An insurance contract will impose conditions on the insured person or entity. For example, most policies require that the insured give notice of the claim and cooperate with the insurance company. Policies may require that the insured file a formal proof of loss, if the insurer requests one. When one party to a contract commits a material breach of that contract, the other party is discharged or excused from any obligations to perform. In the 1994, Texas Supreme Court opinion, Hernandez v. Gulf Group Lloyds, the court said that the breach be “material.” The court explained stating:
In determining the materiality of a breach, courts will consider, among other things, the extent to which the non-breaching party will be deprived of the benefit that it could have reasonably anticipated from full performance … The less the non-breaching party is deprived of the expected benefit, the less material the breach ….
The other factors courts consider in determining the materiality of a breach are: (1) the extent to which the injured party can be adequately compensated for the part of that breach of which he will be deprived; (2) the extent to which the party failing to perform or to offer to perform will suffer forfeiture; (3) the likelihood that the party failing to perform or to offer to perform will cure his failure, taking account of all the circumstances including any reasonable assurances; (4) the extent to whic the behavior of the party failing to perform or to offer to perform comports with standards of good faith and fair dealing.