A Person Has To Ask For Policy Benefits To Get The Benefits

As strange as this one may seem, it is actually fairly common.  This is a Southern District, Houston Division opinion styled, Gavion et al v. ACE American Insurance Company.

In 2009, Gavion swerved into the path of a train.  He was driving under the policy of his mother’s employer.  A passenger in the vehicle, Jackson, sued Gavion and ACE.  ACE was later dismissed from the lawsuit and Gavion never appeared in the lawsuit to fight the claim of negligence against him.  ACE was Gavion’s insurance company.  Gavion never asked for ACE to defend him in the lawsuit.  Jackson then took a default judgment against Gavion and Gavion assigned to Jackson the rights Gavion may have against ACE for not defending him in the lawsuit and then Jackson filed suit against ACE for not defending Gavion.

ACE filed a motion for summary judgment stating they had no duty to defend Gavion because Gavion never asked for help.

This case turns on whether ACE owed a duty to defend Gavion in the lawsuit by Jackson.  ACE’s contractual duties in the event of a suit are described in Section IV.A.2 of ACE Policy No. ISA H08250388.  The policy provides in relevant part:

2.Duties In The Event Of Accident, Claim, Suit Or Loss

We have no to provide coverage under this policy unless there has been full compliance with the following duties:

a. In the event of “accident”, claim, “suit” or “loss”, you must give us or our authorized representative prompt notice of the “accident” or “loss”.

….

b. Additionally, you and any other involved “insured” must:

(1) Assume no obligation, make no payment or incur no expense without our consent, except at the “insured’s” own cost.

(2) Immediately send us copies of any request, demand, order, notice, summons or legal paper received concerning the claim or “suit”.

It is undisputed that ACE, as a party to that action, had notice of the lawsuit.  It is also undisputed that Gavion neither tendered the underlying lawsuit to ACE nor demanded a defense at any time before the default judgment against Gavion.  The consequence of Gavion’s failure to tender the lawsuit to ACE and to request a defense is the basis of ACE’s summary judgment motion.

The Texas Supreme Court resolved this issue definitely in the case 2008, in the case styled, National Union Fire Ins. Co. of Pittsburg, PA v. Crocker.  The Texas Supreme Court held that insurers owe no duty to provide an unsought, uninvited, unrequested, unsolicited defense.  This is, in part, because an insurer cannot necessarily assume that an additional insured who has been served but has not given notice to the insurer is looking to the insurer to provide a defense.  Assuming without deciding that Gavion would have been eligible for coverage, and drawing all reasonable inferences and resolving all factual controversies in favor of Gavion, there is no genuine dispute about any material fact in this action.  Gavion sought no defense in the lawsuit and thus us entitled to none.  Gavion’s failure was not that he did not notify ACE that an action was pending but that he did not notify ACE that he was entitled to, and expected, a defense when one was available.  As a result, ACE was prejudiced and Gavion is not entitled to recover against ACE.