Notice Outside Policy’s 30 Day Reporting Requirement Untimely As a Matter of Texas Law Notwithstanding Lack of Prejudice

A Texas appellate court has held that an insured’s notice of an environmental contamination claim within the policy period but outside a 30 day reporting period is untimely as a matter of law. Nicholas Petroleum, Inc. v. Mid-Continent Cas. Co., No. 05-13-01106-CV (Texas App., 5th Dist. July 21, 2015). Because the reporting requirement was a condition precedent to coverage, the insurer need not show prejudice to deny coverage for late notice.

The operative pollution liability and environmental damage policy required notice of a claim “as soon as possible” but “in any event not later than thirty (30) days after receipt of a Claim by the Insured.” The trial court granted summary judgment to the insurer on late notice grounds. On appeal, the insured argued that even though it did not provide notice within 30 days of receipt of the claim, the notice-prejudice rule should apply based on Prodigy Communications Corp. v. Agricultural Excess & Surplus Insurance Co., 288 S.W.3d 374 (Tex. 2009), because it gave notice of the claim during the policy period. According to the insured, Prodigy held that an insurer must demonstrate that the insured’s noncompliance prejudiced the insurer where an insured gives notice of a claim within the policy period but not “as soon as practicable.” The insurer contended that it was not required to show prejudice before denying coverage because the language of the notice provision was different from the one at issue in Prodigy, which required notice “as soon as practicable” but not later than 90 days after the expiration of the policy period.

The appellate court agreed with the insurer that its notice provision went beyond what was present in Prodigy because it required the insured to not only provide notice of a claim “as soon as possible,” but also within 30 days of receipt of the Claim. According to the court, it is undisputed that the policy unambiguously stated that notice is a condition precedent to coverage, and therefore the 30-day requirement was a material part of the bargained-for exchange under the policy, which was materially breached when the insured failed to comply.