Insured Who Refuses to Allow Insurer to Defend or Indemnify Has No Right Against Insurer
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Posted on June 17, 2022 by Barry Zalma
When the district court determined that an insurer’s duty to defend its insured, on which Moreno’s claims are based, was never triggered, relative to Moreno’s underlying personal injury suit, because the insured, N.F. Painting, Inc., never requested a defense or sought coverage Moreno appealed. In Osman Moreno v. Sentinel Insurance Company, Limited, No. 20-20621, United States Court of Appeals, Fifth Circuit (June 2, 2022) the Fifth Circuit resolved the dispute.
FACTS
In July 2016, Moreno worked as a painter for N.F. Painting, Inc. (“N.F. Painting”) on a project undertaken for Beazer Homes Texas, L.P. and Beazer Homes Texas Holdings, Inc. (collectively “Beazer Homes”). Beazer Homes, a homebuilder, contracted N.F. Painting for work on one of its developments. While on site, Moreno fell from a ladder and sustained serious injuries.
In November 2016, Moreno sued N.F. Painting and Beazer Homes for damages, in Texas state court. At all relevant times, N.F. Painting was insured by Sentinel Insurance Company, Limited (“Sentinel”) under a “Business Owner’s Policy.” As part of a “Master Construction Agreement” with N.F. Painting, Beazer Homes was an “additional insured” under the Sentinel policy.
N.F. Painting’s policy provided coverage for business liability, including personal injury, up to $1,000,000. Regarding payment under that coverage, and the provision of a defense for the insured, the policy stated, in pertinent part:
Despite being served with Moreno’s suit on March 9, 2017, N.F. Painting did not contact Sentinel to request, or even inquire about, coverage and/or a defense under its liability policy. Nor did it send Sentinel a copy of the petition or any other documentation received in connection with the suit. Instead, N.F. Painting retained the services of attorney Armando Lopez. On April 3, 2017, Lopez filed an answer on behalf of N.F. Painting and, on May 12, 2017, provided responses to Moreno’s requests for admissions and disclosures. In those discovery responses, N.F. Painting denied possessing any insurance that would cover the incident.
Beazer Homes, however, did not hesitate to contact Sentinel about Moreno’s suit.
By letter dated June 2, 2017, Sentinel agreed to defend and indemnify Beazer Homes “without a reservation of rights” (pursuant to the construction contract between Beazer Homes and N.F. Painting) in the state court suit filed by Moreno.
In mid-September 2018, Beazer Homes settled with Moreno and was dismissed from the state court suit. The litigation between N.F. Painting and Moreno, however, progressed and, on October 23, 2018, Moreno filed a “First Amended Petition,” alleging (for the first time) that he was injured while working “as an independently contracted painter.” It is undisputed that Sentinel was not notified when the amended petition was filed.
Shortly before trial was scheduled the parties entered into a “Proposed Agreed Judgment” “order[s], ad-judge[s], and decree[s],” among other things, that: (1) Moreno was “an independently contracted painter” and not an employee at the time of his July 3, 2016 injury; (2) Sentinel provided Business Liability insurance with a $1,000,000 limit of liability to N.F. Painting, Inc., at the time of Moreno’s injury; (3) N.F. Painting, Inc., placed Sentinel on proper notice of Moreno’s claims; and (4) Moreno was entitled to recover a total of $1,627,541.35 in damages, before interest and costs, from N.F. Painting, Inc.
Approximately one month later, on June 26, 2019, Moreno sued Sentinel in Texas state court. Sentinel and Moreno filed cross-motions for summary judgment.
The district court reasoned that Moreno had not shown that relevant “facts” were “actually litigated” by true adversaries and were essential to the judgment; nor had Moreno established privity. The district court additionally determined that N.F. Painting had not satisfied the notice requirements of the policy, and had failed to otherwise notify Sentinel of Moreno’s suit and had failed to request a defense.
ANALYSIS
Moreno’s claims against Sentinel are premised upon on his assertion that Sentinel had wrongly refused to defend its insured, N.F. Painting, relative to the personal injury claim that Moreno previously asserted against N.F. Painting in state court and, thus, is legally responsible for the damages awarded against N.F. Painting in the May 20, 2019 Agreed Judgment.
