Always Request a Defense

By Adams and Reese.  

What contractors can learn from Moreno v. Sentinel Insurance Co. about providing insurance claims even if they think there may not be coverage. 

Moreno v. Sentinel Insurance Co. (5th Cir. 2022) is a timely reminder of how important it is for employers to request defense from their insurance carriers regardless of whether or not they believe they will be provided with coverage. “Duty to defend” means the insurance company’s obligation to defend policy holders against claims made under a liability insurance policy. Read on to learn more about the case, duty to defend and why, according to Adams and Reese, it never hurts to request a defense.  

Summary of the Case 

In July 2016, Osman Moreno fell from a ladder while working as a painter for N.F. Painting. Moreno then sued N.F. Painting and the owner of the project, Beazer Homes, for damages in Texas state court. N.F. Painting had a “Business Owner’s Policy” with Sentinel Insurance but believed that the policy would not respond to Moreno’s suit because it thought Moreno was its employee and, therefore, covered under worker’s compensation. N.F. Painting did not contact Sentinel to request a defense under its liability policy, even when Moreno amended his claim to allege that he was an independent contractor and not an employee. However, N.F. Painting’s co-defendant, Beazer Homes, did not hesitate to contact Sentinel about Moreno’s suit. 

In 2019, without notifying Sentinel, N.F. Painting and Moreno agreed to a $1,627,541.35 judgment. Roughly one month later, Moreno sued Sentinel for breach of contract. The case was removed to federal court. 

Moreno argued that Sentinel breached its insurance contract with N.F. Painting because it refused to pay the agreed judgment on N.F. Painting’s behalf. The trial court disagreed, and dismissed Moreno’s suit against Sentinel. On appeal, the Fifth Circuit affirmed, finding that N.F. Painting had not satisfied the notice requirements of its policy with Sentinel. Accordingly, the Fifth Circuit held that Sentinel had not breached its insurance contract by not defending N.F. Painting and by not paying the proposed judgment against N.F. Painting. Put differently, Sentinel could not be blamed for N.F.'s Painting’s decision to handle the matter on its own. 

Finally, the Fifth Circuit noted that Sentinel “did not have an obligation to sua sponte inject itself into the state court action” and that N.F. Painting’s inability to control N.F. Painting’s defense of Moreno’s injury claim, together with N.F. Painting’s agreement to entry of judgment against it in the amount of approximately $1.6 million, constitute prejudice as a matter of law, which also defeated the claim. 

Key Takeaways 

It appears that Sentinel would have defended N.F. Painting in the suit against Moreno if N.F. Painting would have requested a defense. However, because N.F. Painting failed to ask, Sentinel was not required to defend N.F. Painting.  

Put another way, Sentinel had no duty to defend – unless and until – N.F. Painting requested the defense. It is worth noting that Sentinel still learned about the suit through Beazer Homes. Still, in the eyes of the Fifth Circuit, this was not sufficient – the notification had to come directly from N.F. Painting. Indeed, in the words of the Fifth Circuit, “despite having knowledge and opportunity, an insurer is not required to simply interject itself into a proceeding on its insured’s behalf.” 

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The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.

Original article source: Adams and Reese