Policyholder's Duty to Cooperate: Advocating or Defending ...media.straffordpub.com/products/policyholders-duty... · 4/23/2014 · Agents, 1994; Houston Claims Association, 1994;

Policyholder's Duty to Cooperate: Advocating

or Defending Against Loss of Coverage for Breach Navigating Scope of the Duty, Privilege Issues, Settlement,

and Consequences of Insured's Failure to Cooperate

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WEDNESDAY, APRIL 23, 2014

Presenting a live 90-minute webinar with interactive Q&A

R. Brent Cooper, Shareholder, Cooper & Scully, Dallas

Michael W. McCoy, Partner, Fowler Rodriguez, Houston

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POLICYHOLDER’S DUTY TO COOPERATE:

DOES IT HAVE LIMITS AND WHAT IS THE EFFECT?

by

Michael W. McCoy

Fowler Rodriguez

Michael W. McCoy

Partner

Fowler Rodriguez

Four Houston Center

1331 Lamar Street, Suite 1560

Houston, Texas 77010

Telephone: (713) 654-1560

Direct Dial: (713) 654-3308

Fax: (713) 654-7930

Mobile: (713) 253-8299

E-Mail: [email protected]

6

Mr. McCoy has expertise in insurance coverage and related matters. During his over 30 year career,

he has been involved in complicated and sophisticated insurance coverage disputes involving multi

parties, multi lines of insurance, reinsurance, retail and wholesale insurance brokers, managing

general agencies, and various syndicates from the overseas market.

Mr. McCoy has been involved in insurance coverage litigation involving almost every type of

insurance policy imaginable, in both first and third party insurance cases, and in respect to both

primary and excess insurance. Additionally, he has represented insurance brokers in almost every

type of dispute over the brokering and producing of insurance policies, has represented other

professionals in liability and malpractice actions, including lawyers, and has defended numerous

insurance carriers and third party claims administrators in "bad faith" and extra-contractual

litigation, and has been involved in countless general insurance defense matters ranging in scope

from premises liability to sophisticated machinery products cases.

Mr. McCoy writes and lectures frequently in the insurance coverage, insurance "bad faith" and

insurance broker errors and omissions area, is active as an affiliate member of Independent

Insurance Agents and Brokers Organization, and additionally serves as an expert witness with

respect to coverage, and insurance broker errors and omissions. Further, Mr. McCoy is also actively

involved in employment litigation on behalf of employers, and is active as an affiliate member in

certain HR organizations.

7

Born Houston, Texas, October 12, 1955. Admitted to Texas Bar, 1979. Also admitted to practice

before U.S. Court of Appeals, Fifth Circuit; U.S. District Court, Northern, Eastern, Southern and

Western Districts of Texas. Preparatory education, University of Texas (B.A., with high honors,

1976); legal education, Baylor University (J.D., 1979); Fraternity: Phi Delta Phi. Associate Editor,

Baylor Law Review, 1977-1979. Member: State Bar of Texas; American Bar Association; Houston

Bar Association; Texas Association of Defense Counsel; Defense Research Institute; Texas Bar

Foundation. Lecturer and Author: Representing an Insurance Company at Trial and Overcoming Jury

Bias; State Bar of Texas Lecture Series: Spring, 1993; Summer, 1993; Spring, 1994; and Summer,

1994. Lecturer: Insurance Concerns; Houston Claims Association; 1992 and 1993. Lecturer:

Conducting Depositions; Houston Association of Independent Insurance Agents; 1994 and 2000.

Lecturer: Disputes Among Insurance Carriers; University of Houston Law Center and Advanced

Personal Injury Seminar or Advanced Insurance Seminar: Summer, 1996; Summer, 1997; Summer,

1998; Summer, 1999; Summer, 2000 and Spring, 2001. Lecturer and Author: Appraisal and

Arbitration; Texas Insurance Law Symposium at South Texas Law School; Fall, 1997. Lecturer and

Author: Overview of Agents' and Brokers' Errors and Omissions Liability; Houston Association of

Independent Insurance Agents; Summer, 1998 and Fall, 1998; Texas Insurance Law Symposium;

Summer, 1998 and 1999. Lecturer: Recent Trends in Employment Law; Association of Hospital

Human Resource Managers, 1998. Director and Participant. Mock Trials: Houston Association of

Independent Insurance Agents, 1994 and 1997; Tarrant County Association of Independent Insurance

Agents, 1994; Houston Claims Association, 1994; Association of Human Resource Managers, 1996

and 1998. AV Rated by Martindale-Hubbell Law Directory. Texas Super Lawyer in 2006, 2007, as

named by Texas Monthly Magazine in insurance coverage area; Top Lawyer as named by H

Magazine, 2008, 2009. 8

Practices:

•Insurance Law

•Litigation

Awards:

•AV Rated by Martindale- Hubbell Law Directory

•Texas Super Lawyer in insurance coverage area, 2006-2007

Bars & Courts:

•Texas Bar, 1979

•U.S. Court of Appeals, Fifth Circuit, Eleventh Circuit

•U.S. District Court Northern, Eastern, Southern and Western Districts of Texas

Education:

•B.A., with high honors, University of Texas, 1976

•J.D., Baylor University, 1979, Baylor Law Review

Professional Associations:

•American Bar Association

•Houston Bar Association

•TexasAssociationofDefenseCounsel

•Defense Research Institute

•Texas Bar Foundation

9

POLICYHOLDER’ S DUTY TO COOPERATE: DOES IT HAVE LIMITS AND WHAT IS THE EFFECT?

I. DUTY OF THE INSURE R TO DEFEND AN D RIGHT TO CONTROL THE DEFENSE

A. General Provisions

1. Duty to defend of the insurer is built in to the boilerplate insuring agreement in

most policies.

2. Question arises with respect to right to control the defense.

3. Most policies do provide insurer the rig ht to control the defense.

4. Exceptions:

a. Conflict between the insurer and the insured;

b. Nature of conflict and requirements with respect to same;

c. Different interpretation in different states. 5. T ermination of the Defense

a. Policy dri ven; 10

b. Coverage driven ;

c. Court driven .

B. Policy Defenses 1. Voluntary Payments.

a. Is there a prejudice requirement?

b. Consent to settle clause; c. Policy differences (i.e., UM coverages);

d. Policy provision: part of insuring agreement or exclusion?

e. Definitions of “voluntary.”

2. Fail ure to Cooperate: Can it Bar Coverage?

a. Duty to cooperate with the insurer with respect to the investigation of the claim;

b. Limitations on cooperation and whether it will provide a valid defense to

coverage; 11

c. Alleged lack of cooperation with respect to th e defense; d. Alleged lack of cooperation with respect to settlement: Is the insured in

favor of settlement or opposed to settlement?

1. Does it matter? 2. If so, what are the pressure points for both the insurer and

policyholder?

3. Likely relates to consent to settle clause, regardless of how framed in the policy.

4. Case law varies.

3. Failure to Provide Notice: Will it Bar Coverage?

a. Is prejudice required?

b. Does the type of policy matter?

c. If prejudice is required, what level of prejudice?

d. The test for prejudic e. 12

e. Can prejudice be waived?

f. Case law varies.

g. Can notice be waived by insurer?

4. Can the policyholder be considered uncooperative if there is an alleged misrepresentation in the application which also constitutes a breach of warranty in the insuring agree ment?

a. Some states look with disfavor on forfeiture because of breach of

warranty.

b. Some states will define the policy differently if the alleged misrepresentation constitutes a breach of warranty as opposed to just a misrepresentation in the application.

c. May also give rise to an exclusion.

1. The “new or could have reasonably foreseen” offense: essentially same as to whether policy - holder had knowledge of an alleged wrongful act or could reasonably anticipate a claim would be made. (a) What is the test?

(b) Matte r of law or fact issue? 13

II. EXAMPLES OF POLICY PROVISIONS A. Insuring Agreement.

1. Obligations placed on policyholder to cooperate.

a. Investigation. b. Providing notice with respect to the claim or suit.

c. Selection of defense counsel.

d. Possible settlement.

e. Questi ons of reasonableness on the part of policyholder.

f. Questions of reasonableness on the part of the insurer.

B. Exclusions.

1. Prior knowledge of the incident and failure to disclose. 2. Claim or incident of which the policyholder had knowledge or could have

reas onably foreseen. 14

3. Conditions precedent: does it matter?

4. Alleged breach of contract by policyholder: materiality? C. Consent to Settle: which party has the consent and does it matter?

1. Possible reimbursement if policyholder settles without insurer’s consen t.

2. Waiver agreement v s . reservations of rights: does it matter ?

15

III. EXAMPLES OF PREJUDICE A. Requirements of S ubstantial P rejudice.

1. Adopted by most states today. 2. Can vary depending upon whether notice provision or consent to settle

provision.

3. Can vary de pending upon whether part of the insuring agreement or exclusion or condition precedent.

4. Can vary depending upon the type of policy.

5. Can vary depending upon public policy exceptions.

B. How F ar will the Court G o?

C. Principles of E stoppel and W aiver. D. Unique Provisions as Outlined in S ome C ase L aw.

16

IV. CONCLUSION A. Groundswell, E merging T rends, or B usiness as U sual?

B. Will P olicy F orms C hange? C. Will M ajor Events D rive the D iscussion?

17

SAMPLE PROVISIONS IN POLICIES

18

Sample Provisions in Policies

SECTION V-PROFESSIONAL LIABILITY CONDITIONS . . .

2. Duties In The Event Of A “Wrongful Act,” “Claim” Or “Suit”

a. You must see to it that we are notified as soon as practicable of a

“wrongful act” that may result in a “claim”. To the extent possible, notice must

include:

(1) How, when and where the “wrongful act” took place;

(2) The names and addresses of any injured persons and witnesses; and

(3) The nature and location of any injury or damage arising out of the

“wrongful act.”

