قالب وردپرس درنا توس
Home / Insurance / Bad Faith Set-Up Suit fails

Bad Faith Set-Up Suit fails



It takes knowledge and skill to set up an insurer for bad faith and excessive judgment

When the district court ruled that an insurer’s obligation to defend its insured, on which Moreno’s claim is based, was never triggered, relative to Moreno’s underlying personal injury lawsuit, because the insured, NF Painting, Inc., never sought a defense or sought coverage Moreno appealed. IN Osman Moreno v. Sentinel Insurance Company, Limitedno. 20-20621, United States Court of Appeals, Fifth Circuit (June 2, 2022) Fifth Circuit resolved disputes.

FACTS

In July 2016, Moreno worked as a painter for NF Painting, Inc. (“NF Painting”) on a project carried out for Beazer Homes Texas, LP and Beazer Homes Texas Holdings, Inc. (collectively “Beazer Homes”). Beazer Homes, a house builder, hired NF Painting to work on one of its developments. On the spot, Moreno fell from a ladder and suffered serious injuries.

In November 2016, Moreno sued NF Painting and Beazer Homes for damages in the Texas state court. At all relevant times, NF Painting was insured by Sentinel Insurance Company, Limited (“Sentinel”) under a “Business Owner’s Policy.” As part of a “Master Construction Agreement” with NF Painting, Beazer Homes was a “supplementary insured” under the Sentinel policy.

NF Painting’s policy provided coverage for corporate liability, including personal injury, up to $ 1,000,000. Regarding payment under this coverage and the provision of a defense for the insured, the insurance stated in applicable parts:

Despite being notified of Moreno’s action on March 9, 2017, NF Painting did not contact Sentinel to request, or even ask for, coverage and / or a defense under its liability policy. Nor did it send the Sentinel a copy of the petition or any other documentation received in connection with the lawsuit. Instead, NF Painting retained the services of attorney Armando Lopez. On April 3, 2017, Lopez submitted a response on behalf of NF Painting and on May 12, 2017, responded to Moreno’s requests for acknowledgments and disclosures. In these findings, NF Painting denied that they had any insurance to cover the incident.

However, Beazer Homes did not hesitate to contact the Sentinel regarding Moreno’s suit.

In a letter dated June 2, 2017, the Sentinel agreed to defend and indemnify Beazer Homes “without reservation of rights” (in accordance with the construction contract between Beazer Homes and NF Painting) in the state lawsuit filed by Moreno.

In mid-September 2018, Beazer Homes made a deal with Moreno and was denied the lawsuit in the state. However, the lawsuit between NF Painting and Moreno progressed and on October 23, 2018, Moreno filed a “First Amended Petition” claiming (for the first time) that he was injured while working “as a self-employed painter.” It is common ground that Sentinel was not notified when the amended petition was filed.

Shortly before the trial was scheduled, the parties entered into a “proposed agreed judgment”[s]ad-domare[s]and decree[s]”, including that: (1) Moreno was” a self-employed painter “and not an employee at the time of his injury on July 3, 2016; Inc., at the time of Moreno’s claim; (3) NF Painting, Inc., sent Sentinel a proper notice of Moreno’s claim; and (4) Moreno was entitled to recover a total of $ 1,627,541.35 in damages, before interest and costs. , from NF Painting, Inc.

About a month later, on June 26, 2019, the Moreno Sentinel sued in Texas State Court. Sentinel and Moreno filed cross-motions for summary judgment.

The district court held that Moreno had not shown that relevant “facts” were “actually tried” by true opponents and were material to the judgment; nor had Moreno established privacy. The district court also ruled that NF Painting had not complied with the notification requirements of the policy and had failed to notify Sentinel of Moreno’s action in any other way and had failed to request a defense.

ANALYSIS

Moreno’s claim against Sentinel is based on his assertion that Sentinel had wrongly refused to defend its insured, NF Painting, in relation to the personal injury claim that Moreno had previously claimed against NF Painting in the state court and is thus legally liable for the damages awarded. against NF Painting in the agreed judgment of 20 May 2019.

