Texas Supreme Court Answers Another Certified Insurance Law Question from the Fifth Circuit

Q: Must an insurer show prejudice to deny payment on a claims-made policy, when the denial is based upon the insured's breach of the policy's prompt-notice provision, but the notice is nevertheless given within the policy's coverage period? XL Specialty Ins. Co. v. Fin. Indus. Corp., 259 F. App’x 675, 678 (5th Cir. 2007), certified question accepted, 51 Tex. Sup. Ct. J. 298 (Jan. 14, 2008).

A: Insurer must show prejudice to deny payment on a claims-made policy, when the denial is based upon the insured's breach of the policy's prompt-notice provision, but the notice is given within the policy's coverage period.
Financial Industries Corp. v. XL Specialty Ins. Co.,
No. 07-1059 (Tex. Mar. 27, 2009) (Jefferson) (cert. question from the 5th Circuit) (effect of insured's failure to give insurer prompt notice of claim, prejudice criterion, insurance policy construction)
FINANCIAL INDUSTRIES CORPORATION v. XL SPECIALTY INSURANCE COMPANY
The Court answers the question certified by the United States Court of Appeals for the Fifth Circuit. Chief Justice Jefferson delivered the opinion of the Court.

Decided contemporaneously:
Prodigy Communications Corp. v. Agricultural Excess & Surplus Insurance,
No. 06-0598 (Tex. Mar. 27, 2009) (Jefferson) (insurance law, effect of noncompliance with prompt notice requirement as condition precedent for coverage of claim, prejudice factor) (Supreme Court concludes that "“notice as soon as practicable” was not an essential part of the bargained-for exchange under the claims-made policy at issue here." Following its earlier decision in PAJ, the Court holds that, "in the absence of prejudice to the insurer, the insured’s alleged failure to comply with the provision does not defeat coverage."
PRODIGY COMMUNICATIONS CORP. v. AGRICULTURAL EXCESS & SURPLUS INSURANCECOMPANY, N/K/A GREAT AMERICAN E & S INSURANCE COMPANY AND GREAT AMERICANINSURANCE COMPANY; from Dallas County; 5th district (05-05-00442-CV, 195 SW3d 764, 05-30-06) The Court reverses the court of appeals' judgment, renders judgment in part, and remands the case tothe trial court. Chief Justice Jefferson delivered the opinion of the Court, in which Justice O'Neill, Justice Wainwright,Justice Brister, Justice Medina, and Justice Green joined.
Justice Wainwright delivered a concurring opinion.
Justice Johnson delivered a dissenting opinion, in which Justice Hecht and Justice Willett joined.

Links: 2009 Texas Supreme Court Insurance Law Decisions 2008 Insurance Law Rulings by the Tex. Sup. Ct.