19

Notice to us of a “wrongful act” is notice of “claim”.

b. If a “claim” is received by any insured, you must:

(1) Immediately record the specifics of the “claim” and the date received;

and

(2) Notify us in writing as soon as practicable, but within the “policy period”

or any applicable Extended Reporting Period.

c. You and any other involved insured must:

(1) Immediately send us copies of any demands, notices, summonses or

legal papers received in connection with a “claim” or “suit”;

(2) Authorize us to obtain records and other information;

(3) Cooperate with us in the investigation, settlement or defense of the

“claim” or “suit”; and 20

(4) Assist us, upon our request, in the enforcement of any right against any

person or organization that may be liable to the insured because of injury or

damage to which this insurance may also apply.

d. No insureds will, except at their own cost, voluntarily make a payment,

assume any obligation, or incur any expense without our consent.

. . .

arises from a series of a related Professional Health Care Services, such

Professional Liability Incident will be deemed to have happened at the time of the

first act, error or omission in respect of which the Insured may be legally

obligated to pay Damages.

25. Professional Health Care Services means services in the treatment or

care of any person by an Insured in the practice of the Named Insured’s

profession as stated in the Declarations, including but not limited to:

A. the furnishing of medical, surgical, dental, nursing or other health care

services; therapy services; furnishing or dispensing of drugs, blood products, or

medical, surgical, dental or psychiatric supplies, equipment or appliances in

connection with such services; the providing of counseling or other social

services in connection with such care; 21

i. Immediately record the specifics of the “claim” and the date received;

and

ii. Notify us in writing of the “claim” as soon as practicable.

c. You and any other involved insured must:

i. Immediately send us copies of any demands, notices, summonses, or

legal papers received in connection with the “claim” or suit;

…

iii. Cooperate with us in the investigation, settlement, or defense of the

“claim” or suit; and

…

d. No insured will, except at that insured’s own cost, voluntarily make a

payment, assume any obligation, or incur any expense without our consent. 22

SECTION II. EXCLUSIONS

A. Exclusions Applicable to BOTH Insuring Agreements A. and B.

We will not defend any “Claim” or pay any “Damages” based upon, arising out of,

directly or indirectly relating to or in any way involving:

1. Any “Medical Incident”, “Event” or offense committed prior to the

effective date of this Policy if:

(i) Such “Medical Incident”, “Event” or offense was the subject of a notice

under any prior insurance policy or any prior or pending litigation; or

(ii) At the effective date of this Policy you knew or could have reasonably

foreseen that such “Medical Incident”, “Event” or offense might reasonably be

expected to be the basis of a “Claim”.

. . .

23

B. CLAIMS MADE PROVISION

This insurance applies to a wrongful act only if all of the following

conditions are satisfied:

1. the wrongful act took place on or after the Retroactive Date;

2. prior to the inception date of this policy period no Insured had

knowledge of such wrongful act and had no basis to reasonably anticipate a

claim that would be made. For purposes of this provision, prior knowledge

of a wrongful act includes, but is not limited to, any prior claim or possible

claim or circumstance referenced in your application;

3. the claim arising out of the wrongful act is first made against any

Insured during the policy period; and

4. the claim is reported in writing to us no later than 60 days after

the end of the policy period or,

24

insurance in the payment of judgments or settlements.

No other obligation or liability to pay sums or perform acts or services is

covered unless explicitly provided for under SECTION II-“Claims” Expenses

and Defense Costs.

2. Exclusions

This insurance does not apply to:

. . .

s. Any “claim”, “suit” or “wrongful act” that might

result in a “claim” or “suit”, of which any insured had knowledge or could

have reasonably foreseen, at the signing date of the application for this

insurance.

25

TEXAS LAW ON NOTICE/CONSENT TO SETTLE - CASES

26

In the context of an underinsured motorist claim, there may be instances when an insured's settlement

without the insurer's consent prevents the insurer from receiving the anticipated benefit from the insurance

contract; specifically, the settlement may extinguish a valuable subrogation right. Cf. Liberty Mut. Ins. Co.

v. Cruz, 1994 Tex. LEXIS 61 (Tex. 1994)(insured's failure to provide notice of suit prejudiced insurer as a

matter of law). 3 In other instances, however, the insurer may not be deprived of the contract's expected

benefit, because any extinguished subrogation right has no value. In the latter situation--where the insurer is

not prejudiced by the settlement--the insured's breach is not material. We conclude, therefore, that an

insurer who is not prejudiced by an insured's settlement may not deny coverage under an

uninsured/underinsured motorist policy that contains a settlement-without-consent clause. 4

3 Cruz involved an insurance policy provision that required the insured to provide notice of suit. In spite of this provision, the insurer in Cruz did not receive notice of suit

until 41 days after the entry of a $ 3.2 million default judgment. The insured's failure to comply with the notice provision prejudiced the insurer by denying its opportunity to

answer for the insured and litigate the merits of the suit or to appeal any adverse judgment.

4 Most other jurisdictions presented with this issue have likewise imposed a prejudice requirement, primarily on public policy grounds. See Thompson v. American States

Ins. Co., 687 F. Supp. 559, 564 (M.D. Ala. 1988); Shelter Mut. Ins. Co. v. Bough, 310 Ark. 21, 834 S.W.2d 637, 640 (Ark. 1992); Rafferty v. Progressive American Ins. Co.,

558 So. 2d 432, 433 (Fla. App. 1990); Marsh v. Prestige Ins. Group, 58 Ill. App. 3d 894, 374 N.E.2d 1268, 1270, 16 Ill. Dec. 390 (Ill. App. 1978); Kapadia v. Preferred Risk

Mut. Ins. Co., 418 N.W.2d 848, 852 (Iowa 1988); MacInnis v. Aetna Life & Casualty Co., 403 Mass. 220, 526 N.E.2d 1255, 1257-58 (Mass. 1988); Silvers v. Horace Mann

Ins. Co., 324 N.C. 289, 378 S.E.2d 21, 27 (N.C. 1989); Wheeler v. Nationwide Mut. Ins. Co., 749 F. Supp. 660, 663 (E.D. Penn. 1990). But see Stevens v. Merchants Mut.

Ins. Co., 135 N.H. 26, 599 A.2d 490 (N.H. 1991)(enforcement of settlement-without-consent term did not depend upon showing of prejudice to insurer). Cf. Newark Ins. Co.

v. Ezell, 520 S.W.2d 318 (Ky. Ct. App. 1975)(showing of prejudice required in order for insurer to invoke a "consent to sue" clause as a basis for denying uninsured

motorist benefits); Bazinet v. Concord Gen. Mut. Ins. Co., 513 A.2d 279 (Me. 1986)(stating that when an insurer's subrogation rights are unaffected by a settlement, courts

may not permit settlement-without-consent clauses to defeat the claims of the insured); Tegtmeyer v. Snellen, 791 S.W.2d 737, 740 (Mo. App. 1990)(insurer who refused to

consent to a settlement for the full limits of a tortfeasor's liability policy was not prejudiced and therefore could not escape liability under a settlement-without-consent

exclusion); Thiringer v. American Motors Ins. Co., 91 Wash. 2d 215, 588 P.2d 191, 193 (Wash. 1978)(showing of prejudice required in order for insurer to deny personal

injury protection coverage on the basis that an insured's settlement failed to comply with a subrogation provision).

Because the stipulated facts establish as a matter of law that Gulf was not prejudiced by the

Hernandezes’ settlement with McCullough, Gulf may not escape liability by invoking the settlement-

without-consent exclusion.

Hernandez v. Gulf Group Lloyds

875 S.W.2d 691

27

Attempts by insurer coverage counsel to distinguish the Hernandez decision requiring

prejudice on the consent to settle provision if such constituted an actual policy

requirement, as opposed to timely notice of a claim, was soundly rejected by Texas

Supreme Court in Lennar Corp. v. Markel American Ins. Co., 413 S.W.3d 750 (Tex. 2013)

[referred to as Lennar II].

28

Lennar Corp. v. Markel Am. Ins. Co.,

413 S.W.3d 750

As noted above, Condition E of Markel's policy forbade Lennar, "except at [its] own

cost, [from] voluntarily mak[ing] any payment, assuming] any obligation, or

incurring] any expense. . . without [Markel's] consent". Though Markel did not

consent to Lennar's settlements with homeowners, it concedes, as Lennar I held,22

that this provision does not excuse its liability under the policy unless it was

prejudiced by the settlements. Lennar I relied on our decision in Hernandez v. Gulf

Group Lloyds.23

29

In this Court, Markel nevertheless asserts that it established prejudice as a matter

of law. It argues in its brief:

When an insurer is not asked to adjust a claim, provide a defense, or be involved

in negotiating [**15] a settlement, but is simply told it has to pay for a voluntary

payment, [*756] the insurer has suffered prejudice as a matter of law. That

prejudice is even more stark in this case, in which the insured actively solicited

claims which might otherwise never have been brought and made payments

which were not covered under the Policy.32Under Hernandez, an insurer

establishes prejudice from a settlement to which it did not agree by showing that

the insured's unilateral settlement was a material breach of the policy — that is,

that it significantly impaired the insurer's position. Markel's argument boils down

to this — had Lennar stonewalled the homeowners, fewer repairs would have

been made. On this record, that is a question of fact, not of law, which the jury

resolved in Lennar's favor.