Duty to Defend and Indemnify
As noted by the district court, it is well-established, under Texas law, that mere awareness of a claim or suit does not impose a duty on the insurer to defend under the policy. [Nat’l Union Fire Ins. Co. of Pittsburgh, PA v. Crocker, 246 S.W.3d 603, 608 (Tex. 2008).]
Put simply, there is no duty to provide a defense absent a request for coverage.
The Texas Supreme Court explained that notice and delivery-of-suit-papers provisions in insurance policies serve two essential purposes: (1) they facilitate a timely and effective defense of the claim against the insured, and more fundamentally, (2) they trigger the insurer’s duty to defend by notifying the insurer that a defense is expected.
The rule is clear: an insurer has no duty to defend and no liability under a policy unless and until the insured in question complies with the notice-of-suit conditions and demands a defense. The rule applies regardless of whether the insurer knows that the insured has been sued and served, regardless of whether the insurer actually defends another insured in the same litigation and regardless of whether the insurer was aware of an interlocutory default judgment against the insured.
It is the “action by the insured” in sending the suit papers to the insurer that “triggers the insurer’s obligation to tender a defense and answer the suit.” [Members Ins. Co. v. Branscum, 803 S.W.2d 462, 467 (Tex. App.-Dallas 1991, no writ)]. Defendants were entitled to rely on the fact that plaintiffs were represented by counsel and surely would have made a demand for defense and indemnification if they wanted defendants to be involved.
It is clear that, under Texas law, an insurer’s duty to defend is not triggered unless and until the insured requests that a defense be provided. And, if a duty to defend is not triggered, it likewise is not breached when a defense is not provided.
Here, as stated, N.F. Painting did not seek defense or coverage from Sentinel when it was served with Moreno’s original state court petition; nor did it forward the suit papers that it received to Sentinel for that purpose.
Even after Sentinel assumed the defense of Moreno’s claims against Beazer Home, in June 2017, N.F. Painting did not tender (to Sentinel) defense of the claims that Moreno had asserted against it, or request coverage from Sentinel for the claims. Rather, Lopez’s representation of N.F. Painting continued, without further request, or inquiry, by N.F. Painting regarding Sentinel’s duty of defense or coverage. This remained true even when Moreno amended his complaint, in October 2018, to allege independent contractor (rather than employee) status, and N.F. Painting agreed, in May 2019, to entry of the Agreed Judgment against it for approximately $1.6 million in damages.
As the notice of suit and delivery-of-suit-papers policy provisions have been construed by the Texas courts, an insured’s transmittal of suit papers to the insurer triggers the duty of defense because, in the ordinary case, the documents are sent with the expectation that having the documents will enable and cause the insurer to promptly provide (or at least fund) the insured’s defense against the claims asserted against it. This, however, is not the ordinary case.
In short, the undisputed facts show that N.F. Painting chose, with the assistance of counsel, to handle Moreno’s personal injury claims in its own way, without involving Sentinel in its defense, as it was entitled to do.
Having made that decision, it is N.F. Painting, and thus Moreno, as third-party beneficiary, not Sentinel, who must bear responsibility for any resulting adverse consequences. Because no defense ever was sought, it was not owed.
Despite actual knowledge that the insured had been sued, insurers were prejudiced as a matter of law by entry of default judgment and being deprived of the right to answer, defend, conduct discovery and fully litigate the merits of the claims asserted against the insured.
ZALMA OPINION
Individuals, with no experience in insurance coverage law, make odd decisions on whether to seek defense or indemnity from their liability insurer. N. F. Painting decided there was no coverage and hired a lawyer to defend it while ignoring the assistance their insurer was willing to provide and, in fact, provided to an additional insured. Then when it was about to lose at trial, with an amended complaint, it entered into an agreement with the injured person to stipulate to a major judgment and assign its rights against Sentinal to set up a bad faith case. The scheme failed since no insurer is obligated to defend an insured who refuses to ask for a defense.
(c) 2022 Barry Zalma & ClaimSchool, Inc.
Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at
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