Insured’s Failure to “Immediately” Forward Asbestos Lawsuits to Insurer Dooms Its Coverage Bid, FIfth Circuit Affirms

February 28, 2015 | Insurance Coverage

The U.S. Court of Appeals for the Fifth Circuit, affirming a district court’s decision, has ruled that an insurance carrier was not obligated to defend its insured where the insured had not “immediately” forwarded asbestos lawsuits to the insurer – and the insurer did not have to demonstrate that it had been prejudiced by the untimely tender. 

The Case

From approximately 1972 through the early 1980s, Anco Insulations, Inc., sold, installed, repaired, and distributed insulation materials that contained asbestos. It was sued in approximately 2,700 asbestos-related lawsuits filed in Louisiana, Texas, and Mississippi.

National Union Fire Company of Pittsburgh, Pennsylvania, insured Anco under a primary general liability insurance policy effective from January 1, 1987 to January 1, 1988.

In September 2007, Anco filed a complaint seeking a declaratory judgment against several of its excess liability insurers. National Union was not named as a defendant in that initial complaint. During the course of discovery, Anco allegedly became aware of the existence of the National Union policy.

On April 23, 2009, Anco forwarded all suits to National Union that had been served on Anco and tendered them to National Union under the policy. The following month, Anco added National Union as a party-defendant to its pending declaratory judgment action against its excess insurers.

In December 2011, National Union moved for partial summary judgment, contending that it was not liable for any of Anco’s defense costs in the underlying asbestos lawsuits or, alternatively, that National Union was not obligated to reimburse Anco or any of its other primary insurers for legal fees or costs incurred prior to April 23, 2009 – the date on which Anco had first forwarded its asbestos lawsuits to National Union.

The district court granted National Union’s motion, concluding that the record established that Anco had first tendered its claims under the policy on April 23, 2009. Relying on that date as the first tender of claims, the district court ruled that Anco’s failure to tender defense of the lawsuits to National Union timely constituted a breach of the policy’s requirement that Anco “immediately” forward any lawsuits to National Union. The district court ruled in favor of National Union.

Anco appealed to the Fifth Circuit, arguing that Louisiana law required that, before avoiding coverage, an insurer had to demonstrate that it had suffered prejudice from its insured’s late tender, and that National Union had never asserted that it had been prejudiced by Anco’s untimely tender.

The Fifth Circuit’s Decision

The Fifth Circuit affirmed.

In its decision, the circuit court explained that the general rule in Louisiana was that when the requirement of timely notice was not an express condition precedent to insurance coverage, the insurer must demonstrate that it was sufficiently prejudiced by the insured’s late notice to deny coverage. This general rule, the circuit court added, was subject to an exception: Louisiana law enforced provisions of insurance contracts that required notice as a condition precedent without also requiring the insurer to make a particular showing of prejudice.

Accordingly, because Anco first tendered defense of the underlying lawsuits on April 23, 2009 and because the National Union policy required that Anco “immediately” forward any claims, suits, or process received by Anco, the circuit court ruled that Anco’s failure to comply with the notice provision of the policy precluded coverage of its untimely tendered lawsuits.

The Fifth Circuit concluded that because Louisiana law did not require an insurer to demonstrate prejudice as a result of late tender when timely notice was a condition precedent to coverage, the district court had correctly determined that Anco had breached the policy by failing to tender its claims immediately.

The case is Anco Insulations, Inc. v. National Union Fire Ins. Co., No. 13-31313 (5th Cir. Feb. 25, 2015).

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