Liberty Mut. Ins. Co. v. Cruz
| Decision Date | 08 December 1993 |
| Docket Number | No. D-3990,D-3990 |
| Citation | 883 S.W.2d 164 |
| Parties | LIBERTY MUTUAL INSURANCE COMPANY, Petitioner, v. Roque CRUZ and Rosaura Cruz, Individually and as next friends for Rosibel Cruz, Alvaro Cruz and Perla Evelyn Cruz, Minor Children. |
| Court | Texas Supreme Court |
C. Douglas Calvert, Dallas, for petitioner.
Charles Montemayor, Lawrence L. Mealer, Dallas, for respondents.
This is a summary judgment case concerning the liability of an insurance company for a default judgment rendered against its insured without notice of suit to the insurance company. We hold that failure to comply with the insurance policy notice provision by not providing notice of suit until after a default judgment is final, when the insurer does not otherwise have actual knowledge of the suit, prejudices the insurer as a matter of law and relieves the insurer of liability under the policy. We therefore reverse the judgment of the court of appeals and render judgment that Mr. and Mrs. Cruz take nothing.
Metropolitan Transportation Company, a taxicab company, was a named insured under comprehensive automobile and umbrella excess liability policies issued to Southland Financial Corporation by Liberty Mutual Insurance Company. On April 17, 1986, a Metropolitan cab driver lost control of a cab, and struck and injured three children of Roque and Rosaura Cruz. On June 3, 1986, Mr. and Mrs. Cruz filed suit against Metropolitan to recover for personal injuries to their children. No notice or citation was sent to Liberty Mutual. A default judgment was entered in the amount of $3.2 million against Metropolitan on May 20, 1987. On July 2, 1987, Liberty Mutual received a copy of the default judgment. Pursuant to an order assigning Metropolitan's causes of action to Mr. and Mrs. Cruz, they sued Liberty Mutual on September 14, 1987.
Mr. and Mrs. Cruz filed a motion for partial summary judgment, seeking a determination that Metropolitan's coverage, under the Liberty Mutual policies, was not cancelled in accordance with the terms of the policies and was still in effect at the time of the accident. 1 Liberty Mutual also filed a motion for summary judgment asserting that, even if coverage was not cancelled, it had not been given proper notice of Mr. and Mrs. Cruz's suit against Metropolitan and, thus, there was no coverage. The trial court granted Liberty Mutual's summary judgment and denied Mr. and Mrs. Cruz's summary judgment. The court of appeals reversed and rendered judgment that the insurance policies had not been cancelled before the accident, and remanded the cause for trial. 853 S.W.2d 714, 717 (1993).
The insurance policies placed a duty upon the insured to notify the company in the event of an occurrence, if a claim was made, or if a suit was brought. Neither Metropolitan nor Mr. and Mrs. Cruz notified Liberty Mutual of suit. Mr. and Mrs. Cruz knew who the insurer (Liberty Mutual) was, and claim to have sent a letter of representation, 2 but did not send Liberty Mutual notice of suit against its insured. Although Liberty Mutual later became aware of the accident through a newspaper article, Liberty Mutual did not receive notice of suit against its insured until July 2, 1987, 41 days after entry of the default judgment against Metropolitan.
Although notice, the condition precedent to the policy, was not given according to the policy, Liberty Mutual does not escape liability, unless it was "prejudiced" because of the lack of notice. 3 Liberty Mutual argues that failure to send any notice of suit to Liberty Mutual and the subsequent entry of a default judgment against Metropolitan that became final is prejudice to Liberty Mutual as a matter of law. We agree that an insurer that is not notified of suit against its insured until a default judgment has become final, absent actual knowledge of the suit, is prejudiced as a matter of law. 4 Here, Liberty Mutual was...
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