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Texas Federal Court Holds Insurer Has No Duty to Defend or Indemnify an Uncooperative Insured
Insurance Law Update
U.S. District Court for the Northern District of Texas, Dallas Division
In State Farm Lloyds v. Brown, 2009 WL 2902511 (N.D. Tex. Sept. 9, 2009), a Texas federal district court granted State Farm Lloyds’ motion for summary judgment, holding State Farm Lloyds had no duty to defend or indemnify its insured, Tony Ray Brown, because he had failed to cooperate with State Farm Lloyd’s defense of the underlying action at issue.
In the underlying action, the plaintiff, who alleged that Brown shot him in the face with a .32 caliber automatic pistol, sought damages for injuries resulting from the shooting. Brown demanded that State Farm Lloyds defend and indemnify him under his homeowners policy. State Farm Lloyds agreed to defend subject to a reservation of rights and retained defense counsel to represent Brown. Brown, however, failed to cooperate with the defense of the underlying action by missing scheduled appointments, failing to attend hearings, and failing to assist in responding to discovery requests. Brown’s defense counsel was eventually forced to withdraw, and State Farm Lloyds subsequently filed the instant declaratory judgment action in federal court.
The district court reiterated “well established” Texas law that “an insured’s breach of a cooperation provision relieves an insurer of liability on the policy” and that “[a]n insurer must show prejudice from the failure to cooperate to be relieved of any contractual obligations.” The court found that defense counsel’s withdrawal for cause and Brown’s failure to cooperate and attend meetings and hearings were sufficient evidence of prejudice, as State Farm Lloyds was effectively “deprived . . . of any opportunity to put on evidence disputing liability or damages for the shooting.”
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