- Fifth Circuit Affirms Ruling that Notice Requirement in Coverage "Buy Back" Applies Regardless of Lack of Prejudice
- July 22, 2013 | Author: George B. Hall
- Law Firm: Phelps Dunbar LLP - Houston Office
The U.S. Fifth Circuit Court of Appeals, applying Texas law, recently held that the failure to comply with a notice provision of an endorsement may entitle an insurer to deny coverage without proof of prejudice. Starr Indemnity & Liability Co. v. SGS Petroleum Service Corp., 2013 WL 3013873 (5th Cir. June 18, 2013).
An insurer issued an umbrella policy that contained a pollution liability coverage “buy back” endorsement, which stated that the pollution coverage would not apply unless the insured reported the incident in writing “within 30 days after having been known.” Fifty-nine days after an accidental release of chemicals, the insured submitted a claim. The insurer denied coverage due to the insured’s non-compliance with the notice provision in the endorsement.
The Fifth Circuit affirmed the district court's holding that the insured's failure to notify within 30 days prevented coverage from attaching. It reasoned that the notice provision in the endorsement was to be treated differently than a standard notice provision since the pollution "buy back" was "separately negotiated by the parties, and with a clear notice requirement." The Fifth Circuit held that whether the insurer suffered prejudice as a result of the failure to comply with the notice requirement was irrelevant because the policy should be enforced according to its terms.