Obligation to defend and make amends

As pointed out by the district court, it is well established, under Texas law, that mere awareness of a claim or process does not impose on the insurer an obligation to defend under the insurance. [Nat’l Union Fire Ins. Co. of Pittsburgh, PA v. Crocker, 246 S.W.3d 603, 608 (Tex. 2008).]

Simply put, there is no obligation to provide a defense without a request for coverage.

The Texas Supreme Court stated that provisions on the issuance and delivery of insurance papers in insurance serve two essential purposes: (1) they facilitate the rapid and effective defense of the claim against the insured, and more fundamentally, (2) they trigger the insurer’s obligation to defend itself through notify the insurer that a defense is expected.

The rule is clear: an insurer has no liability and no liability under an insurance unless and until the insured in question meets the conditions for reporting the claim and requires a defense. The rule applies regardless of whether the insurer is aware that the insured has been sued and served, regardless of whether the insurer actually defends another insured in the same civil case and regardless of whether the insurer is aware of an interim judgment against the insured.

It is “the insured’s conduct” by sending the court documents to the insurer that “triggers the insurer’s obligation to file a defense and answer the claim.” [Members Ins. Co. v. Branscum, 803 S.W.2d 462, 467 (Tex. App.-Dallas 1991, no writ)]. Defendants had the right to invoke the fact that the plaintiffs were represented by counsel and would certainly have demanded defense and indemnity if they wanted the defendants to be involved.

It is clear that under Texas law, an insurer’s liability is not triggered unless and until the insured requests that a defense be provided. And if a defense duty is not triggered, it is not broken even when a defense is not provided.

Here, as I said, NF Painting did not seek defense or coverage from the Sentinel when it was notified of Moreno’s original lawsuit; Nor did it forward the procedural documents it received to the Sentinel for that purpose.

Not even after Sentinel took over the defense of Moreno’s claims against Beazer Home, in June 2017, did NF Painting not (to Sentinel) defend itself of the claims that Moreno had asserted against it, or request coverage from Sentinel for the claims. Rather, Lopez continued to represent NF Painting, without further request or request, by NF Painting regarding Sentinel’s obligation to defend or cover. This remained true even when Moreno changed his complaint, in October 2018, to claim status as an independent contractor (rather than an employee), and NF Painting agreed, in May 2019, that the agreed judgment against it for approximately 1.6 million USD in damages.

Since the lawsuit and the law on the delivery of lawsuits have been interpreted by Texas courts, an insured person’s transfer of lawsuits to the insurer triggers the defense obligation because, in the ordinary casethe documents are sent with expectations that the documents will enable and get the insurer to immediately provide (or at least finance) the insured’s defense against the claims made against it. However, this is not common case.

In short, the undisputed facts show that NF Painting, with the assistance of agents, chose to handle Moreno’s personal injury claims in its own way, without involving the Sentinel in its defense, as it was entitled to do.

Having made that decision, it is NF Painting, and thus Moreno, as the third party beneficiary, not Sentinel, which must be responsible for any negative consequences. Since no defense was ever sought, it was not guilty.

Despite real knowledge that the insured had been sued, the insurance companies were affected by law by the entry into force of the default judgment and that they were deprived of the right to answer, defend, make a discovery and fully examine the claims made against the insured.

Individuals, without experience in insurance coverage legislation, make strange decisions about whether to seek defense or compensation from their liability insurance. NF Painting decided that there was no coverage and hired a lawyer to defend it while ignoring the help that their insurer was willing to provide and in fact provided another insured. When it was then losing in the trial, with an amended complaint, it entered into an agreement with the injured person to demand a larger sentence and transfer their rights against Sentinal to establish a case in bad faith. The system failed because no insurer is obliged to defend an insured who refuses to request a defense.


(c) 2022 Barry Zalma & ClaimSchool, Inc.

Barry Zalma, Esq., CFE, now limits his internship to the position of insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as a lawyer for insurance coverage and claims management and more than 54 years in the insurance industry. He is available at http://www.zalma.com and zalma@zalma.com.

Subscribe to Zalma on Insurance at locals.com https://zalmaoninsurance.local.com/subscribe.

Subscribe to Excellence in Claims Handling at https://barryzalma.substack.com/welcome.

Write to Mr Zalma at zalma@zalma.com; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma; Follow Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos on Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/




Source link