But Condition E's consent-to-settlement requirement also finds expression in the

policy's Insuring Agreement, and Markel argues that it can insist on compliance

with this separate provision without proving prejudice. 30

Assuming Markel is right, that an insurer need not show prejudice from an insured’s

failure to comply with a policy requirement that is “considered essential to coverage” ,

the Loss Establishment Provision does not qualify, certainly not for the reasons Markel

argues. Its language is no clearer than Condition E’s, and the purpose of the two

provisions, precluding liability for the insured’s voluntary [**17] payments without the

insurer’s consent, is exactly the same. The Loss Establishment Provision is no more

central to the policy than Condition E, and the requirement that Markel show prejudice

from Lennar’s non-compliance with either operates identically. Markel failed to prove

that it was prejudiced in any way by Lennar cannot use those non-prejudicial

settlements

Settlements to establish the amount of its loss would plainly subvert the requirement

that Markel show that Lennar’s non-compliance was material. The jury’s failure to find

prejudice leaves but one conclusion: that Lennar’s loss as shown by the settlements is

the amount Markel is obligated to pay under the policy.

[*757] Absent prejudice to Markel, Lennar’s settlements with homeowners establish

both its legal liability for the property damages and the basis for determining the

amount of loss.

37

34

35

36

31

CONCURRENCE IN LENNAR II

Similarly, as in this case, we have repeatedly inserted into insurance contracts a

requirement that insurers must suffer harm or prejudice before they can deny coverage

based on certain provisions, even though the policies' unambiguous language would

have permitted the insurers to deny coverage without showing prejudice.

The Court essentially holds that it does not matter where in the policy a settlement-

without-consent provision is located, and it does not matter whether it is expressed as a

condition precedent, a covenant, an exclusion to coverage, or a definition of the scope of

coverage.

I would instead expressly hold that, as a matter of public policy, a prompt-notice,

prompt-service, or settlement-without-consent provision will negate coverage only if the

lack of prompt notice, prompt service, or consent causes harm or prejudice to the insurer.

32

East Texas Medical Center v. Lexington Ins. Co., 575 F.3d 520 At the end of the policy period, the loss run remained the only notice given to Lexington. In January 2004, very soon after the depositions but about seven months after both the lawsuit was filed and the policy period expired, the Medical Center first gave written notice of the Cornelius lawsuit to Lexington. It asserted that there was insufficient evidence to support the jury findings on any of the claims. The district court granted the motion, rendering judgment in favor of Lexington and against the Medical Center on all claims. The Medical Center's interpretation of the use of the word "or" is unreasonable. We cite Cutaia not for its discussion of prejudice, which has been superceded by subsequent developments in Texas insurance law. Rather, the case illustrates that requiring notice of the filing of suit even when an insurer has actual notice of the underlying incident is by no means an unprecedented or inexplicable requirement in an insurance contract.

33

EVOLUTION OF PRODIGY AND FINANCIAL INDUSTRIES/XL SPECIALTY

Prodigy Communications Corp. v. Agric. Excess; Surplus Ins. Co., 288 S.W.3d 374 (Tex. 2009), involved a claims made policy, where the insured was required to give written notice of the claim to the insurer as soon as practicable. There was a temporal provision as well, namely requiring claim notice no later than 90 days. Admission by the insurer that the claim was reported within 90 days, but contention not, “as soon as practicable.” Texas Supreme Court in Prodigy noted the distinction between “as soon as practicable” and “in no event later than 90 days” requirement as to its decision that the claim could not be denied under the facts.

34

Prodigy Communs. Corp. v. Agric. Excess & Surplus Ins. Co., 288 S.W.3d 374

“Today, we decide whether PAJ's notice-prejudice rule applies to a claims-made policy when the notice provision requires that the insured, "as a condition precedent" to its rights under the policy, give notice of a claim to its insurer "as soon as practicable . . ., but in no event later than ninety (90) days after the expiration of the Policy Period or Discovery Period." The parties dispute whether notice of the claim was given "as soon as practicable" [**3] but agree that the insured gave notice within the ninety-day cutoff period. The insurer also admits that it was not prejudiced by the delayed notice.

For the reasons explained below, we conclude that "notice as soon as practicable" was not an essential part of the bargained-for exchange under the claims-made policy at issue here. Following PAJ, we hold that, in the absence of prejudice to the insurer, the insured's alleged failure to comply with the provision does not defeat coverage.

We [**9] must decide whether, under a claims-made policy, an insurer can deny coverage based on its insured's alleged failure to comply with a policy provision requiring that notice of a claim be given "as soon as practicable," when (1) notice of the claim was provided before the reporting deadline specified in the policy; and (2) the insurer was not prejudiced by the delay.

First, unlike the PAJ policy, this one states unambiguously that the insured's duty to give "notice, in writing, as soon as practicable" is a "condition precedent" to coverage. Importantly however, our holding in PAJ did not rest on the distinction between conditions and covenants. 35

In PAJ, we recognized a "critical distinction" between the role of notice in claims-

made policies and the role of notice in occurrence policies and concluded that timely

notice was not an essential part of the bargained-for exchange in PAJ's occurrence-

based policy. 243 S.W.3d at 636. In reaching this conclusion, we were persuaded by

the Fifth Circuit's explanation that "'[i]n the case of an "occurrence" policy, any

notice requirement [**12] is subsidiary to the event that triggers coverage.'" Id.

(quoting Matador Petroleum Corp. v. St. Paul Surplus Lines Ins. Co., 174 F.3d 653,

658 (5th Cir. 1999)).

In a claims-made policy, the requirement that notice be given to the insurer "as soon

as practicable" serves to "maximiz[e] the insurer's opportunity to investigate, set

reserves, and control or participate in negotiations with the third party asserting the

claim against the insured." By contrast, the requirement that the claim be made

during the policy period "is directed to the temporal boundaries of the policy's basic

coverage terms . . . . [This type [**18] of notice] is not simply part of the insured's

duty to cooperate, but defines the limits of the insurer's obligation, and if there is no

timely notice, there is no coverage." Similarly, a notice provision requiring that a

claim be reported to the insurer during the policy period or within a specific number

of days thereafter "define[s] the scope of coverage by providing a certain date after

which an insurer knows it is no longer liable under the policy."

36

The role of notice in claims-made policies has been described as follows: Claims made or discovery policies are essentially reporting policies. If the [*381] claim is reported to the insurer during the policy period, then the carrier is legally obligated to pay; if the claim is not reported during the policy period, no liability attaches. Claims made policies require notification to the insurer to be within a reasonable time. Critically, however, claims made policies require that that notice be given during the policy period itself. In a claims-made policy, when an insured gives notice of a claim within the policy period or other specified reporting [**24] period, the insurer must show that the insured's noncompliance with the policy's "as soon as practicable" notice provision prejudiced the insurer before it may deny coverage. Accordingly, we conclude that Prodigy's obligation to provide AESIC with notice of [**25] a claim "as soon as practicable" was not a material part of the bargained-for exchange under this claims-made policy. See Hernandez, 875 S. W.2d at 693. In a claims-made policy, when an insured notifies its insurer of a claim within the policy term or other reporting period that the policy specifies, the insured's failure to provide notice "as soon as practicable" will not defeat coverage in the [*383] absence of prejudice to the insurer.”

37

Financial Indus. Corp. v. XL Specialty Ins. Co., 285 S.W.3d 877 (Tex. 2009) was a claims made policy that contained a condition precedent to coverage that the insured give the insurer written notice of any claim “as soon as practicable.” No temporal deadline. Was a claims made policy, but not a “claims made and reported policy.” Texas Supreme Court in XL Specialty required a showing of prejudice by the insurer to allow denial of coverage, regardless of the “claims made” nature of the policy, where notice was indeed given within the policy period. Fin. Indus. Corp. v. XL Specialty Ins. Co., 285 S.W.3d 877 “This case comes before us on a certified question from the United States Court of Appeals for the Fifth Circuit. XL's claims-made policy differs slightly from the Prodigy policy in that XL's policy requires only that notice of a claim be given "as soon as practicable" and does not contain a clear-cut reporting deadline. See id. at 379 n.7 (discussing difference between standard "claims-made" and "claims-made-and-reported" policies).

38

For the reasons stated above and explained more fully in Prodigy

Communications Corp. v. Agricultural Excess & Surplus Insurance Co., 288

S.W.3d 374, we answer the certified question in the affirmative and hold that an

insurer must show prejudice to deny payment on a claims-made policy, when

the denial is based upon the insured's breach of the policy's prompt-notice

provision, but the notice is given within the policy's coverage period.”

39

Claims Made and Reported Policies; Distinction? Argument can be made that even under PAJ, Prodigy, and XL Specialty,

prejudice is not required for “claims made and reported” policy if there is a temporal

requirement with respect to the giving of notice, and it has not been met.

40

However, see concurrence in Lennar II, essentially stating that

despite a “bright line” distinction between a condition precedent and insuring

agreement language requiring consent to settle, that all insurance policies

should be subject to a prejudice requirement as to notice provisions, consent

provisions, cooperation clauses, and any other portion of the policy, regardless

of the type of policy.

41

DUTY TO DEFEND/CONFLICT

-TEXAS CASES

42

NORTHERN COUNTY MUTUAL INSURANCE CO.

v.

TIMOTEO DAVALOS

SUPREME COURT OF TEXAS

140 S.W.3d 685

The automobile liability policy in this case obligated the insurer to provide a defense for

covered claims and granted the insurer the right to conduct that defense. The insured, however,

refused the insurer’s tendered defense because of a disagreement about where the case should be

defended. The issue we must decide is whether a disagreement over venue is a sufficient reason

for the insurer to lose its right to conduct the defense, while still remaining obligated to pay for it.

We conclude that this venue impasse was not a sufficient reason to take the contractual right to

conduct the defense away from the insurer.

