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July 2019

Houston Team Prevails in Issue of First Impression on behalf of Market-Leading Insurance Company

Houston attorneys Christopher M. Raney, Heidi J. Gumienny, and Kristina Brar obtained a significant victory before the Fifth Circuit Court of Appeals on behalf of a market-leading insurance company in an issue of first impression in Texas.  

The case involved alleged damage to an insured’s commercial property from a hailstorm. The insured did not report the alleged loss to its insurer until approximately 17 months after the date of loss. The insurer denied the claim based on a one-year notice requirement in a policy endorsement. The Texas Windstorm or Hail Loss Conditions Amendment Endorsement stated that:

"In addition to your obligation to provide us with prompt notice of loss or damage, with respect to any claim where notice of the claim is reported to us more than one year after the reported date of loss or damage, this policy shall not provide coverage for such claims."

The insured sued the insurer in Houston federal court, alleging causes of action for breach of contract and violations of the Texas Insurance Code. The issue before the trial court was whether, under Texas law, an insurer is required to demonstrate prejudice resulting from an insured’s failure to comply with an agreed term set in an endorsement to the parties’ insurance contract establishing a specific time limit for an insured to give the insurer notice of a claim.  The insured argued that prejudice was required; the insurer argued that a showing of prejudice was not required.  The trial court recognized that this issue had not been decided by the Texas Supreme Court of the Fifth Circuit Court of Appeals.

Gordon & Rees moved for summary judgment on behalf of the insurer based on the policy’s endorsement. The trial court granted summary judgment in favor of Gordon & Rees’ client and dismissed the insured’s claims. 

The Fifth Circuit Court of Appeals affirmed the trial court’s order and held that while insurers are required to show prejudice following the insured’s breach of general provisions requiring notice of loss or damage “as soon as practicable” (and variations thereof), that shifting burden was not required in this case where the parties signed a very specific endorsement that required the insured to submit claims for wind or hail losses within one year.

Christopher M. Raney