Last week, the Texas Supreme Court handed down an opinion that involved the material breach doctrine. The doctrine — adopted twenty years ago in Hernandez v. Gulf Group Lloyds, 875 S.W.2d 691 (Tex. 1994) and subsequently applied in PAJ, Inc. v. Hanover Ins. Co., 243 S.W.3d 630 (Tex. 2008), Prodigy Commc’ns Corp. v. Agric. Excess & Surplus Ins. Co., 288 S.W.3d 374 (Tex. 2009), and Lennar Corp. v. Markel Am. Ins. Co., 413 S.W.3d 750 (Tex. 2013) – stands for the proposition that if the insurer receives its reasonably anticipated benefit despite an insured’s breach, then the breach is immaterial and the insurer is neither prejudiced nor excused from performance. In the four cases cited above, policyholders were held entitled to coverage despite having made settlements without the carrier’s consent and failed to provide notice of loss “as soon as practicable.”
Justice Jeffrey S. Boyd and one other member on the panel concurred in the result in a lengthy opinion. After an exhaustive analysis of the genesis of the material breach doctrine, however, the two justices disagreed with the majority’s conclusion that the facts at bar were in any meaningful way distinguishable from those in Hernandez and its progeny, and the two authored a concurring opinion to recommend that the court instead simply restrict the doctrine’s judicially-imposed prejudice requirement to the specific policy provisions at issue in those four cases, which is to say ones requiring either prompt notice of loss or consent to any settlements.
In an upcoming Alert, Lynn Alexander from our Dallas office will discuss the two opinions and explore their ramifications in considerably more detail. Look for it to arrive in your mailbox soon.