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Nat'l Union Fire Ins. Co. v. Crocker

Supreme Court of Texas

January 25, 2007, Argued; February 15, 2008, Opinion Delivered

NO. 06-0868

Opinion

 [*604]  This insurance-coverage case comes to us on certified questions from the United States Court of Appeals for the Fifth Circuit. 1 The principal issue is whether an insurer has a duty to notify an additional insured 2 of available liability coverage. On the facts presented, we conclude that Texas law imposes no such extra-contractual duty. We further hold that an insurer's actual knowledge that an additional insured has been served with process does not establish as a matter of law that the insurer has not been prejudiced by the additional insured's failure to notify the insurer of the receipt of process.

I. Background

Beatrice Crocker was a resident of Redwood Springs  [**2] Nursing Home, which is owned by Emeritus Corporation. She filed suit in state court against Emeritus and Richard Morris, a nursing home employee, seeking compensation for injuries suffered when she was hit by a door swung open by Morris 3 Crocker's claims against Emeritus were covered by a commercial general liability policy issued by National Union Fire Insurance Company of Pittsburgh, PA. Because Morris was acting within the course and scope of his employment when the accident occurred, he qualified as an additional insured under the policy. 4 National Union defended Emeritus, the named insured, but did not defend  [*605]  Morris even though the claims against him were covered by the policy and National Union knew he was a named defendant that had been served. As the Fifth Circuit points out, "Morris was not aware of the terms and conditions of the Emeritus policy [and] did not know that he was an additional insured under the policy." 5 National Union did not inform Morris that he was an insured, nor did it offer to defend him. Morris was served, but he "did not forward the suit papers to National Union or otherwise inform it that he had been sued, and did not request a defense from either  [**3] National Union or Emeritus." 6 Morris never answered the suit and did not appear at trial. National Union attempted to contact Morris about Crocker's claims, both before and after Crocker filed her lawsuit, but to no avail--the certified mail was returned, and the repeated phone messages were not returned. Morris spoke privately with Crocker's attorney at a deposition, but Morris refused to speak in private with Emeritus's counsel.

After the evidence was presented, the state trial court granted Crocker's motion to sever the claims against Morris. The claims against Emeritus were submitted to the jury, which returned a take-nothing verdict, finding that Emeritus, acting "by and through its agents acting within  [**4] the course and scope of their employment," including Morris, was not negligent. A few days later, however, the trial court entered a $ 1 million default judgment against Morris on the severed claims. 7 

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246 S.W.3d 603 *; 2008 Tex. LEXIS 119 **; 51 Tex. Sup. J. 518

NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA, APPELLANT, v. BEATRICE CROCKER, APPELLEE

Subsequent History: Released for Publication April 4, 2008.

Rehearing denied by Nat'l Union Fire Ins. Co. v. Crocker, 2008 Tex. LEXIS 351 (Tex., Apr. 4, 2008)

Prior History:  [**1] ON CERTIFIED QUESTIONS FROM THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT.

Crocker v. Nat'l Union Fire Ins. Co., 466 F.3d 347, 2006 U.S. App. LEXIS 24542 (5th Cir. Tex., 2006)

CORE TERMS

insurer, additional insured, coverage, notify, notice, no duty, inform, papers, actual knowledge, duty to defend, provisions, default

Insurance Law, Claim, Contract & Practice Issues, Policy Interpretation, Plain Language, Commercial General Liability Insurance, Persons Insured, Additional Parties, Business Insurance, Duty to Defend