Facts

Plaintiff Concierge Asset Management LLC manages a significant portfolio of apartments, across the United States, which is owned by related entities. Jacqueline Rhodes, a tenant in the Waterstone Place Apartments, then owned by Drever Waterstone LP, in Houston, Texas, claimed to have been injured on the property on Aug. 22, 2010. Less than one month after the alleged accident, the claim was reported to Indian Harbor and assigned to Ed Walsh.

Two weeks later, a letter of representation was received from an attorney and that letter was submitted to the adjuster who stated, "I have the claim and will contact the attorney." Four months later, plaintiff forwarded a second representation letter, from the same attorney. That letter was also tendered but the adjuster did not respond to a request for status.

In October 2011, a default judgment was entered, based on two broken ankles, for $440,000.

In December 2011, the independent adjuster learned that there was actually litigation, reviewed the court file, and notified Indian Harbor about the default judgment. Walsh didn't read the December 15 email until January 9. He immediately hired defense counsel for Concierge.

Efforts were made by that counsel to have the default judgment set aside, but the trial court judge denied those requests. The defense counsel advised Concierge to appeal and advised Indian Harbor that a supersedeas bond would be required for the default judgment. Indian Harbor then wrote to Concierge and stated that it would be unilaterally withdrawing the defense of the claim because it had been prejudiced by the entry of default prior to any tender of the lawsuit.

This case was filed a few months later alleging that Indian Harbor had failed to provide defense and indemnity and had breached the covenant of good faith and fair dealing in the process.

PLAINTIFF'S CONTENTIONS:
In July 2011, plaintiff was served with a lawsuit. An email was sent from plaintiff to their insurance broker, asking whether the slip and fall had been settled, but through inadvertence, the lawsuit was not attached to the email. The broker wrote to the adjuster, but didn't receive a response, and then wrote to his supervisor. The adjuster, who was located in Pennsylvania, did not know there was an actual lawsuit, finally hired an independent adjuster in Texas to investigate the claim. Over the next few months, the independent adjuster tried to contact the attorney for Rhodes, but apparently received no response, because the attorney was moving forward with default proceedings in the underlying personal injury case.

Concierge claimed that Indian Harbor had adequate notice of the occurrence because notice was given timely, on multiple occasions, even though the lawsuit papers were inadvertently never forwarded to Indian Harbor. This was not a breach of the policy because it had a specific endorsement, which said that there could be no breach of the notice clause unless certain people at Concierge were aware of the claim, and Indian Harbor had created an ambiguity by leaving the names "blank." Concierge affirmatively alleged that if the endorsement had been completed it would have referred to the chief financial officer of the parent company, who never had any notice of the claim.

DEFENDANT'S CONTENTIONS:
Defendant contended that the failure to tender the lawsuit was fatal to coverage.

Damages

Because plaintiff, at its own expense, obtained an appellate reversal of the underlying default judgment, the damages were about $20,000 paid to the appellate counsel and about $20,000 paid as fees on the bond, plus the attorney fees.

Result

Indian Harbor paid $105,000 plus, now that the underlying appeal has prevailed, and the default has been reversed, Indian Harbor will defend and indemnify the underlying matter without any reservation of rights.

Other Information

Mediation was undertaken but did not result in a resolution. Defendants filed a Motion to Dismiss based upon forum non conveniens, but that motion was denied because a California entity has a right to the protection of the California courts. All the underlying facts occurred in Texas. But Concierge was formed in California 14 years ago. Concierge elected to continue with the appeal, using the same counsel, at its own expense since Indian Harbor would not pay. A Texas Court of Appeals reversed the default and the Texas Supreme Court recently denied a Petition for Review. The underlying personal injury case is now being returned to trial court in Houston, before a different judge. FILING DATE: Sept. 18, 2012.