The Texas Supreme Court Court, in National Union Fire Ins. Co. of Pittsburgh, PA. v. Crocker.1 In Crocker, has taken a decidedly pro-insurer stance, holding that an insurer has no obligation to defend an additional or omnibus insured, despite knowledge that such insured has been sued and served, where there is no
request for a defense.
The case arose on certified questions from the Fifth Circuit. The two questions ruled upon by the Court were:
“Where an additional insured does not and cannot be presumed to know of coverage under an insurer’s liability policy, does an insurer that has knowledge that a suit implicating policy coverage has been filed against its additional insured have a duty to inform the additional insured of the available coverage?”, and “Does proof of an insurer’s actual knowledge of service of process in a suit against the additional insured, when such knowledge is obtained in sufficient time to provide a defense for the insured, establish as a matter of law the absence of prejudice to the insurer from the additional insured’s failure to comply with the notice-of-suit provisions of the policy?”
The Court answered both questions in the negative.
As to the first question, the Court reaffirmed its earlier holding in Weaver v. Hartford Accident & Indemnity Co., 570 S.W.2d 367 (Tex. 1978), that there is no duty to provide a defense absent a request for coverage. The Court further commented that: (1) mere awareness of a claim or suit does not impose a duty on the insurer to defend unless and until an insured requests a defense; and (2) an insurer that has not been notified that a defense is expected has no duty to provide notice to an insured that a defense is available.
As to the latter question, the Court specifically distinguished the case from PAJ, (see related article on our site) noting that in PAJ, notice was tardy, while in Crocker, the notice was “nonexistent.” Noting that National Union was obviously prejudiced by a potential exposure to a $1 million default judgment, the Court restated the second certified question as whether National Union “should be stopped to deny coverage because it was aware that Morris had been sued and served and had ample time to defend him.” As noted, the Court answered this question in the negative as well. Justice Willett concluded the Court’s unanimous decision by stating:
“Insurers owe no duty to provide an unsought, uninvited, unrequested, unsolicited defense. Consistent with our decision in Weaver, we decline to impose an extracontractual duty on liability insurers that would force them to keep track of potential litigants who may or may not be additional insureds, may or may not be entitled to coverage, and may or may not expect a defense to a claim. Accordingly, because insurers need not provide coverage to additional insureds who never seek it, National Union had no duty either to inform Morris of available coverage or to voluntarily undertake a defense for him, and its actual knowledge did not establish lack of prejudice as a matter of law.”
By Sid Davis
Sidney H. Davis, Jr. passed away on October 26, 2009. If you are seeking legal help, or have a question about this article or a pending legal matter, please contact Dawn Woelfel Hansen at (214) 741-1166.