Every disagreement about how the defense should be conducted cannot amount to a conflict of

interest within Traver’s meaning. If it did, the insured, not the insurer, could control the defense

by merely disagreeing with the insurer’s proposed actions. This is not at all what we

contemplated in Traver.

43

Who Picks Counsel: Firm or Insurer?by BRENDA SAPINO JEFFREYS

[email protected] @BrendaSJeffreys

O'Donnell, Ferebee, Medley & Frazer of Houston wants to select the lawyer who will defend the firm from some malpractice counterclaims instead of using a defense attorney picked by its liability insurer.

In a petition filed April 3 in the 269th District Court in Harris County, O'Donnell Ferebee seeks a declaratory judgment that it has a conflict of interest with Travelers Casualty and Surety Co. of America that would prevent Travelers from selecting the defense counsel.

"Therefore, defendant has the duty

to defend O'Donnell Ferebee and the law firm can choose the counsel to rep-resent it and that defense will be paid for by defendant," O'Donnell Ferebee alleges in O'Donnell, Ferebee, Medley & Frazer PC v. Travelers Casualty and Surety Co. of America.

John Schutza, the Travelers claim counsel handling the O'Donnell Ferebee claim, did not return a telephone mes-sage left at his office in Richardson or respond to an emailed request for comment.

O'Donnell Ferebee alleges in the petition that it filed a lawsuit in 2012 against former clients for attorney fees "owing from the trial of a case." The defendants in that fee collection suit

filed counterclaims alleging malpractice "under a variety of theories."

In the underlying case, O'Donnell Ferebee filed a motion seeking a no-evi-dence summary judgment in response to the counterclaims.

O'Donnell Ferebee alleges that Travelers notified it by letter on Feb. 7 that it would provide the firm with a defense but reserved the right to limit coverage and stated there may be no coverage for "damages for civil or crimi-nal fines; sanctions; liquidated damages; payroll or other taxes; penalties; the multiplied portion of any multiplied damages award; equitable or injunction relief; any return, withdrawal, restitu-tion or reduction of professional fees, profits or other charges; or damages or types of relief deemed uninsurable under applicable law."

"The letter then sought to control the defense of the claim by assigning the defense to a law firm chosen by defendant," O'Donnell Ferebee alleges in the petition.

O'Donnell Ferebee alleges that a conflict of interest prevents Travelers from "conducting the defense" in the

underlying litigation because it selected defense counsel and because the facts to be adjudicated in the underlying liti-gation are the same as the facts upon which the defendant will determine coverage.

O'Donnell Ferebee requests that the court declare that Travelers has a con-flict of interest in the underlying case, and the firm can employ its own inde-pendent counsel for the counterclaim, and Travelers should pay reasonable attorney fees for the defense.

The firm also seeks up to $75,000 for costs and attorney fees for the declara-tory judgment action.

John Venzke, who represents O'Donnell Ferebee in the declaratory judgment suit, said O'Donnell Ferebee would like to use the lawyer repre-senting it in the underlying litiga-tion to defend it from the malpractice counterclaims.

Venzke, of the Venzke Law Firm of Houston, said O'Donnell Ferebee filed the declaratory judgment action to get attention from Travelers.

"We are trying to force the issue and to get the lawyer we've got," Venzke said.

O'Donnell Ferebee seeks a declaratory judgment that it has a conflict of interest with Travelers Casualty and Surety Co. of America that would prevent Travelers from selecting the defense counsel.

Texas Lawyer April 14, 2014

44

CALIFORNIA RULE

– CUMIS COUNSEL

45

SAN DIEGO FEDERAL CREDIT UNIION

v.

CUMIS INS. SOCIETY, INC.

162 Cal. App. 3D 358, 208

Cal. Rptr. 494 (Cal. 1984)

Where the insurer defends under a reservation of rights which creates an actual conflict of

interest between the insurer and insured, the insurer is obligated to furnish independent counsel to

represent its insured.

46

CAL. CIV. CODE

§ 2860. Conflict of interest; duty to provide independent counsel; waiver;

qualifications of independent counsel; fees; disclosure of information

(a) If the provisions of a policy of insurance impose a duty to defend upon an

insurer and a conflict of interest arises which creates a duty on the part of the

insurer to provide independent counsel to the insured, the insurer shall provide

independent counsel to represent the insured unless, at the time the insured is

informed that a possible conflict may arise or does exist, the insured expressly

waives, in writing, the right to independent counsel. An insurance contract may

contain a provision which sets forth the method of selecting that counsel

consistent with this section.

(b) For purposes of this section, a conflict of interest does not exist as to allegations

or facts in the litigation for which the insurer denies coverage; however, when an

insurer reserves its rights on a given issue and the outcome of that coverage

issue can be controlled by counsel first retained by the insurer for the defense of

the claim, a conflict of interest may exist. No conflict of interest shall be deemed

to exist as to allegations of punitive damages or be deemed to exist solely

because an insured is sued for an amount in excess of the insurance policy limits.

47

(c) When the insured has selected independent counsel to represent him or her, the

insurer may exercise its right to require that the counsel selected by the insured

possess certain minimum qualifications which may include that the selected

counsel have (1) at least five years of civil litigation practice which includes

substantial defense experience in the subject at issue in the litigation, and (2) errors

and omissions coverage. The insurer's obligation to pay fees to the independent

counsel selected by the insured is limited to the rates which are actually paid by the

insurer to attorneys retained by it in the ordinary course of business in the defense

of similar actions in the community where the claim arose or is being defended.

This subdivision does not invalidate other different or additional policy provisions

pertaining to attorney's fees or providing for methods of settlement of disputes

concerning those fees. Any dispute concerning attorney's fees not resolved by these

methods shall be resolved by final and binding arbitration by a single neutral

arbitrator selected by the parties to the dispute.

(d) When independent counsel has been selected by the insured, it shall be the duty of

that counsel and the insured to disclose to the insurer all information concerning

the action except privileged materials relevant to coverage disputes, and timely to

inform and consult with the insurer on all matters relating to the action. Any claim

of privilege asserted is subject to in camera review in the appropriate law and

motion department of the superior court. Any information disclosed by the insured

or by independent counsel is not a waiver of the privilege as to any other party. 48

(e) The insured may waive its right to select independent counsel by signing the

following statement: "I have been advised and informed of my right to select

independent counsel to represent me in this lawsuit. I have considered this matter

fully and freely waive my right to select independent counsel at this time. I

authorize my insurer to select a defense attorney to represent me in this lawsuit."

(f) Where the insured selects independent counsel pursuant to the provisions of this

section, both the counsel provided by the insurer and independent counsel

selected by the insured shall be allowed to participate in all aspects of the

litigation. Counsel shall cooperate fully in the exchange of information that is

consistent with each counsel's ethical and legal obligation to the insured. Nothing

in this section shall relieve the insured of his or her duty to cooperate with the

insurer under the terms of the insurance contract. Cal. Civ. Code § 2860

49

INSURED CONSENTING TO SETTLEMENT/

NO REIMBURSEMENT RIGHT

FOR INSURER

50

EXCESS UNDERWRITERS AT LLOYD’S, LONDON AND CERTAIN COMAPANIES

SUBSCRIBING SEVERALLY BUT NOT JOINTLY TO POLICY NO. 548/TA4011F01

v.

FRANK’S CASING CREW & RENTAL TOOLS, INC.

SUPREME COURT OF TEXAS

246 S.W.3d 42; 2008

In this case, which involves excess coverage, the insured consented to the settlement but not to

the excess insurer’s asserted reimbursement right. We must decide whether to recognize an

exception to the rule in Matagorda County and imply a reimbursement obligation when the policy

involves excess coverage, the insurer has no duty to defend under the policy, and the insured

acknowledges that the claimant’s settlement offer is reasonable and demands that the insurer

accept it. Because none of these distinctions alleviates the concerns that drove the Court’s

analysis in Matagorda County, we decline to recognize such and exception.

51

TEXAS CASE EXCERPTS

52

American Physicians Ins. Exchange v. Garcia, 876 S.W.2d 842

To decide this case we need not determine how many policies provided Garcia indemnity coverage. The consecutive

policies, covering distinct policy periods, could not be "stacked" to multiply coverage for a single claim involving

indivisible injury. Even assuming that Garcia was covered under all three "occurrence" policies, APIE's Stowers duty to

settle was never triggered.

Simply because a "Claim Occurrence" 21 extends throughout several policy [*854] periods does not raise the per-

occurrence indemnity cap established in every policy. 22 Even the jurisdiction embracing the broadest coverage trigger rule

has held that multiple coverage does not permit an insured to "stack" the limits of multiple policies that do not overlap:

21. "Each Claim Occurrence," a term of art defined in the APIE policy, appears to be an adaptation of "occurrence,"

a term of art from standard-form commercial liability policies, to the unique characteristics of medical malpractice

risks and to other language in the APIE policy. "Occurrence" is typically defined in the following manner:

An accident, including continuous or repeated exposure to substantially the same general conditions,

which results in bodily injury or property damage that is neither expected nor intended from the

standpoint of the insured. Continuous or repeated exposure to substantially the same general conditions

shall be considered as arising out of one occurrence.

In contrast, "Each Claim Occurrence" means "each act or occurrence or series of acts or occurrences arising out

of one event." APIE POLICY § II.C. The APIE policy language that defines the scope of "Each Claim Occurrence"

to include "[a] series of acts or occurrences," is apparently intended to have a coverage effect similar to the

"continuous or repeated exposure" unifying directive in commercial liability policies -- but in a manner that is

meaningful in the medical context. For example, medical malpractice frequently involves an operation or an

extended course of treatment. A malpractice event may involve numerous independent grounds of negligence that

cannot be unified as "repeated exposure to substantially the same conditions," but that nevertheless constitute "a

series of acts or occurrences" that are related and form a single malpractice claim.

