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Click here for the full text of this decision FACTS:Beatrice Crocker was a resident of a nursing home owned by Emeritus Corp. She filed suit in state court against Emeritus and Richard Morris, a nursing home employee, seeking compensation for injuries suffered when she was hit by a door swung open by Morris. Crocker’s claims against Emeritus were covered by a commercial general liability policy issued by National Union Fire Insurance Co. of Pittsburgh. Because Morris was acting within the course and scope of his employment when the accident occurred, he qualified as an additional insured under the policy. National Union defended Emeritus, the named insured but did not defend Morris even though the claims against him were covered by the policy and National Union knew he was a named defendant that had been served. Morris did not know that he was an additional insured under the policy. National Union did not inform Morris that he was an insured nor did it offer to defend him. Morris was served, but he “did not forward the suit papers to National Union or otherwise inform it that he had been sued, and did not request a defense from either National Union or Emeritus.” Morris never answered the suit and did not appear at trial. National Union attempted to contact Morris about Crocker’s claims, both before and after Crocker filed her suit, but to no avail the certified mail was returned, and the repeated phone messages were not returned. Morris spoke privately with Crocker’s attorney at a deposition, but Morris refused to speak in private with Emeritus’ counsel. After the evidence was presented, the state trial court granted Crocker’s motion to sever the claims against Morris. The claims against Emeritus were submitted to the jury, which returned a take-nothing verdict, finding that Emeritus, acting “by and through its agents acting within the course and scope of their employment,” including Morris, was not negligent. A few days later, however, the trial court entered a $1 million default judgment against Morris on the severed claims. Crocker sued National Union to collect the judgment, asserting that she was a third-party beneficiary to the policy. National Union removed the case to federal court, and both parties moved for summary judgment. National Union argued that Morris never triggered the duty to defend, because he failed to forward the suit papers or otherwise notify National Union that he had been sued and he did not ask National Union to provide a defense. National Union contended that because Morris failed to comply with the notice provisions of the policy, he did not invoke coverage or the right to a defense under the policy, meaning that Crocker, who now purports to stand in Morris’ shoes, cannot collect under the policy either. Crocker responded that even though Morris did not comply with the notice-of-suit provision, National Union had actual knowledge of Crocker’s suit and hence was not prejudiced by Morris’ failure to forward the suit papers. Crocker contends that National Union’s actual knowledge of the suit, coupled with its failure to notify Morris that he was covered, amounted to a breach of its duty to defend Morris, thus making National Union liable to Crocker for the full $1 million default judgment. The federal district court agreed with Crocker, concluding that Texas law required National Union to show prejudice in order to establish a notice-based policy defense. The court also found that National Union breached a duty to defend Morris by failing to notify Morris that it would defend him. Therefore, the court granted summary judgment in favor of Crocker and awarded her $1 million. National Union appealed to the 5th Circuit, which certified three questions to the court. HOLDING:The principal issue in the certified question from the 5th U.S. Circuit Court of Appeals is whether an insurer has a duty to notify an additional insured of available liability coverage. On the facts presented, the court concluded that Texas law imposes no such extracontractual duty. The 5th Circuit first asked: “Where an additional insured does not and cannot be presumed to know of coverage under an insurer’s liability policy, does an insurer that has knowledge that a suit implicating policy coverage has been filed against its additional insured have a duty to inform the additional insured of the available coverage?” The court answered the question in the negative. Insurance policies are written contracts, interpreted and enforced according to settled rules of construction. One must give the policy’s words their plain meaning, without inserting additional provisions into the contract. Thus, the court held that an insurer that has not been notified that a defense is expected bears no extracontractual duty to provide notice that a defense is available to an additional insured who has not requested one. The next question asked: “Does proof of an insurer’s actual knowledge of service of process in a suit against its additional insured, when such knowledge is obtained in sufficient time to provide a defense for the insured, establish as a matter of law the absence of prejudice to the insurer from the additional insured’s failure to comply with the notice-of-suit provisions of the policy?” The court answered this question in the negative. Accordingly, the court held that because insurers need not provide coverage to additional insureds who never seek it, National Union had no duty either to inform Morris of available coverage or to voluntarily undertake a defense for him, and National Union’s actual knowledge did not establish lack of prejudice as a matter of law. OPINION:Willett, J., delivered the opinion of the court.

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