ABSENT NOTICE, WHAT IS INSURER'S DUTY TO DEFEND?

Commercial General Liability	Duty To Defend
Notice Of Loss Provisions

Beatrice Crocker, a resident of Redwood Springs Nursing Home, was injured when a nursing home employee, Richard Morris, opened a door that struck her. Crocker sued Morris for her damages.

Emeritus Corporation (Emeritus) owned Redwood Springs and had a commercial general liability policy issued by National Union Fire Insurance Company (National Union). Morris qualified as an additional insured under that policy because he was an employee and had injured Crocker while acting within the course and scope of his employment.

Morris received suit papers but neglected to notify National Union of the lawsuit. He never submitted any papers or appeared in court. National Union tried to contact him by telephone and mail but was never able to reach him although Morris did have some contact with Crocker's attorney.

The lower court allowed Crocker to file a claim against Emeritus but the courts ruled that Emeritus was not negligent. However, because Morris did not appear, the court ordered a $1 million default judgment against Morris because he never appeared. Crocker then sued National Union to collect the $1 million judgment.

National Union argued that it was not obligated to provide coverage because Morris never triggered its duty to defend.

It argued that Morris did not comply with the policy's notice provisions. Crocker argued that National Union was liable for the judgment because it had actual knowledge of the lawsuit. The lower court agreed with Crocker. National Union appealed to the United States Court of Appeals for the Fifth Circuit, which in turn asked the Texas Supreme Court to certify three questions to guide the circuit court's decision.

The first and second certified questions asked whether National Union owed Morris a duty to inform him of his coverage and right to a defense or to provide him with a defense, and, if so, the extent of that duty. The answers were both no.

The third certified question was whether National Union could claim it was prejudiced by Morris's failure to comply with the policy's notice provision even though it knew that Morris had been served. To which the court answered yes.

National Union Fire Insurance Company of Pittsburgh, PA vs. Crocker-No. 06-0868-Supreme Court of Texas-February 15, 2008-246 South Western Reporter 3d 603