53

Although the triggering of multiple policies would provide multiple funding sources and thereby have a considerable

effect on any contribution claims between ICA and APIE, it cannot lead to the conclusion that Garcia's total coverage for

a "continuing" Claim Occurrence somehow exceeds the "Per Claim Occurrence" limit stated in every policy he

purchased.

If a single occurrence triggers more than one policy, covering different policy periods, then different limits may have

applied at different times. In such a case, the insured's indemnity limit should be whatever limit applied at the single

point in time during the coverage periods of the triggered policies when the insured's limit was highest. The insured is

generally in the best position to identify the policy or policies 24 that would maximize coverage. Once the applicable limit

is identified, all insurers whose policies are triggered must allocate funding of the indemnity limit among themselves

according to their subrogation rights.

Downhole Navigator, LLC v. Nautilus Ins. Co., 686 F.3d 325

The insured argued a reservation of rights created a conflict of interest, that the facts to be adjudicated in the operator's

suit were the same facts upon which coverage depended. But the operator's suit concerned whether the insured

negligently performed its work. Although the policy excluded coverage for testing or consulting services, the operator's

suit would not decide if the insured was testing or consulting. Other issues — whether "professional" or "data processing"

services were provided, or whether damage from the work should have been expected — could have been critical

coverage issues, but were irrelevant to whether the insured acted negligently. The Texas Supreme Court had never held

that a conflict arose any time an attorney offered by an insurer could be tempted — in violation of his duty of loyalty to

the insured — to develop facts in the underlying lawsuit that could be used to exclude coverage. Because the facts to be

adjudicated in the operator's suit were not the same facts upon which coverage depended, the potential conflict did not

disqualify the attorney offered by the insurer. The insured was not entitled to reimbursement for the cost of independent

counsel.

It is also well-settled that an insurer's "right to conduct the defense includes the authority to select the attorney who will

defend the claim and to make other decisions that would normally be vested in the insured as the named party in the

case." N. Cnty. Mut. Ins. Co. v. Davalos, 140 S.W.3d 685, 688 (Tex. 2004). "Under

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certain circumstances, however, an insurer may not insist upon its contractual right to control the defense." Id. In

Davalos, the [**7] Texas Supreme Court noted one such circumstance:

In the typical coverage dispute, an insurer will issue a reservation of rights letter, which creates a potential

conflict of interest. And when the facts to be adjudicated in the liability lawsuit are the same facts upon

which coverage depends, the conflict of interest will prevent the insurer from conducting the defense.

Of course, the attorney hired by the insurer to represent the insured is duty-bound to defend the interests of the insured.

State Farm Mut. Auto. Ins. Co. v. Traver, 980 S.W.2d 625, 628 (Tex. 1998) ("[B]ecause the lawyer owes unqualified

loyalty to the insured, the lawyer must at all times protect the interests of the insured if those interests would be

compromised by the insurer's instructions."

East Texas Medical Center v. Lexington Ins. Co., 575 F.3d 520

At the end of the policy period, the loss run remained the only notice given to Lexington.

In January 2004, very soon after the depositions but about seven months after both the lawsuit was filed and the policy

period expired, the Medical Center first gave written notice of the Cornelius lawsuit to Lexington.

It asserted that there was insufficient evidence to support the jury findings on any of the claims. The district court granted

the motion, rendering judgment in favor of Lexington and against the Medical Center on all claims.

The Medical Center's interpretation of the use of the word "or" is unreasonable.

We cite Cutaia not for its discussion of prejudice, which has been superceded by subsequent developments in Texas

insurance law. Rather, the case illustrates that requiring notice of the filing of suit even when an insurer has actual notice

of the underlying incident is by no means an unprecedented or inexplicable requirement in an insurance contract.

This last point led the Prodigy court to articulate a distinction, though it may not be one directly relevant to this case's

outcome. A claims-made policy containing a 55




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requirement that claims must be reported to the insurer during a specified period is known as a "claims-made and reported"

policy. Id. In such a policy, a provision will require not only that a claim be made but also that it be reported to the insurer

within the specified time period. Both reports are "considered essential to coverage" such that "an insurer need not

demonstrate prejudice to deny coverage when an insured does not give notice within the policy's specified time frame." Id.

Because of our sustaining the jury's finding [*529] that loss runs could provide notice of claim, here there was such notice

within the policy period. After Prodigy, though, prejudice must be shown to use failure to give notice "as soon as

practicable" as a bar to recovery, even under [**19] the terms of a claims-made or claims-made and reported policy.

The policy in Prodigy was a claims-made and reported policy, but the insured complied with the 90-day time limitation in

that policy. It ran afoul only of the "as soon as practicable" requirement. Thus, the insurer was required to show it had been

prejudiced in order to deny coverage. See also PAJ, Inc. v. Hanover Ins. Co., 243 S.W.3d 630, 631 (Tex. 2008) (explaining

the "notice-prejudice" principle generally).

In the companion case, XL Specialty, the Supreme Court of Texas applied the same principle to a more traditional claims-

made policy. By that, we mean one without a "clear-cut reporting deadline" for the reporting of claims to the insurer, but

with an "as soon as practicable" requirement. 2009 Tex. LEXIS 109, 2009 WL 795529, at *1-2. The insured had failed to

report a claim as soon as practicable, but had done so before the expiration period of the policy. 2009 Tex. LEXIS 109, [WL]

at *2. The court held that, because notice had been received before the end of the policy period, "XL was not denied the

benefit of the claims-made nature of its policy," and could not deny coverage without showing prejudice. Id.

With this new law to guide them, both parties in the [**20] present case agree that the policy here is more like the one in XL

Specialty than that in Prodigy. The Lexington policy does not establish a particular number of days within which all claims

must be reported. Section V.A.1. of the policy provides for a 60-day "Optional Extended Reporting Period" added to the

expiration date of the policy if certain conditions are met, but under the facts of this case we need not address the import of

this provision.

Notice of suit does not need to be given within the coverage period or any other reporting time. That is because a

suit [*530] based on a claim that arose during the policy period might not be filed until long after the policy's end. As long as

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notice of the underlying claim had been timely given, coverage would exist under either a claims-made or [**22] claims-

made and reported policy. Once a claim has been timely reported, the insurer would be unable to obtain the bargained-for

benefit of closing its books until it had ascertained whether a suit would actually be filed. We find, then, that notice of suit

is an obligation that is subject to the need to show prejudice.

Even if the Medical Center ultimately prevails because Lexington was not prejudiced, "mere breach of contract, without

more, does not constitute a 'false, misleading, or deceptive act.'" Crawford v. Ace Sign, Inc., 917 S.W.2d 12, 14 (Tex. 1996)

(quoting [**28] Ashford Dev., Inc. v. USLife Real Estate Serv., 661 S.W.2d 933 (Tex. 1983)). The Medical Center did not

show either that the statement in the letter was false, or that the statement caused it any damage. The jury's verdict on this

point was unsustainable.

Evanston Ins v. Keeway American, 210 U.S. Dist LEXIS 66072

Because the subject policy does not require Keeway to report claims to Evanston within a specific number of days of the

making of the claim, or by the end of the policy period, the subject policy is a claims-made policy, rather than a "claims-

made and reported" policy. 15 If this were a claims-made and reported policy, Evanston would not need to show prejudice

resulting from Keeway's failure to provide notice within a specified time [*6] frame, 16 but Texas law is unsettled as to

whether or not an insurer must demonstrate prejudice from the failure of an insured to provide notice "as soon as

practicable," if notice is provided after the expiration of the policy period, and the policy does not expressly require earlier

notice.

In Precis, the Fifth Circuit, purporting to apply Texas law in a non-precedential opinion, held that an insurer need not

show prejudice from late notice, but the decision was based on policy language making timely notification a condition

precedent to coverage.

Considering these circumstances, this Court concludes that Evanston must show prejudice to deny coverage under the

policy.

Texas courts have "definitively and narrowly defined" what prejudice is sufficient.

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In St. Paul, another court in this district specifically and definitively defined the types of actionable prejudice:

(1) when the insurer, without notice or actual knowledge of suit, receives notice [*11] after entry of default

judgment against the insured; (2) when the insurer receives notice of the suit and the trial date is fast

approaching, thereby depriving it of an opportunity to investigate the claims or mount an adequate defense;

(3) when the insurer receives notice of a lawsuit after the case has proceeded to trial and judgment has been

entered against the insured; and (4) when the insurer receives notice of a default judgment against its insured

after the judgment has become final and nonappealable.

No actionable prejudice is present here.

Excess Underwriters at Lloyd’s, London v. Frank’s Casing, 246 S.W.3d 42

In this case, which involves excess coverage, the insured consented to the settlement but not to the excess insurer's

asserted reimbursement right. We must decide whether to recognize an exception to the rule in Matagorda County [**2]

and imply a reimbursement obligation when the policy involves excess coverage, the insurer has no duty to defend under

the policy, and the insured acknowledges that the claimant's settlement offer is reasonable and demands that the insurer

accept it. Because none of these distinctions alleviates the concerns that drove the Court's analysis in Matagorda County,

we [*44] decline to recognize such an exception.

Federal Ins. Co. v. COMPUSA, Inc., 319 F.3d 746

Federal issued the Policy to CompUSA, insuring it and its officers and directors against specified legal liabilities, for an

initial term of two years, beginning December 16, 1998 and ending December 16, 2000. The Policy covered "claims

made" during that two-year policy period, and contained a provision allowing CompUSA to extend the "reporting period"

(but not the coverage period) for any claims made within one year following the effective date of termination of the 58

Policy, but only as to claims based on acts committed during the policy term, i.e., prior to the effective date of

termination of the Policy.

