- Fifth Circuit Holds Insured Had Sufficient Notice Of Endorsement In Renewal Policy That Changed And Precluded Coverage
- May 28, 2013 | Author: George B. Hall
- Law Firm: Phelps Dunbar LLP - New Orleans Office
The Fifth Circuit recently held that an insurer did not breach its duty to defend because the triggered policy included an endorsement excluding coverage that the prior policy did not have and that the insured could not avoid its application on the basis of claimed ignorance of it. Materials Evaluation and Technology Corp. v. Mid-Continent Cas. Co., 2013 WL 1693697 (5th Cir. March 18, 2013).
Two of the insured’s employees sustained injuries while working on its behalf for a client. The employees filed suit against the client, which settled and demanded the insured reimburse it for legal costs and litigation expenses. The insured’s insurer denied defense and indemnity, and the insured sued its insurer. The insured had CGL insurance for a two-year period. The first policy contained an employer’s liability exclusion that did not exclude coverage for an employee’s injuries if liability arose from a third-party contractual relationship. The second policy included an endorsement that excluded coverage for an employee’s injuries arising from a third-party contractual relationship. The court concluded that since the injuries occurred during the term of the second policy, it was triggered and, as it contained the endorsement excluding coverage, the insurer did not owe a duty to defend.
On appeal, the insured contended that Texas law presumes that a policy renewal is made on the same terms of the original policy unless there is evidence of a contrary agreement and that the endorsement in the second policy was therefore not enforceable. The insured further contended that the insurer did not provide “actual notice” that the endorsement was in the policy. The Fifth Circuit noted that the insured received sufficient notice of the endorsement when it received the proposed policy prior to its inception and the policy declaration page and the endorsement page explicitly notified the insured that the endorsement had changed the terms of the policy. The Fifth Circuit affirmed, holding that the endorsement was valid and enforceable and that the insurer did not owe a duty to defend.