Noah Nadler in Law360: Texas High Court May Reshape Insurers' Decision To Defend


The Texas Supreme Court recently agreed to hear a case challenging whether an adversarial trial is required to establish damages, putting it in a position to push insurers to favor tendering a defense rather than rolling the dice and risking waiving their rights to dispute a judgment or settlement.

In the case, which involves claims that a pair of insurers breached their duty to defend a drilling company in a wrongful death action, the state high court has been asked to weigh whether its 2008 decision in Evanston Insurance Co. v. Atofina conflicts with its 1996 decision in State Farm Fire & Casualty Co. v. Gandy. Atofina held that an insurance company may not challenge a settlement’s reasonableness when it has refused a defense or coverage, while Gandy requires that an insured’s damages result from a fully adversarial trial…

One of the issues the court may consider is whether the principles in Gandy apply when an insurance company has wrongfully denied coverage for a claim, according to Noah Nadler, a policyholders' attorney at Haynes and Boone LLP.

"There seems to potentially be a glitch in Gandy or an area of claims where it may not apply," Nadler said. "Gandy involves a situation where the insurance company is actually defending the insured, unlike in Atofina, where the insurance company denied coverage."

Excerpted from Law360. To read the full article, click here (subscription required).

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