The Insureds shall, as a condition precedent to exercising their rights under this coverage section, give to

[Federal] written notice as soon as practicable of any Claim made against any of them for a Wrongful

Act (emphasis added).

We speculate that CompUSA's decision not to furnish notice to Federal when COC's claims were made, and instead to

assume sole responsibility for the claims, was influenced, if not directly caused, by the fact that CompUSA, in full

awareness of its impending acquisition and the impending early termination of the policy, was negotiating for the six-

year reporting-period extension at the same time, and likely viewed the COC claims as a potential fly in the ointment.

Some things are too much of a coincident to be a coincident.

Fin. Indus. Corp. v. XL Specialty Ins. Co., 285 S.W.3d 877

This case comes before us on a certified question from the United States Court of Appeals for the Fifth Circuit.

XL's claims-made policy differs slightly from the Prodigy policy in that XL's policy requires only that notice of a claim

be given "as soon as practicable" and does not contain a clear-cut reporting deadline. See id. at 379 n.7 (discussing

difference between standard "claims-made" and "claims-made-and-reported" policies).

For the reasons stated above and explained more fully in Prodigy Communications Corp. v. Agricultural Excess &

Surplus Insurance Co., 288 S.W.3d 374, we answer the certified question in the affirmative and hold that an insurer must

show prejudice to deny payment on a claims-made policy, when the denial is based upon the insured's breach of the

policy's prompt-notice provision, but the notice is given within the policy's coverage period.

59





















Gouverne v. Care Risk Retention Group, Inc., 2008 U.S. Dist. LEXIS 38869

Generally, provisions in insurance contracts that turn on the truth or falsity of answers in an insurance application are

treated as representations because warranties which cause forfeiture are disfavored under Texas law. Allied Bankers Life

Ins. Co. v. De La Cerda, 584 S.W.2d 529, 532 (Tex. Civ. App.--Amarillo 1979, writ ref 'd n.r.e.) . However, a policy

provision that expressly provides that coverage does not exist unless the applicant's statements are true operates as a

warranty or condition precedent. Riner v. Allstate Life Ins. Co., 131 F.3d 530, 536-37 (5th Cir. 1997).

Hernandez v. Gulf Group Lloyds, 875 S.W.2d 691

In the context of an underinsured motorist claim, there may be instances when an insured's settlement without the

insurer's consent prevents the insurer from receiving the anticipated benefit from the insurance contract; specifically, the

settlement may extinguish a valuable subrogation right. Cf. Liberty Mut. Ins. Co. v. Cruz, 1994 Tex. LEXIS 61 (Tex.

1994)(insured's failure to provide notice of suit prejudiced insurer as a matter of law). 3 In other instances, however, the

insurer may not be deprived of the contract's expected benefit, because any extinguished subrogation right has no value.

In the latter situation--where the insurer is not prejudiced by the settlement--the insured's breach is not material. We

conclude, therefore, that an insurer who is not prejudiced by an insured's settlement may not deny coverage under an

uninsured/underinsured motorist policy that contains a settlement-without-consent clause. 4

Because the stipulated facts establish as a matter of law that Gulf was not prejudiced by the Hernandezes' settlement with

McCullough, Gulf may not escape liability by invoking the settlement-without-consent exclusion.

Hirsch v. Texas Lawyers’ Ins. Exchange, 808 S.W.2d 561

The major distinction between the "occurrence" policy and the "claims made" policy constitutes the difference between

the peril insured. In the "occurrence" policy, the peril insured is the "occurrence" itself. Once the "occurrence" takes

place, coverage attaches even though the claim may not be made for some time thereafter. While in the "claims made"

policy, it is the making of the claim which 60

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is the event and peril being insured and, subject to the policy language, regardless of when the occurrence took place.

[Emphases added].

Insurance contracts are subject to careful scrutiny to avoid injury to the public. However, we must look to the type of

contract bargained for. In Gulf Insurance Company v. Dolan, Fertig and Curtis, 433 So.2d 512 (Fla. 1983), the Supreme

Court aptly states:

Claims-made policies . . . require that notification to the insurer be within a reasonable time . . . claims-

made policies require that notice be given during the policy period itself. When an insured becomes aware

of any event that could result in liability, then it must [**11] give notice to the insurer, and that notice must

be given "within a reasonable time" or "as soon as practicable" -- at all times, however, during the policy

period. With claims-made policies, the very act of giving an extension of reporting time after the expiration

of the policy period . . . negates the inherent difference between the two contract types [referring to

occurrence and claims-made policies].

Claims made or discovery policies are reporting policies. If the (claim is reported to the insurer during the policy period,

then the carrier is legally obligated to pay; if the claim is not reported during the policy period, no liability attaches. If a

court would allow an extension of reporting time after the end of the policy period . . . in effect rewrites the contract

between the two parties. [Emphases added].

The policies, in the instant case, are unambiguous in stating that coverage is provided when claims are made and

reported during the policy period.

Lennar Corp. v. Markel Am. Ins. Co., 413 S.W.3d 750

As noted above, Condition E of Markel's policy forbade Lennar, "except at [its] own cost, [from] voluntarily mak[ing]

any payment, assuming] any obligation, or incurring] any expense. . . without [Markel's] consent". Though Markel did

not consent to Lennar's settlements with homeowners, it concedes, as Lennar I held,22 that this provision does not excuse

its liability under the policy unless it was prejudiced by the settlements. Lennar I relied on our decision in Hernandez v.

Gulf Group Lloyds.23

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In this Court, Markel nevertheless asserts that it established prejudice as a matter of law. It argues in its brief:

When an insurer is not asked to adjust a claim, provide a defense, or be involved in negotiating [**15] a

settlement, but is simply told it has to pay for a voluntary payment, [*756] the insurer has suffered prejudice

as a matter of law. That prejudice is even more stark in this case, in which the insured actively solicited claims

which might otherwise never have been brought and made payments which were not covered under the

Policy.32Under Hernandez, an insurer establishes prejudice from a settlement to which it did not agree by

showing that the insured's unilateral settlement was a material breach of the policy — that is, that it

significantly impaired the insurer's position. Markel's argument boils down to this — had Lennar stonewalled

the homeowners, fewer repairs would have been made. On this record, that is a question of fact, not of law,

which the jury resolved in Lennar's favor.

But Condition E's consent-to-settlement requirement also finds expression in the policy's Insuring Agreement, and Markel

argues that it can insist on compliance with this separate provision without proving prejudice.

Markel contends that these three ways for establishing a covered loss are exclusive, and we assume, without deciding,

that Markel is correct. Markel argues that this Loss Establishment Provision, unlike Condition E, is central to the policy

because of its "unmistakeable language" and its purpose in preventing insureds from determining loss unilaterally, and

therefore any breach is material. Lennar responds that the provision cannot operate differently than Condition E.

The Loss Establishment Provision is no more central to the policy than Condition E, and the requirement that Markel

show prejudice from Lennar's non-compliance with either operates identically. Markel failed to prove that it was

prejudiced in any way by Lennar's settlements. To allow it to argue that Lennar cannot use those non-prejudicial

settlements to establish the amount of its loss would plainly subvert the requirement that Markel show that Lennar's non-

compliance was material. The jury's failure to find prejudice leaves but one conclusion: that Lennar's loss as shown by the

settlements is the amount Markel is obligated to pay under the policy.35

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[*757] Absent prejudice to Markel, Lennar's settlements with homeowners establish both its legal liability36 for the

property damages and the basis for determining the amount of loss.37

Similarly, as in this case, we have repeatedly inserted into insurance contracts a requirement that insurers must suffer

harm or prejudice before they can deny coverage based on certain provisions, even though the policies' unambiguous

language would have permitted the insurers to deny coverage without showing prejudice.

The Court essentially holds that it does not matter where in the policy a settlement-without-consent provision is located,

and it does not matter whether it is expressed as a condition precedent, a covenant, an exclusion to coverage, or a

definition of the scope of coverage.

I would instead expressly hold that, as a matter of public policy, a prompt-notice, prompt-service, or settlement-without-

consent provision will negate coverage only if the lack of prompt notice, prompt service, or consent causes harm or

prejudice to the insurer.

Lexington Ins. Co. v. Buckingham Gate, Ltd., 993 S.W.2d 185

An insurer is generally liable for any misconduct by an agent that is within the actual or apparent scope of the agent's

authority. Celtic Life, 885 S.W.2d at 98. In determining a principal's vicarious liability, the proper inquiry is whether the

agent was acting within the scope of the agency relationship at the time of committing the act. Celtic Life, 885 S.W.2d at

99.

The Texas Insurance Code defines who is an agent. An insurer's agent is any [**33] person who: (1) solicits insurance on

behalf of an insurance company; (2) transmits an application or policy to or from an insurance company; (3) receives or

delivers a policy on behalf of an insurance company; (4) examines or inspects any risk; (5) receives, collects, or transmits

an insurance premium; or (6) adjusts a loss on behalf of an insurance company. TEX. INS. CODE ANN. art. 21.02

(Vernon Supp. 1998); Celtic Life, 885 S.W.2d at 98 n.3.

In Royal Globe the supreme court said: 63

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We are not to be understood as holding that the statutory authority granted an agent under Article 21.02

authorizes that agent to misrepresent policy coverage and bind the company to terms contrary to

those [**34] of the written policy; that question was decided by us in International Security Life Ins. Co.

v. Finck, supra. However, an insurance company that authorizes an agent to sell its policies may not escape

liability for the misrepresentations made by that agent which violate Article 21.21 or Section 17.46 merely

by establishing that the agent had no actual authority to make any such misrepresentation.

