Zalma on Insurance
Education • Business
Insurance Claims professional presents articles and videos on insurance, insurance Claims and insurance law for insurance Claims adjusters, insurance professionals and insurance lawyers who wish to improve their skills and knowledge. Presented by an internationally recognized expert and author.
Interested? Want to learn more about the community?
June 17, 2022
Bad Faith Set-Up Suit Fails

Insured Who Refuses to Allow Insurer to Defend or Indemnify Has No Right Against Insurer
Read the full article at https://lnkd.in/ggc7uNHA and at https://zalma.com/blog plus more than 4250 posts.

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

http://www.zalma.com and [email protected].

Subscribe to Zalma on Insurance at locals.com https://zalmaoninsurance.local.com/subscribe.

Subscribe to Excellence in Claims Handling at https://barryzalma.substack.com/welcome.

Write to Mr. Zalma at [email protected]; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com.

Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

Interested? Want to learn more about the community?
What else you may like…
Videos
Posts
21 hours ago
Allegations That Establish Breach of a Condition Defeats Suit

Notice of Claim Later than 60 Days After Expiration is Too Late

Post 5089

Injury at Massage Causes Suit Against Therapist

Read the full article at https://lnkd.in/gziRzFV8, see the full video at https://lnkd.in/gF4aYrQ2 and at https://lnkd.in/gqShuGs9, and at https://zalma.com/blog plus more than 5050 posts.

Hiscox Insurance Company (“Hiscox”) moved the USDC to Dismiss a suit for failure to state a claim because the insured reported its claim more than 60 days after expiration of the policy.

In Mluxe Williamsburg, LLC v. Hiscox Insurance Company, Inc., et al., No. 4:25-cv-00002, United States District Court, E.D. Missouri, Eastern Division (May 22, 2025) the trial court’s judgment was affirmed.

FACTUAL BACKGROUND

Plaintiff, the operator of a massage spa franchise, entered into a commercial insurance agreement with Hiscox that provided liability insurance coverage from July 25, 2019, to July 25, 2020. On or about June 03, 2019, a customer alleged that one of Plaintiff’s employees engaged in tortious ...

00:08:31
June 02, 2025
Zalma’s Insurance Fraud Letter – June 1, 2025

ZIFL – Volume 29, Issue 11
The Source for the Insurance Fraud Professional
Posted on June 2, 2025 by Barry Zalma

Post 5087

See the full video at and at

Read the full article and the full issue of ZIFL June 1, 2025 at https://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-06-01-2025.pdf

Zalma’s Insurance Fraud Letter – June 1, 2025

See the full video at https://lnkd.in/gw-Hgww9 and at https://lnkd.in/gF8QAq4d, and at https://zalma.com/blog plus more than 5050 posts.

ZIFL – Volume 29, Issue 11

The Source for the Insurance Fraud Professional

Read the full article and the full issue of ZIFL June 1, 2025 at https://lnkd.in/gTWZUnnF

Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at ...

00:08:42
placeholder
May 30, 2025
Plain Language of Policy Enforced

No Coverage if Home Vacant for More Than 60 Days

Failure to Respond To Counterclaim is an Admission of All Allegations

Post 5085

See the full video at https://lnkd.in/gbWPjHub and at https://lnkd.in/gZ9ztA-P, and at https://zalma.com/blog plus more than 5050 posts.

In Nationwide Mutual Insurance Company v. Rebecca Massey, Civil Action No. 2:25-cv-00124, United States District Court, S.D. West Virginia, Charleston Division (May 22, 2025) Defendant Nationwide Mutual Insurance Company's (“Nationwide”) motion for Default Judgment against Plaintiff Rebecca Massey (“Plaintiff”) for failure to respond to a counterclaim and because the claim was excluded by the policy.

BACKGROUND

On February 26, 2022, Plaintiff's home was destroyed by a fire. At the time of this accident, Plaintiff had a home insurance policy with Nationwide. Plaintiff reported the fire loss to Nationwide, which refused to pay for the damages under the policy because the home had been vacant for more than 60 days.

Plaintiff filed suit ...

00:06:50
May 15, 2025
Zalma's Insurance Fraud Letter - May 15, 2025

ZIFL Volume 29, Issue 10
The Source for the Insurance Fraud Professional

See the full video at https://lnkd.in/gK_P4-BK and at https://lnkd.in/g2Q7BHBu, and at https://zalma.com/blog and at https://lnkd.in/gjyMWHff.

Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at http://zalma.com/zalmas-insurance-fraud-letter-2/ You can read the full issue of the May 15, 2025 issue at http://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-05-15-2025.pdf
This issue contains the following articles about insurance fraud:

Health Care Fraud Trial Results in Murder for Hire of Witness

To Avoid Conviction for Insurance Fraud Defendants Murder Witness

In United States of America v. Louis Age, Jr.; Stanton Guillory; Louis Age, III; Ronald Wilson, Jr., No. 22-30656, United States Court of Appeals, Fifth Circuit (April 25, 2025) the Fifth Circuit dealt with the ...

May 15, 2025
CGL Is Not a Medical Malpractice Policy

Professional Health Care Services Exclusion Effective

Post 5073

See the full video at https://lnkd.in/g-f6Tjm5 and at https://lnkd.in/gx3agRzi, and at https://zalma.com/blog plus more than 5050 posts.

This opinion is the recommendation of a Magistrate Judge to the District Court Judge and involves Travelers Casualty Insurance Company and its duty to defend the New Mexico Bone and Joint Institute (NMBJI) and its physicians in a medical negligence lawsuit brought by Tervon Dorsey.

In Travelers Casualty Insurance Company Of America v. New Mexico Bone And Joint Institute, P.C.; American Foundation Of Lower Extremity Surgery And Research, Inc., a New Mexico Corporation; Riley Rampton, DPM; Loren K. Spencer, DPM; Tervon Dorsey, individually; Kimberly Dorsey, individually; and Kate Ferlic as Guardian Ad Litem for K.D. and J.D., minors, No. 2:24-cv-0027 MV/DLM, United States District Court, D. New Mexico (May 8, 2025) the Magistrate Judge Recommended:

Insurance Coverage Dispute:

Travelers issued a Commercial General Liability ...

April 30, 2025
The Devil’s in The Details

A Heads I Win, Tails You Lose Story
Post 5062

Posted on April 30, 2025 by Barry Zalma

"This is a Fictionalized True Crime Story of Insurance Fraud that explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The story is designed to help everyone to Understand How Insurance Fraud in America is Costing Everyone who Buys Insurance Thousands of Dollars Every year and Why Insurance Fraud is Safer and More Profitable for the ­­­Perpetrators than any Other Crime."

Immigrant Criminals Attempt to Profit From Insurance Fraud

People who commit insurance fraud as a profession do so because it is easy. It requires no capital investment. The risk is low and the profits are high. The ease with which large amounts of money can be made from insurance fraud removes whatever moral hesitation might stop the perpetrator from committing the crime.

The temptation to do everything outside the law was the downfall of the brothers Karamazov. The brothers had escaped prison in the old Soviet Union by immigrating to the United...

post photo preview
See More
Available on mobile and TV devices
google store google store app store app store
google store google store app tv store app tv store amazon store amazon store roku store roku store
Powered by Locals