state and federal courts, including premises liability, products liability, professional liability, health care liability, commercial trucking, and first-party property and coverage disputes.

Ramy Elmasri  |  Clausen Miller P.C.
16945 Northchase Dr., Suite 1400  |  Houston, TX 77060
346.229.4612  |  [email protected]

This client alert is for general informational purposes only and is not legal advice. The information may not apply to your particular situation and should not be acted on without specific legal advice based on the facts of your matter.