COURT OF APPEALS AFFIRMS SUMMARY JUDGMENT IN FAVOR OF INSURER ON GROUNDS THAT INSURED BREACHED DUTY TO COOPERATE

July 12, 2011

In Martinez v. ACCC Ins. Co., --- S.W.3d ----, 2011 WL 2449509 (Tex.App. – Dallas June 21, 2011), the Dallas Court of Appeals recently affirmed a summary judgment in favor of Best Texas General Agency, State and County Mutual Fire Insurance Company, and ACCC Claims Service,  finding they owed no duty to defend or indemnify the insured, Carmensa Romero, with respect to claims in an underlying lawsuit brought by Ann Martinez, individually and as next friend of Michael Munoz and Patricia Davilla.

Martinez and Davilla were involved in an automobile accident with Carmensa Romero. Martinez and Davilla alleged they were traveling through a controlled intersection on Buckner Boulevard when Romero ran a red light and slammed into their vehicle. At the time, Romero was insured under a personal automobile liability insurance policy issued by Best Texas General Agency  acting as the authorized managing general agent for State and County Mutual Fire Insurance Company. Best Texas provided claims servicing for this policy through ACCC Claims Services.  Martinez and Davilla filed a lawsuit against Romero and their attorney forwarded a copy of the original petition to ACCC Claims.  ACCC Claims forwarded a copy of the original petition to its attorney, Trey Harlin, and requested that he confirm whether service had been effected on Romero. Over the next several months, Harlin and Tkach had several communications in which Harlin asked whether Romero had been served and asked that he be provided with the executed citation when Romero was served.  When Romero was finally served, Tkach did not send a copy of the executed citation to Harlin or ACCC Claims and the trial court ultimately signed  a  default  judgment  against  Romero  in  the  underlying  suit,  awarding  damages  in  excess  of $150,000.  Tkach did not forward the default judgment to ACCC Claims until June 26, 2006, almost five months later after it had become a final, non-appealable order.

Martinez and Davilla subsequently filed suit seeking coverage as third-party beneficiaries.  The policy contained provisions regarding contractual duties on the part of a person seeking coverage, including: (1) the duty to provide prompt notice of how, when, and where the accident occurred; (2) the duty to cooperate in the investigation, settlement, and defense of any claim; and (3) the duty to promptly send copies of any notices or legal papers. Best Texas argued that Romero’s breach of these conditions precedent prejudiced it and State & County and precluded coverage for Martinez and Davilla's claims against Romero.  Martinez and Davilla addressed the conditions precedent of notice of the accident and notice of the suit, arguing that Best Texas was provided actual notice of the accident, the underlying suit, and service of citation on Romero.  But Martinez and Davilla did not challenge the granting of summary judgment on the basis that Best Texas was prejudiced by Romero’s failure to satisfy the condition precedent to cooperate in the investigation, defense and settlement of the claims against her.  Thus, the court of appeals affirmed the summary judgment as to Best Texas and State & County on that basis.

With regard to ACCC Claims, it asserted that it was not a party to the policy made the subject of the claims alleged by Martinez and Davilla and that it could not be liable for the contractual obligations to be performed by the insurer under the policy.  Because Martinez and Davilla did not claim error by the trial court in granting summary judgment in favor of ACCC Claims on that basis, the court of appeals affirmed the summary judgment in its favor.