TX top bench allows insureds to file claims late

By Rob Luke | Jan 14, 2008

Justice Harriet O'Neill

AUSTIN -- Insurers can't deny coverage if an insured is tardy in filing so long as the delay doesn't harm the insurer, the Texas Supreme Court ruled in a split decision Jan 11.

In Prime Art and Jewel, Inc. v. Hanover Insurance Company, the majority overturned a ruling for the insurer by both the trial court and the Fifth District Court of Appeals. Both courts ruled that Hanover wasn't required to show prejudice from the delay to avoid covering the PAJ claim.

The five-justice majority disagreed. "We hold ... that an immaterial breach does not deprive the insurer of the benefit of the bargain and thus cannot relieve the insurer of the contractual coverage obligation," wrote Justice Harriet O'Neill.

But a four-justice dissenting opinion held that the unambiguous language in the notice-of-suit section of PAJ's policy must be enforced. Lack of positive law dictating otherwise means the appeals court decision should be upheld, the dissent concluded.

"We cannot fashion for parties a new-and-improved contract... nor impose by judicial fiat a brand of justice, however earnest and strongly felt, that we find more personally congenial," wrote Justice Don Willett.

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