Berkley Regional Insurance v. Philadelphia Indemnity Insurance
2012 U.S. App. LEXIS 15998
| 5th Cir. | 2012Background
- Excess carrier Berkley appeals after district court granted Berkley summary judgment for Rouhani verdict excess over Nautilus primary policy.
- Underlying incident: 2004 slip-and-fall by Rouhani at Towers of Town Lake, Tower's liability covered by Nautilus ($1M) with excess through Philadelphia ($20M).
- Rouhani sued Towers; Nautilus defended; Philadelphia allegedly had no notice of the suit before trial verdict.
- Jury awarded Rouhani $1,654,663.50; judgment plus interest and costs exceeded Nautilus’ primary coverage, triggering Berkley’s exposure.
- After verdict, Towers/Nautilus pursued delays via supersedeas bonds; Berkley paid remaining excess after Philadelphia refused to pay.
- Berkley now owns the underlying rights through assignments and sues Philadelphia as assignee; issue is whether late notice to Philadelphia prejudiced the insurer such that coverage is forfeited.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did late notice to the excess carrier prejudice coverage? | Philadelphia contends late/no notice defeats coverage due to prejudice. | Berkley argues late notice can be fatal to coverage under prejudice rule. | Prejudice required; late notice can support prejudice if substantial rights are lost. |
| Is the notice-prejudice rule applicable to excess carriers as to preclude coverage for late notice? | Philadelphia asserts same prejudice standard applies to excess carriers. | Berkley contends the rule should not favor excess carriers differently than primary. | Excess carriers are subject to prejudice rule; prejudice can develop from late notice. |
| Does evidence show Philadelphia’s lack of notice caused prejudice given loss of mediation, defense participation, and settlement leverage? | Philadelphia was deprived of investigation, settlement participation, and negotiation leverage. | Berkley argues prejudice is insufficient or too late to be shown for excess carrier. | Material facts creating prejudice exist; remand to determine extent of prejudice. |
| Does PAJ/ Crocker apply to the excess-carrier context for prejudice analysis? | PAJ/Crocker support that immaterial breaches do not defeat coverage when not prejudicial. | Defendant argues Crocker is distinguishable or not controlling for excess carriers. | Texas precedent supports applying prejudice principle; statement that immaterial breach not defeat coverage. |
Key Cases Cited
- PAJ, Inc. v. Hanover Insurance Co., 243 S.W.3d 630 (Tex. 2008) (immaterial breach does not defeat coverage if insurer not prejudiced)
- Hernandez v. Gulf Group Lloyds, 875 S.W.2d 691 (Tex. 1994) (non‑prejudiced insurer must perform; contract principles apply)
- Cutaia v. Members Mutual Ins. Co., 476 S.W.2d 278 (Tex. 1972) (notice/precondition precedent leading to forfeiture absent prejudice)
- Crocker v. National Union Fire Ins. Co. of Pittsburgh, 246 S.W.3d 603 (Tex. 2008) (breach of notice and prejudice analysis for additional insured context)
- Coastal Ref. & Mktg., Inc. v. U.S. Fid. & Guar. Co., 218 S.W.3d 279 (Tex. App.—Houston [14th Dist.] 2007) (notice prejudice defined by loss of rights to investigate/settle)
- Md. Cas. Co. v. Am. Home Assurance Co., 277 S.W.3d 107 (Tex. App.—Houston [1st Dist.] 2009) (wholly lacking notice constitutes prejudice)
- Hernandez v. Gulf Group Lloyds, 875 S.W.2d 691 (Tex. 1994) (contractual breach prejudice inquiry; material breach requires prejudice)