Court of Appeals of Texas, Seventh District, Amarillo
IN RE LANDMARK AMERICAN INSURANCE COMPANY, RELATOR
OPINION ON ORIGINAL PROCEEDING FOR WRIT OF MANDAMUS
QUINN, C.J., and CAMPBELL and PIRTLE, JJ.
American Insurance Company (Relator) petitions for a writ of
mandamus directing the Honorable Pat Phelan, 286th Judicial
District, Hockley County, (Respondent) "to vacate his
order compelling Relator to present a corporate
representative for deposition." It believes itself
entitled to same because "the trial court clearly abused
its discretion by misapplying Texas law and ordering a
deposition that falls outside the scope of discovery."
We conditionally grant the writ.
underlying suit involves asphalt testing. Levelland
Independent School District needed a new parking lot, and
Lubbock Labs, Inc. (Labs) was retained to test the asphalt.
Those tests were done but allegedly proved faulty. That
resulted in the contractor replacing the asphalt and suing
Labs to recoup the loss. A demand letter was sent to Labs on
March 28, 2016. At the time, Labs was the named insured of a
professional liability policy issued by Landmark. The policy
term ran from May 8, 2015, to May 8, 2016. Through the
policy, Landmark agreed to "pay on behalf of the Insured
. . . all sums that the Insured becomes legally obligated to
pay as Damages . . . provided that the . . . Claim is first
made against the Insured during the Policy Period, and
reported to the Company no later than sixty (60) days after
the end of the Policy Period."
timely forwarded the contractor's demand letter to the
insurance agency from which it acquired the Landmark policy
(BCT). Yet, that agency did not deliver the correspondence to
Landmark until February of 2017, or approximately nine months
after the May 2016 date on which the policy expired.
Consequently, Landmark denied coverage due to the belatedness
of the notice, despite agreeing to provide a defense. That
resulted in Labs filing a third-party petition against the
insurer and BCT wherein Labs, in effect, sought to enforce
the policy and recover damages.
Landmark answered Lab's third-party petition and moved
for both a traditional and no-evidence summary judgment, Labs
moved to compel the deposition of Landmark. Allegedly, the
sole purpose for that deposition was to discover whether the
delay in notifying Landmark of the contractor's claim
actually caused the insurer to suffer prejudice. If it did
not, then Labs believed the delay was inconsequential and the
policy was enforceable. Landmark disagreed; it believed the
topic of prejudice was irrelevant. The trial court ultimately
heard the motion to compel and ordered Landmark to cooperate
in scheduling "the requested corporate deposition within
the next 60 days and/or a date that is mutually agreeable to
all parties." That order underlies the petition for writ
standard of review is well settled and needs no explanation
here. Instead, we refer the parties to its discussion in the
seminal opinion of Walker v. Packer, 827 S.W.2d 833
(Tex. 1992) (orig. proceeding), and our opinion in In re
Hesse, 552 S.W.3d 893 (Tex. App.-Amarillo 2018, orig.
substantive issue before us is rather straightforward. It
implicates the delay in notifying Landmark of the
contractor's claim and whether the failure to abide by
the notice provision in the insurance agreement bars
enforcement of the policy. Labs invoked the Supreme Court
opinion in PAJ, Inc. v. Hanover Ins. Co., 243 S.W.3d
630 (Tex. 2008), to say it does not. Landmark invoked the
Supreme Court opinion in Prodigy Comm'ns Corp. v.
Agric. Excess & Surplus Ins. Co., 288 S.W.3d 374
(Tex. 2009), to say it did.
answering the dispute, we turn to the Supreme Court's
opinion in Fin. Indus. Corp. v. XL Specialty Ins.
Co., 285 S.W.3d 877 (Tex. 2009). After discussing
Prodigy, the Financial Industries court
held "an insurer must show prejudice to deny payment on
a claims-made policy, when the denial is based upon the
insured's breach of the policy's prompt-notice
provision, but the notice is given within the policy's
coverage period." Id. at 879. It so held after
observing that "for the insurer, the inherent benefit of
a claims-made policy is the insurer's ability 'to
"close its books" on a policy at its expiration and
thus to attain a level of predictability unattainable under
standard occurrence policies.'" Id. at 878.
Since notice of the claims was afforded the insurer within
the policy's term in Prodigy, the insured's
"alleged failure to give notice 'as soon as soon as
practicable' was immaterial because it did not interfere
with this benefit." Id. at 878; accord
Nicholas Petrol., Inc. v. Mid-Continent Cas. Co., No.
05-13-01106-CV, 2015 Tex. App. LEXIS 7489, at *16 (Tex.
App.-Dallas July 21, 2015, no pet.) (mem. op.) (citing
Prodigy and stating that "[b]ecause the purpose
of a claims-made policy is to define the limits of the
insurer's obligation, when there is no timely notice,
there is no coverage").
no one disputes that the policy acquired by Labs was a
claims-made, as opposed to an occurrence, policy. See
Prodigy Comm'ns Corp., 288 S.W.3d at 379 (quoting 3
Rowland H. Long, The Law of Liability Insurance §
12A.05 (2006), and explaining that a claims-made policy
only covers those claims first asserted against the insured
during the policy period and provides unlimited retroactive
coverage without prospective coverage while an occurrence
policy covers only claims arising out of occurrences
happening within the policy period regardless of when the
claim is made and provides unlimited prospective coverage
without retroactive coverage). Similarly undisputed is that
Landmark was not notified of the contractor's claim
against Labs until after expiration of both the policy term
and the sixty-day grace period appended to its end. Given
these circumstances, whether Landmark suffered prejudice due
to the delay in notice is irrelevant. See Oceanus Ins.
Co. v. White, 372 S.W.3d 700, 705 (Tex. App.-El Paso
2012, no pet.) (quoting Prodigy and stating that,
with a claims-made policy, a claim must be made within the
policy period and, without timely notice, there is no
coverage). In allowing Labs to depose Landmark on the topic
of prejudice, the trial court held otherwise. That decision
constitutes an instance of abused discretion because the
trial court's decision failed to comport with settled
law. See In re C.M.G., 339 S.W.3d 317, 319 (Tex.
App.-Amarillo 2011, no pet.) (stating that a trial court
abuses its discretion when its decision fails to comport with
guiding rules and principles).
and as we stated in In re Barlow, No.
07-05-00321-CV, 2005 Tex. App. LEXIS 8523 (Tex. App.-Amarillo
Oct. 14, 2005, orig. proceeding) (mem. op.), "a party
will not have an adequate remedy by appeal when a discovery
order compels the production of patently irrelevant
documents." Id. at *7. While the dispute at bar
is not one directly related to the production of documents,
it is one involving discovery on an irrelevant topic, i.e.,
prejudice arising from ...