Appellate: Civil; Business; Consumer; Insurance;
Litigation; Personal Injury; Procedure.

PAJ, Inc. v. Hanover Ins. Co.
1-11-2008  05-08490
Justice O'Neill. Justice Willett filed a dissenting opinion, in which Justice Hecht, Justice Wainwright, and Justice Johnson joined.

Insurance. Untimely notice of claim or suit does not defeat coverage, unless the insured is prejudiced.

PAJ, Inc., a jewelry manufacturer and distributor, purchased a commercial general liability ("CGL") policy from Hanover Insurance company that covered liability for advertising injury. The policy required PAJ to notify Hanover of any claim or suit brought against PAJ "as soon as practicable." In 1998, Yurman Designs, Inc. sued PAJ for copyright infringement. PAJ did not notify Hanover of the suit until four to six months after litigation commenced. PAJ brought this suit against Hanover, seeking a declaration that Hanover was contractually obligated to defend and indemnify PAJ in the copyright suit. The trial court granted Hanover's motion, and denied PAJ's, holding that Hanover was not required to demonstrate prejudice to avoid coverage under the policy. The court of appeals affirmed. 170 S.W.3d 258, 259. Held: Reversed and rendered that the insurer could not deny coverage, because of untimely notice. The remaining issues are remanded to the trial court. An insured's failure to timely notify its insurer of a claim, or suit, does not defeat coverage under the policy, if the insurer was not prejudiced by the delay. 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.

State Bar of Texas Civil Digest
January 23, 2008