Give Notice To The Insurance Company

The United States 5th Circuit Court issued an opinion in October 2017, that is basic to insurance law.  The opinion is styled, Nautilus Insurance Company v. Irma Miranda-Mondragon.

This is a declaratory judgment action filed by Nautilus against its insured Houston Star Security Patrol and Mondragon.  Nautilus argued it had no duty to indemnify Houston Star regarding a claim brought by Mondragon.  Summary Judgement was granted in favor of Nautilus.

Mondragon worked as a waitress at a nightclub when armed gunmen entered and began shooting customers and employees.  Mondragon was shot and required significant treatment.

Mondragon filed a lawsuit against the owners of the nightclub and later added Houston Star to the lawsuit.  Later, a default judgement was taken against Houston Star.  Sic weeks after, Mondragon sent a letter to Nautilus containing a copy of the default judgment and asking Nautilus to settle payment of the judgment amount.

The district court found that Nautilus had not received notice of the initial lawsuit until over 40 days a default judgment had been taken against Houston Star.  The district court concluded that under Texas law, such a delay by an insured in providing notice of a suit resulted in Nautilus having no duty either to defend Houston Star or to indemnify its insured for the default judgment.

In making its ruling in favor of Nautilus, this appeals Court stated it would affirm a district court’s judgment if no genuine issue of fact was presented.  The Court said there is no factual dispute.  Nautilus first received notice of the lawsuit when counsel sent a letter to Nautilus over 40 days after the default judgment against Houston Star was taken.  Settled Texas law provides: “Compliance with the notice of suit provision is a condition precedent to the insurer’s liability on the policy.”  When an insurer first receives notice of a suit after a default judgment has been entered, prejudice exists as a matter of law.

The insurance policy contained a notice of suit provision.  The first notice Nautilus received of the lawsuit came from Mondragon’s counsel 41 days after the default judgment was entered.  The delayed notice prejudiced Nautilus as a matter of law and relieved Nautilus of liability under the policy.