Royal Globe, 577 S.W.2d at 693.

The evidence does not show that: (1) Lexington had authorized Adams & Porter to solicit business and to write, sign,

and execute insurance policies; (2) Adams & Porter had authority co-extensive with Lexington insofar as writing

insurance; or (3) that Adams & Porter had the authority to speak and act for Lexington and transact all the insurance

business of Lexington which it was authorized to transact under its State permit. We conclude that Adams & Porter was

not Lexington's recording or soliciting agent. The evidence showed that it was an insurer's agent under article 21.02 and

did not have actual authority to represent coverage on Lexington's behalf.

The evidence does not show that when Adams & Porter made the misrepresentations Lexington knowingly allowed

Adams & Porter to hold itself out as having authority to act as its recording or soliciting agent, or that Lexington showed

a lack of ordinary care such that it clothed Adams & Porter with indicia of authority to act as its recording or soliciting

agent. We conclude that Adams & Porter, as Lexington's agent under article 21.02, did not have apparent authority to act

on Lexington's behalf. We hold that Lexington was not responsible for any misrepresentation made by Adams & Porter.

We sustain the third issue.

Matador Petroleum Corp. v. St. Paul Surplus Lines Ins. Co., 174 F.3d 653

In conjunction with this basic insurance policy, Matador purchased from St. Paul an endorsement that provided a narrow

exception to the absolute pollution exclusion. The endorsement stated that St. Paul would not apply the pollution

exclusion in the event of a "covered pollution incident." The endorsement defined "covered pollution incident" as:

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[*656] the discharge, dispersal, release, or escape of pollutants that:

. Results from an event;

. Begins and ends within 72 hours, and does not result [**3] from a well out of control; or results from a well out

of control above the surface of the ground or waterbottom;

. Is known to you or your operating partner within 7 days of its beginning; and

. Is reported to the company within 30 days of its beginning.

St. Paul argued before the district court that it properly denied coverage to Matador because [**4] Matador failed to

report the pollution incident within thirty days as required by the endorsement. The district court agreed and granted St.

Paul summary judgment. Matador timely appealed.

The impact that untimely notice has on coverage depends on the type of insurance policy. For example, courts

traditionally distinguish between two types of insurance policies: "occurrence" policies and "claims-made" policies. 2 In

the case of an "occurrence" policy, any notice requirement is subsidiary to the event that triggers coverage. See FDIC v.

Booth, 82 F.3d 670, 678 (5th Cir. 1996) ("In occurrence based policies, the notice requirement is generally

included [**11] to aid the insurer in administration of its coverage of claims."); see also Zuckerman v. National Union

Fire Ins. Co., 100 N.J. 304, 324, 495 A.2d 395, 406 (N.J. 1985) (noting that "the requirement of notice in an occurrence

policy is subsidiary to the event that invokes coverage"). Courts have not permitted insurance companies to deny

coverage on the basis of untimely notice under an "occurrence" policy unless the company shows actual prejudice from

the delay. See Hirsch v. Texas Lawyers' Ins. Exch., [*659] 808 S.W.2d 561, 562 (Tex. App.--El Paso 1991, writ denied)

(noting that the prejudice-notice requirement applies to "occurrence" policies). In the case of a "claims-made" policy,

however, notice itself constitutes the event that triggers coverage. See, e.g., FDIC v. Mijalis, 15 F.3d 1314, 1330 (5th Cir.

1994) (noting that "notice provisions are integral parts of claims made policies"); McCullough v. Fidelity & Deposit Co.,

2 F.3d 110, 112 (5th Cir. 1993) ("Notice, as provided in the policy, is required in a claims made policy to trigger

coverage."). Courts strictly interpret notice provisions in a "claims-made" policy. See Booth, 82 F.3d at 678.

Courts interpret notice provisions in "claims-made" policies strictly because in these types of policies, unlike in

"occurrence" policies, the insured and insurer specifically negotiate the terms of the notice provisions.

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Hence, courts will not "rewrite policies to permit notice-prejudice to be applied to claims-made policies. . . . [because to

do so] would . . . interfere with the public's right to contract." Hirsch, 808 S.W.2d at 565 (internal citations omitted).

Likewise, in this case, under the plain language of the endorsement, timely reporting of the claim constituted one of the

events necessary to trigger coverage. We will respect the plain language of the limitation contained in the endorsement.

Matador received what it bargained for under the endorsement, with premiums presumably reduced to reflect the limited

coverage. Whether St. Paul suffered prejudice as a result of Matador's late notice is irrelevant. The district court properly

enforced the insurance policy according to its terms.

Mayes v. Massachusetts Mut. Life Ins. Co., 608 S.W.2d 612

Under these circumstances we hold that insured's failure to advise the insurer of the changes in his prior answers were

misrepresentations. It is now settled law in this state that these five elements must be pled and proved before the insurer

may avoid a policy because of the misrepresentation of the insured: (1) the making of the representation; (2) the falsity of

the representation; (3) reliance thereon by the insurer; (4) the intent to deceive on the part of the insured in making same;

and (5) the materiality of the representation.

Members Mut. Ins. Co. v. Cutai, 476 S.W.2d 278

This Court again stated in Womack v. Allstate Ins. Co., 156 Tex. 467, 296 S.W.2d 233 (1956) that as a general rule, the

failure of the insured to comply with the conditions of the policy requiring notice of accident and notice of claim of suit

will relieve the company of liability to an injured third party. Womack held that there had been a waiver by the company

in that case. [**6] There is no waiver here. The company here proceeded under a plainly-worded [*280] non-waiver

agreement, and the validity or efficacy of the non-waiver agreement is not questioned here.

Our conclusion is, however, that on balance it is better policy for the contracts of insurance to be changed by the public

body charged with their supervision, the State Board of Insurance, or by the Legislature, rather than for this Court to

insert a provision that violations of conditions precedent will be excused if no harm results from their violation.

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North American Shipbuilding, Inc. v. So. Marine & Aviation Underwriting, 930 S.W.2d 829

Southern Marine was not North American’s agent; it was the Underwriters’ agent. When the agent (Mr. Schall) of an

applicant (North American) agrees to apply for insurance on behalf of the principal (North American), the agent (Mr.

Schall) has the duty to inform the principal (North American) what coverages are included. McNeill v. McDavid Ins.

Agency, 594 S.W.2d 198, 202-03 (Tex.Civ.App.—Fort Worth 1980, no writ). An agent (Southern Marine) of the insurer

(the Underwriters) does not have a duty to the applicant (North American) to explain the terms of and coverages included

in the application. Id.; see also Riggs v. Sentry Ins., 821 S.W.2d 701,705 (Tex.App.—Houston [14th Dist.] 1991, writ

denied); Cf. Duhon v. Mobil Oil Corp., 12 F.3d 55 (5th Cir. 1994).

Northern Co. Mutual Ins. v. Davalos, 140 S.W.3d 685

Every disagreement about how the defense should be conducted cannot amount to a conflict of interest within Traver's

meaning. If it did, the insured, not the insurer, could control the defense by merely disagreeing with the insurer's

proposed actions. This is not at all what we contemplated in Traver.

PAJ, Inc. v. Hanover, Ins. Co., 243 S.W.3d 630

In this case, we must decide whether an insured's failure to timely notify its insurer of a claim defeats coverage under the

policy if the insurer was not prejudiced by the delay. We hold, as we did in Hernandez v. Gulf Group Lloyds, that an

immaterial breach does not deprive the insurer of the benefit of the bargain and thus cannot relieve the insurer of the

contractual coverage obligation. 875 S.W.2d 691, 692 (Tex. 1994).

The fact that Hernandez involved a policy exclusion rather than a policy provision does not supply a valid ground for

distinguishing its application here. Exclusions and conditions are in effect two sides of the same coin; exclusions avoid

coverage if the insured does something, and conditions avoid coverage unless an insured does something.

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In addition, the timely notice provision was not an essential part of the bargained-for exchange under PAJ's occurrence-

based policy. The Fifth Circuit, applying Texas insurance law, aptly describes the critical distinction between

"occurrence" polices and "claims-made" policies as follows:

In the case of an "occurrence" policy, any notice requirement is subsidiary to the event that triggers

coverage. Courts have not permitted insurance companies to deny coverage on the basis of untimely notice

under an "occurrence" policy unless the company shows actual prejudice from the delay.Matador

Petroleum Corp. v. St. Paul Surplus Lines Ins. Co., 174 F.3d 653, 658 (5th Cir. 1999

We hold that an insured's failure to timely notify its insurer of a claim or suit does not defeat coverage if the insurer

was [*637] not prejudiced by the delay.

Prodigy Communs. Corp. v. Agric. Excess & Surplus Ins. Co., 288 S.W.3d 374

Today, we decide whether PAJ's notice-prejudice rule applies to a claims-made policy when the notice provision requires

that the insured, "as a condition precedent" to its rights under the policy, give notice of a claim to its insurer "as soon as

practicable . . ., but in no event later than ninety (90) days after the expiration of the Policy Period or Discovery Period."

The parties dispute whether notice of the claim was given "as soon as practicable" [**3] but agree that the insured gave

notice within the ninety-day cutoff period. The insurer also admits that it was not prejudiced by the delayed notice.

For the reasons explained below, we conclude that "notice as soon as practicable" was not an essential part of the

bargained-for exchange under the claims-made policy at issue here. Following PAJ, we hold that, in the absence of

prejudice to the insurer, the insured's alleged failure to comply with the provision does not defeat coverage.

We [**9] must decide whether, under a claims-made policy, an insurer can deny coverage based on its insured's alleged

failure to comply with a policy provision

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requiring that notice of a claim be given "as soon as practicable," when (1) notice of the claim was provided before the

reporting deadline specified in the policy; and (2) the insurer was not prejudiced by the delay.

