LATE NOTICE KILLS COVERAGE

Nicholas Petroleum, Inc. v. Mid-Continent Casualty Co.,
Dallas Court of Appeals, No. 05-13-01106-CV (July 21, 2015)
Justices Bridges (Opinion), Lang, and Lang-Miers
In Texas, an insurer cannot refuse coverage because of late notice unless it proves it was prejudiced by the delay—under most liability policies, but not this one. A claims-made pollution liability and environmental policy required written notice of a claim “as soon as practicable but in any event no later than thirty (30) days after the receipt of the Claim by the insured.” Another provision required notice within the policy period. Nicholas Petroleum was sued for environmental damages in August 2008, but did not notify Mid-Continent until April 2009, before the policy expired. The insurer denied coverage and refused to defend because of the late notice.

Nicholas Petroleum settled the underlying lawsuit, then sued Mid-Continent for breach of contract and bad faith. The trial court granted summary judgment for the insurer. Nicholas Petroleum conceded it did not give notice within 30 days of receiving the claim. Its argument on appeal relied on the Texas Supreme Court’s 2009 Prodigy Communications holding that coverage could not be denied where notice was given within the policy period but not “as soon as practicable” unless the insurer was prejudiced by the late notice. The Dallas Court of Appeals distinguished Prodigy Communications because the notice provision in that case did not include a definite deadline for giving notice, like the “no later than 30 days” language in Nicholas Petroleum’s policy. Because the insured failed to give notice within that specified time, Mid-Continent could avoid coverage without having to show prejudice. Although the Court did not use the term, this date-restrictive language is often said to create a “claims-made-and-reported” policy.
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