In Moreno v Sentinel Insurance Co. Ltd., No. 20-20621, 2022 WL 1791949 (5th Circuit, June 2, 2022, mem. op.), Moreno worked as a painter for N.F. Painting, Inc. on a project in which N.F. Painting contracted with homebuilder Beazer Homes. While working, Moreno fell from a ladder and sustained injuries. Moreno subsequently filed suit against N.F. Painting and Beazer Homes for alleged negligence. 

N.F. Painting was insured by Sentinel Insurance Company, Limited (“Sentinel”). However, after being served with Moreno’s suit, N.F. Painting hired its own attorney, Lopez, rather than reporting or tendering the suit to Sentinel, because N.F. Painting believed that there would be no coverage because Moreno was an employee of N.F. Painting (and the policy excluded coverage for bodily injury to employees). 

Beazer Homes was an “additional insured” under the Sentinel policy.  Beazer Homes promptly notified Sentinel of the lawsuit, by forwarding to Sentinel a copy of Beazer Homes’ Demand and Tender for Defense and Indemnity letter addressed to N.F. Painting.  Upon receipt of this letter, Sentinel sent multiple correspondences to N.F. Painting and Lopez requesting that they contact Sentinel to discuss the claim. Conversations and responses eventually ensued, including Lopez emailing Sentinel the state court petition in response to Sentinel’s request for the same, but neither N.F. Painting nor Lopez requested that Sentinel defend and indemnify N.F. Painting. 

Next, Sentinel sent a letter to N.F. Painting and Lopez disclaiming coverage under the policy  based on Moreno's status as an employee, and informing N.F. Painting that “if there are new allegations or additional information that you feel may alter [Sentinel’s] position as to the coverage, please forward that information to us for consideration.”

Subsequently, Moreno filed a First Amended Petition alleging, for the first time, that he was injured while working “as an independently contracted painter.”  This Petition was not sent to Sentinel. Seven months later, Moreno and N.F. Painting submitted an Agreed Judgment, which was signed by the state court judge, and decreed, among other things, that Moreno was an independent contractor and was entitled to recover a total of $1,627,541.35 in damages from N.F. Painting.

One month later, Moreno, proceeding as a third-party beneficiary to the insurance policy, sued Sentinel seeking damages in the amount awarded against N.F. Painting in the Agreed Judgment.  In response, Sentinel sought summary judgment contending that its duty to defend N.F. Painting was never triggered. 

The Fifth Circuit concluded that Sentinel's duty to defend N.F. Painting was never triggered because N.F. Painting never sought a defense from Sentinel. “That another insured, Beazer Homes, notified Sentinel of the suit against it and demanded a defense by Sentinel, as N.F. Painting's insurer, did not obligate Sentinel to also undertake N.F. Painting's defense.” Texas law requires a request from the insured for whom a defense would be provided, not someone else, to trigger the duty to defend.”

The Fifth Circuit further concluded that Lopez’s email to Sentinel attaching a copy of Moreno's initial state court petition (in response to Sentinel’s request) did not trigger a duty to defend. “An insured's transmittal of suit papers to the insurer triggers the duty of defense because, in the ordinary case, the documents are sent with the expectation that having the documents will enable and cause the insurer to promptly provide (or at least fund) the insured's defense against the claims asserted against it. This, however, is not the ordinary case. Rather, … given N.F. Painting's initial determination that the Sentinel policy did not cover Moreno's claims, Attorney Lopez's continued representation of N.F. Painting, and the absence of any contemporaneous communications regarding N.F. Painting's defense, … [Lopez’s email] cannot reasonably be construed to convey an expression of expectation, intent, or desire by N.F. Painting to have Sentinel assume its defense.”  “It is these additional facts that distinguish this case from the mom and pop hardware store scenario … where the insureds’ prompt forwarding of the lawsuit papers to the insurer ordinarily would, without more, trigger the insurer’s duty of defense.”

Finally, the Fifth Circuit rejected Moreno’s argument that Sentinel’s letter disclaiming coverage demonstrated that Sentinel understood N.F. Painting expected Sentinel to provide it with a defense and, thus, an express request for a defense was unnecessary, concluding that the letter could not reasonably support that inference.  Also, N.F. Painting never contacted Sentinel to discuss the possibility that the newly alleged independent-contractor status would impact Sentinel's earlier assessment of the policy's coverage.

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