First, unlike the PAJ policy, this one states unambiguously that the insured's duty to give "notice, in writing, as soon as

practicable" is a "condition precedent" to coverage. Importantly however, our holding in PAJ did not rest on the

distinction between conditions and covenants.

In PAJ, we recognized a "critical distinction" between the role of notice in claims-made policies and the role of notice in

occurrence policies and concluded that timely notice was not an essential part of the bargained-for exchange in PAJ's

occurrence-based policy. 243 S.W.3d at 636. In reaching this conclusion, we were persuaded by the Fifth Circuit's

explanation that "'[i]n the case of an "occurrence" policy, any notice requirement [**12] is subsidiary to the event that

triggers coverage.'" Id. (quoting Matador Petroleum Corp. v. St. Paul Surplus Lines Ins. Co., 174 F.3d 653, 658 (5th Cir.

1999)).

In a claims-made policy, the requirement that notice be given to the insurer "as soon as practicable" serves to

"maximiz[e] the insurer's opportunity to investigate, set reserves, and control or participate in negotiations with the third

party asserting the claim against the insured." By contrast, the requirement that the claim be made during the policy

period "is directed to the temporal boundaries of the policy's basic coverage terms . . . . [This type [**18] of notice] is

not simply part of the insured's duty to cooperate, but defines the limits of the insurer's obligation, and if there is no

timely notice, there is no coverage." Similarly, a notice provision requiring that a claim be reported to the insurer during

the policy period or within a specific number of days thereafter "define[s] the scope of coverage by providing a certain

date after which an insurer knows it is no longer liable under the policy."

The role of notice in claims-made policies has been described as follows:

Claims made or discovery policies are essentially reporting policies. If the [*381] claim is reported to the

insurer during the policy period, then the carrier is legally obligated to pay; if the claim is not reported

during the policy period, no liability attaches. Claims made policies require notification to the insurer to be

within a reasonable time. Critically, however, claims made policies require that that notice be given during

the policy period itself.

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In a claims-made policy, when an insured gives notice of a claim within the policy period or other specified

reporting [**24] period, the insurer must show that the insured's noncompliance with the policy's "as soon as

practicable" notice provision prejudiced the insurer before it may deny coverage.

Accordingly, we conclude that Prodigy's obligation to provide AESIC with notice of [**25] a claim "as soon as

practicable" was not a material part of the bargained-for exchange under this claims-made policy. See Hernandez, 875 S.

W.2d at 693.

In a claims-made policy, when an insured notifies its insurer of a claim within the policy term or other reporting period

that the policy specifies, the insured's failure to provide notice "as soon as practicable" will not defeat coverage in

the [*383] absence of prejudice to the insurer.

Riner v. Allstate Life Ins. Co., 131 F.3d 530

Under Texas law, the responses given in a life insurance application are mere representations, rather than warranties that

would be capable of making coverage void or [*537] voidable. 6 Short of inserting an unambiguous "good health

warranty" demonstrating that the parties intended the contract to rise or fall on the literal truth of an insured's general

certification of good health, 7 Texas has not allowed an insurer to change that result by contracting to make truthful

application answers a condition precedent to coverage.

Texas Association of Counties v. Matagorda Co., 52 S.W.3d 128

There is a difference between an insurer's reservation of its right to disclaim coverage, which occurred here, and an

agreement by the insured [**13] that he will reimburse the insurer for any reasonable settlement, which did not occur

here. [HN4] An insurer's reservation of rights is the notification to the insured that the insurer will defend the insured, but

that the insurer is not waiving any defenses it may have under the policy, and it protects an insurer from a subsequent

attack on its coverage position on waiver or estoppel grounds.

Rather than place the insured in this position, we hold that, [HN10] when coverage is disputed and the insurer is

presented with a reasonable settlement demand within policy limits, the insurer may fund the settlement and seek reimbursement [**19]

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only if it obtains the insured's clear and unequivocal consent to the settlement and the insurer's right to seek

reimbursement.

Ulico v. Allied Pilots Assoc., 262 S.W.3d 773

In this case we consider whether an insurer's contractual coverage under a claims-made policy can be expanded by the

doctrines of waiver and estoppel to cover a risk not otherwise within the policy coverage: a suit against the insured that

was not reported until after the policy expired. We hold that [HN1] if an insurer's actions prejudice its insured, the insurer

may be estopped from denying benefits that would be payable under its policy as if the risk had been covered, but the

doctrines of waiver and estoppel cannot be used to re-write the contract of insurance and provide contractual coverage for

risks not insured.

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DUTY TO COOPERATE--

THE INSURED’S

PERSPECTIVE

R. Brent Cooper

900 Jackson Street, Suite 100 Dallas, TX 75202

Telephone: 214-712-9501 Telecopy: 214-712-9540

Email: [email protected]

• ORIGIN OF DUTY

• RIGHT TO CONTROL THE DEFENSE (THIRD PARTY POLICIES)

• INDEMNITY OBLIGATION (FIRST AND THIRD PARTY POLICIES)

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• DIFFERENT ASPECTS OF DUTY

• THIRD PARTY POLICIES

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• NOTICE OF OCCURRENCE • a. You must see to it that we are

notified as soon as practicable of an "occurrence" or an offense which may result in a claim. To the extent possible, notice should include: (1) How, when and where the "occurrence"

or offense took place;

(2) The names and addresses of any injured persons and witnesses; and

(3) The nature and location of any injury or damage arising out of the “occurrence” or offense.

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• NOTICE OF CLAIM OR SUIT

• b. If a claim is made or "suit" is brought against any insured, you must:

(1) Immediately record the specifics of the claim or "suit" and the date received; and

(2) Notify us as soon as practicable.

You must see to it that we receive written notice of the claim or "suit" as soon as practicable.

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• SUMMONS OR NOTICES

• You and any other involved insured must:

(1) Immediately send us copies of any demands, notices, summonses or legal papers received in connection with the claim or "suit";

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• AUTHORIZATIONS

• (2) Authorize us to obtain records and other information;

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• INVESTIGATION, SETTLEMENT, DEFENSE

(3) Cooperate with us in the investigation or settlement of the claim or defense against the “suit”; and

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• ENFORCEMENT OF RIGHTS

• (4) Assist us, upon our request, in the enforcement of any right against any person or organization which may be liable to the insured because of injury or damage to which this insurance may also apply.

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• VOLUNTARY PAYMENT

• d. No insured will, except at that insured's own cost, voluntarily make a payment, assume any obligation, or incur any expense, other than for first aid, without our consent.

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• SUBROGATION

• 8. Transfer of Rights of Recovery Against Others to us

If the insured has rights to recover all or part of any payment we have made under this Coverage Part, those rights are transferred to us. The insured must do nothing after loss to impair them. At our request, the insured will bring “suit” or transfer those rights to us and help us enforce them.

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• FIRST PARTY POLICIES

• NOTICE OF LOSS

• (2) Give us prompt notice of the loss or damage. Include a description of the property involved.

• (3) As soon as possible, give us a description of how, when and where the loss or damage occurred.

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• PROTECT PROPERTY • (4) Take all reasonable steps to protect the

Covered Property from further damage, and keep a record of your expenses necessary to protect the Covered Property, for consideration in the settlement of the claim. This will not increase the Limit of Insurance. However, we will not pay for any subsequent loss or damage resulting from a cause of loss that is not a Covered Cause of Loss. Also, if feasible, set the damaged property aside and in the best possible order for examination.

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• PROVIDE INVENTORY

• (5) At our request, give us complete inventories of the damaged and undamaged property. Include quantities, costs, values and amount of loss claimed.

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• INSPECTION • (6) As often as may be reasonably

required, permit us to inspect the property proving the loss or damage and examine your books and records.

• Also permit us to take samples of damaged and undamaged property for inspection, testing and analysis, and permit us to make copies from your books and records.

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• SWORN PROOF OF LOSS

• (7) Send us a signed, sworn proof of loss containing the information we request to investigate the claim. You must do this within 60 days after our request. We will supply you with the necessary forms.

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• INVESTIGATION AND SETTLEMENT

• (8) Cooperate with us in the investigation or settlement of the claim.

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• EXAMINATION UNDER OATH

• b. We may examine any insured under oath, while not in the presence of any other insured and at such times as may be reasonably required, about any matter relating to this insurance or the claim, including an insured's books and records. In the event of an examination, an insured's answers must be signed.

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• BURDEN OF PLEADING

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• BURDEN OF PROOF

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• PREJUDICE ELEMENT

• IS IT REQUIRED?

• HOW IS IT REQUIRED?

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• BURDEN OF SECURING FACT FINDING

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• STRATEGIES FOR THE INSURED TO NEGATE PREJUDICE-THIRD PARTY POLICIES

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• NOTICE OF OCCURRENCE

• NOTICE OF CLAIM OR SUI-SUMMONS OR NOTICES

• AUTHORIZATIONS

• INVESTIGATION, SETTLEMENT, OR DEFENSE

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• VOLUNTARY PAYMENT

• SUBROGATION

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• STRATEGIES FOR THE INSURED TO NEGATE PREJUDICE-FIRST PARTY POLICIES

• NOTICE OF LOSS

• PROTECT PROPERTY

• PROVIDE INVENTORY

• INSPECTION

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• SWORN PROOF OF LOSS

• INVESTIGATION AND SETTLEMENT

• EXAMINATION UNDER OATH

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Documents

Policyholder's Duty to Cooperate: Advocating or Defending ...media.straffordpub.com/products/policyholders-duty... · 4/23/2014 · Agents, 1994; Houston Claims Association, 1994;