Federal Court Dismisses Hail Claims For Late Notice That Was Prejudicial

On August 1st the United States District Court for the Western District of Texas – Waco Division – dismissed an insured’s claims for property damage as time-barred.  In DK Heartsill LP v. The Phoenix Insurance Co, the Plaintiff claimed it suffered wind and hail damage in 2018 and that Phoenix breached the insurance policy and committed other acts of bad faith when it made its claim decision.  Plaintiff reported the loss to Phoenix two years and three months after the alleged weather event and four intervening weather events. Because the roof was made of stone and the twenty-seven-month delay in making the claim, the home inspector hired by Phoenix was “not able to determine if the damage occurred during the policy limit and if the damage was due to poor install or wind and hail.”

Phoenix removed this case to federal court. After adequate time for discovery, Phoenix moved for summary judgment and asserted the case should be dismissed for late notice that was prejudicial.  The district court held the Plaintiff failed to provide prompt notice as required by the insurance policy. Sitting in diversity, the district court then analyzed Texas’ requirement to show prejudice in order to raise breach of notice requirement as a defense against claims on certain types of insurance policies.  The district court held that Phoenix showed it was prejudiced by Plaintiff’s breach of the policy’s notice requirement because Plaintiff’s delay in reporting the damage prevented Phoenix from investigating the incident to prepare its defenses against coverage.  The district court also dismissed all extra-contractual claims because there was a bona fide coverage dispute.

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