in Re Landmark American Insurance Company, Relator
This text of in Re Landmark American Insurance Company, Relator (in Re Landmark American Insurance Company, Relator) is published on Counsel Stack Legal Research, covering Court of Appeals of Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.
Opinion
In The Court of Appeals Seventh District of Texas at Amarillo
No. 07-19-00270-CV
IN RE LANDMARK AMERICAN INSURANCE COMPANY, RELATOR
OPINION ON ORIGINAL PROCEEDING FOR WRIT OF MANDAMUS
September 3, 2019
MEMORANDUM OPINION Before QUINN, C.J., and CAMPBELL and PIRTLE, JJ.
Landmark American Insurance Company (Relator) petitions for a writ of
mandamus directing the Honorable Pat Phelan, 286th Judicial District, Hockley County,
(Respondent) “to vacate his order compelling Relator to present a corporate
representative for deposition.” It believes itself entitled to same because “the trial court
clearly abused its discretion by misapplying Texas law and ordering a deposition that falls
outside the scope of discovery.” We conditionally grant the writ.
Background
The underlying suit involves asphalt testing. Levelland Independent School District
needed a new parking lot, and Lubbock Labs, Inc. (Labs) was retained to test the asphalt.
Those tests were done but allegedly proved faulty. That resulted in the contractor replacing the asphalt and suing Labs to recoup the loss. A demand letter was sent to
Labs on March 28, 2016. At the time, Labs was the named insured of a professional
liability policy issued by Landmark. The policy term ran from May 8, 2015, to May 8, 2016.
Through the policy, Landmark agreed to “pay on behalf of the Insured . . . all sums that
the Insured becomes legally obligated to pay as Damages . . . provided that the . . . Claim
is first made against the Insured during the Policy Period, and reported to the Company
no later than sixty (60) days after the end of the Policy Period.”
Labs timely forwarded the contractor’s demand letter to the insurance agency from
which it acquired the Landmark policy (BCT). Yet, that agency did not deliver the
correspondence to Landmark until February of 2017, or approximately nine months after
the May 2016 date on which the policy expired. Consequently, Landmark denied
coverage due to the belatedness of the notice, despite agreeing to provide a defense.
That resulted in Labs filing a third-party petition against the insurer and BCT wherein
Labs, in effect, sought to enforce the policy and recover damages.
Once Landmark answered Lab’s third-party petition and moved for both a
traditional and no-evidence summary judgment, Labs moved to compel the deposition of
Landmark. Allegedly, the sole purpose for that deposition was to discover whether the
delay in notifying Landmark of the contractor’s claim actually caused the insurer to suffer
prejudice. If it did not, then Labs believed the delay was inconsequential and the policy
was enforceable. Landmark disagreed; it believed the topic of prejudice was irrelevant.
The trial court ultimately heard the motion to compel and ordered Landmark to cooperate
in scheduling “the requested corporate deposition within the next 60 days and/or a date
2 that is mutually agreeable to all parties.” That order underlies the petition for writ of
mandamus.
Disposition
The standard of review is well settled and needs no explanation here. Instead, we
refer the parties to its discussion in the seminal opinion of Walker v. Packer, 827 S.W.2d
833 (Tex. 1992) (orig. proceeding), and our opinion in In re Hesse, 552 S.W.3d 893 (Tex.
App.—Amarillo 2018, orig. proceeding).
The substantive issue before us is rather straightforward. It implicates the delay
in notifying Landmark of the contractor’s claim and whether the failure to abide by the
notice provision in the insurance agreement bars enforcement of the policy. Labs invoked
the Supreme Court opinion in PAJ, Inc. v. Hanover Ins. Co., 243 S.W.3d 630 (Tex. 2008),
to say it does not. Landmark invoked the Supreme Court opinion in Prodigy Comm’ns
Corp. v. Agric. Excess & Surplus Ins. Co., 288 S.W.3d 374 (Tex. 2009), to say it did.
In answering the dispute, we turn to the Supreme Court’s opinion in Fin. Indus.
Corp. v. XL Specialty Ins. Co., 285 S.W.3d 877 (Tex. 2009). After discussing Prodigy,
the Financial Industries court held “an 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.” Id.
at 879. It so held after observing that “for the insurer, the inherent benefit of a claims-
made policy is the insurer’s ability ‘to “close its books” on a policy at its expiration and
thus to attain a level of predictability unattainable under standard occurrence policies.’”
Id. at 878. Since notice of the claims was afforded the insurer within the policy’s term in
Prodigy, the insured’s “alleged failure to give notice ‘as soon as soon as practicable’ was
3 immaterial because it did not interfere with this benefit.” Id. at 878; accord Nicholas
Petrol., Inc. v. Mid-Continent Cas. Co., No. 05-13-01106-CV, 2015 Tex. App. LEXIS 7489,
at *16 (Tex. App.—Dallas July 21, 2015, no pet.) (mem. op.) (citing Prodigy and stating
that “[b]ecause the purpose of a claims-made policy is to define the limits of the insurer’s
obligation, when there is no timely notice, there is no coverage”).
Here, no one disputes that the policy acquired by Labs was a claims-made, as
opposed to an occurrence, policy. See Prodigy Comm’ns Corp., 288 S.W.3d at 379
(quoting 3 ROWLAND H. LONG, THE LAW OF LIABILITY INSURANCE § 12A.05[3] (2006), and
explaining that a claims-made policy only covers those claims first asserted against the
insured during the policy period and provides unlimited retroactive coverage without
prospective coverage while an occurrence policy covers only claims arising out of
occurrences happening within the policy period regardless of when the claim is made and
provides unlimited prospective coverage without retroactive coverage). Similarly
undisputed is that Landmark was not notified of the contractor’s claim against Labs until
after expiration of both the policy term and the sixty-day grace period appended to its end.
Given these circumstances, whether Landmark suffered prejudice due to the delay in
notice is irrelevant. See Oceanus Ins. Co. v. White, 372 S.W.3d 700, 705 (Tex. App.—El
Paso 2012, no pet.) (quoting Prodigy and stating that, with a claims-made policy, a claim
must be made within the policy period and, without timely notice, there is no coverage).
In allowing Labs to depose Landmark on the topic of prejudice, the trial court held
otherwise. That decision constitutes an instance of abused discretion because the trial
court’s decision failed to comport with settled law. See In re C.M.G., 339 S.W.3d 317,
4 319 (Tex. App.—Amarillo 2011, no pet.) (stating that a trial court abuses its discretion
when its decision fails to comport with guiding rules and principles).
Next, and as we stated in In re Barlow, No.
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