Recently, the United States District Court for the Western District of Texas denied summary judgment on issues surrounding an Insured’s prompt notice of a claim to the Insurer. In GuideOne Specialty Mutual Ins. Co. v. Fellowship at Forest Creek, No. AU-16-CA-597-SS, 2018 WL 298788 (W.D. Tex. Jan. 3, 2018) (slip op.) the Court addressed motions for summary judgment on several issues including the diligence of the Insured’s notice of claim to the Insurer. Based on the existence of various issues of material fact, the Court denied summary judgment to both parties.

The case arose from a dispute relating to a hail/wind damage claim between the Fellowship at Forest Creek (FFC) in Round Rock, Texas, and their insurance company, GuideOne Specialty Mutual Insurance Company (“GuideOne”). Staff at FFC noticed considerable leaking in one of FFC’s building in 2014/2015 whenever it rained. Upon investigation by maintenance staff and a parishioner with experience in roofing, FFC determined the cause of the leaking was previous hail damage. FFC hired a public adjuster who, through engineers, determined the hail damage occurred in May 2012. After a five month investigation, FFC submitted a claim to GuideOne in January 2016. GuideOne hired an engineer who investigated and concluded the damage stemmed from a storm in May 2009. As a result, GuideOne denied FFC’s claim and filed an action for declaratory judgment that the damage was not covered by GuideOne’s policy. FFC counterclaimed, alleging breach of contract and violation of the Texas Insurance Code. Both parties subsequently filed motions for summary judgment.

The Court considered the concept of “prompt” notice of a claim and when “reasonable” notice is made—meaning if prompt notice is evaluated in the time elapsed from the date of loss or from the date that the insured learns of the loss. Considering conflicting case law, the Court opted “to consider the diligence and timeliness of the insured in discovering the damage as proper factors in evaluating whether the notice was reasonably prompt.” An additional factor in denying liability based on failure to provide prompt notice is whether the insurer was prejudiced as a result of the insured’s delay in providing notice.

The Court denied summary judgment for both parties based on the existence of several fact issues including: (1) dispute as to when the hail damage occurred; (2) dispute as to when FFC first learned of the hail damage; and (3) dispute as to whether FFC reported the claim within a reasonable period of time.  The denial was based on several key pieces of evidence including the experts’ disagreement on the date of the loss, which is material in determining whether FFC gave reasonably prompt notice. In its denial, the Court rejected GuideOne’s assertion that FFC’s five month investigation was unreasonable as a matter of law.

Editor’s Note: This case underscores the importance in evaluating the insured’s diligence in discovering the claim damage. Careful consideration should be directed to the underlying policy and to whom notice is required—whether it is sufficient for an agent of the insured to discover the loss, or whether it necessitates the knowledge of the insured’s officers.

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