Werner Powers Outlines Potential Reverberations of Prodigy Win

03/30/2009

Not Too Late to Turn Back Time on D&O Claims
Risk and Insurance

The Texas Supreme Court finds for a tardy policyholder, in a case with potential reverberations for professional liability claims everywhere.

The Texas Supreme Court, in its 6-3 decision in Prodigy Communications Corp. v. Agricultural Excess & Surplus Insurance Co. delivered on March 27, rendered judgment "that the insurer may not deny coverage based on the fact that notice was not given 'as soon as practicable.' " It reversed the prior judgments of the trial court and the Dallas Court of Appeals.

In essence, the court said that it's not enough that policyholders report a claim "late" for a claims-made liability policy, despite any sort of "as soon as practicable" reporting language. To shoot down a claim, the insurer must also show prejudice on the part of the policyholder. This has been standard practice for general liability policies, but not for claims-made professional liability policies.

"That had been the big unanswered question," said Werner Powers, the Dallas-based partner at law firm Haynes and Boone, LLP who was hired by Prodigy to sue its insurer.

According to Powers, because most D&O policies are of the claims-made variety, it stands to reason that this decision could answer this question for policyholders beyond Texas.

"For the first time in a policy form that's going to be applicable in all 50 states, you have a well-reasoned decision," he told Risk & InsuranceĀ®.

Article excerpted from Risk & InsuranceĀ®.

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