Defendant Insureds, Lonergan Law Firm, PLLC, et al. (“Lonergan”), recently appealed to the Fifth Circuit Court of Appeals a Northern District of Texas ruling against it, which found it failed to meet a material condition of the policy by not sending its Notice of Claim (“Notice”) to the Claims Department. Landmark American Insurance Co. (“Landmark”) filed suit against its insureds seeking to avoid liability for coverage by arguing that, even though it received notice via a Claim Supplement during the policy period, the insureds failed to send the notice to the location mandated by the Policy.1
The Fifth Circuit found it was undisputed that Lonergan “reported” or “provided information of” the claim to Landmark as required by the policy. Landmark argued that the “Notice of Claim” provision in the Policy obligated Lonergan to “Please send all claim information to: Attention: Claims Dept. [address].” In support of its argument, Landmark cited a string of cases, which held that the insured’s notice of claims “shall” be sent to a specific address. However, the Fifth Circuit reviewed the Landmark policy’s language and quickly distinguished it from the cases cited:
But Landmark’s policy is distinguishable from these cases, because the ‘where’ clause is defined in precatory (‘please’), not mandatory (‘shall’) terms. By its express terms, Landmark’s direction of notice to the claims department cannot be considered a material condition, breach of which automatically justified the insurer’s denial of coverage. We are guided by the Texas Supreme Court, which determined that requiring notice of a claim be made to the insurer ‘as soon as practicable’ is not a material condition of coverage when notice was provided within the time specified in the claims made policy. Prodigy Commc’ns Corp. v. Agric. Excess & Surplus Ins. Co., 288 S.W.3d 374, 382 (Tex. 2009). While an insured’s breach of a material reporting obligation relieves an insurer of its duty to defend and indemnify the insurer, the same is not necessarily true when an insured breaches an immaterial notice condition. See id. Thus, given the immateriality of the particular notice condition expressed here, Landmark may be relieved of its duty to defend and indemnify only upon a showing that it was prejudiced by the breach. See id.; E. Tex. Med. Ctr. Reg’l Healthcare Sys. v. Lexington Ins. Co., 575 F.3d 520, 529– 30 (5th Cir. 2009) (‘[N]otice of suit is an obligation that is subject to the need to show prejudice.’) (discussing Prodigy, 288 S.W.3d at 381). Here, the district court never reached the question of whether Landmark was prejudiced by Lonergan’s alleged failure to comply with the Policy’s notice provisions because the court held that Lonergan failed to satisfy her reporting obligation.
In finding the policy’s “where to report” a “request” immaterial to the obligatory “reporting” requirement, the Fifth Circuit reversed the district court’s granting of summary judgment to Landmark and remanded the matter for proceedings consistent with its opinion.
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1 Landmark American Ins. Co. v. Lonergan Law Firm, P.L.L.C., No. 19-10385 (5th Cir. Jun. 4, 2020).
