Last Thursday, in C.L. Thomas Inc. et al. v. Lexington Insurance Co. et al., 13-13-00566-CV, Sept. 11, 2014, the Thirteenth Court of Appeals held that Lexington Insurance did not have a duty to cover a $5 million arbitration award of a truck driver who was fired after getting stabbed in the neck during a workplace fight.  The altercation arose when another driver employed by the same company became upset that he had been assigned to drive the same truck.  After the altercation, the drivers’ employer, Thomas, fired both of the employees.  The injured employee filed suit against Thomas alleging wrongful termination and defamation.  The parties attended arbitration, and the injured employee was awarded $5,091,777.  Seeking to recoup the amount it had to pay the injured employee, Thomas made claims under its insurance policy that it had with Lexington as well as under a policy it had with another insurer.  Lexington denied coverage because Thomas’s insurance claims were denied because Thomas had failed to timely provide notice of a potential claim.  Thomas then sued Lexington alleging Lexington breached the insurance contract and violated the Texas Insurance Code.  The parties filed cross-motions for summary judgment, and the trial court ultimately determined Lexington did not owe a duty to cover Thomas’s judgment because Thomas had failed to timely provide notice of the claim to the carrier.  Under the Policy, Thomas was required to “immediately” notified Lexington of any claim that could exhaust more than 25% of the insurance beneath Lexington’s umbrella policy.  As such, according to the Court, Thomas should have notified Lexington as soon as he received the arbitration demand. 

The Court of Appeals noted: “Notice that comes after judgment defeats all of the recognized purposes of the notice requirements because it renders the insurer unable to investigate the claim, defend the claim or negotiate in an attempt to settle the claim.”  As such, the Corpus Christi Court of Appeals affirmed the trial court’s grant of Lexington’s Motion for Summary Judgment.

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